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Insurance industry consolidation continues with planned $4.9 billion merger

Patient Financial Services Weekly Advisor, April 30, 2004

In a move that would strengthen its position in the Northeast, Minneapolis-based health insurer UnitedHealth Group agreed to acquire Oxford Health Plans, based in Trumbull, CT, the companies announced April 26.

The deal, expected to be worth $4.9 billion in cash and stock based on UnitedHealth's closing stock price Monday, is set to close by the end of the year.

According to an April 26 Reuters report, UnitedHealth made the deal a few days after talks between Oxford and WellChoice, Inc., fell apart.

UnitedHealth insures 20.2 million people through business divisions United Healthcare, AmeriChoice, and Ovations. Oxford Health Plans cover about 1.5 million members, mostly in New York, New Jersey, and southern Connecticut.

Although the acquisition might seem to solidify UnitedHealth's position as the nation's largest HMO by medical membership, that designation will go to rival insurer Anthem, Inc., when it closes its purchase of WellPoint Health Networks later this year.

Reuters also reported that Oxford has been having trouble growing membership and was seen as a prime target for takeover by a bigger HMO.

Competition for new members is fierce in the Northeast, with market share held by several notable players, including UnitedHealth, Oxford, WellChoice, and Aetna, Inc., analysts said.

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