N.J. Medical Society Files Suit to Block State-Approved Oxford Merger with UnitedHealthcare

August 3, 2004

The Medical Society of New Jersey has filed a lawsuit to block the merger of Oxford Health Plans (NJ), Inc. and UnitedHealthcare Inc., claiming it would create a health care monopoly that would not benefit consumers.

The filing of the lawsuit effectively stays the merger in the state, pending a ruling by a judge of the Superior Court of the State of New Jersey whether the acquisition by UnitedHealthcare should be allowed to proceed.

Within days of the final hearing on the matter, Banking and Insurance Commissioner Holly Bakke approved the $3.7 billion merger. The combination would create the third-largest health insurer in New Jersey. A total of 440,620 policyholders are covered by the two companies, according to the state.

According to the medical society, the projected statewide market share of the merged entity approaches 20 percent, and it will be significantly greater in New Jersey’s six northern counties (Bergen, Essex, Passaic, Sussex, Union, Morris) where the vast majority of United’s and Oxford’s insured base is currently located. The market shares in these regions violate anti-competitive guidelines set by the state’s attorney general, the doctors have charged.

“Unlike the state of New Jersey, physicians are accustomed to advocating for patients, which is why we take legal action today,” said Michael T. Kornett, executive director nd chief executive officer,, MSNJ. “Patients deserve to get the tests, treatment and prescriptions they need when they need them. People are paying more for their health care, and should demand more. After having to jump managed care bureaucratic hurdles for years, physicians and patients have had enough.”

Bakke said the decision to approve the merger come after a thorough review. Insurance regulators said combining the companies would bring increased efficiencies that could result in lower costs and improved access to health care. She also stressed the importance of the marketplace’s responsibility to preserve access to healthcare and address the issue of the uninsured.

The merger of the health care companies has also been approved by California, Connecticut and New York.

In filings submitted to New Jersey department as part of the application process, MSNJ had encouraged Bakke to apply more restrictive New Jersey guidelines to determine whether a merger will substantially lessen competition and be hazardous or prejudicial to the insurance buying public.

“These two companies systematically interfere in the patient/physician
relationship, so much so that MSNJ is in court now with both of them for unfair and deceptive business practices,” continued Kornett. “This acquisition intensify United’s power over patients and providers, leading to even more one-sided contracts and medical decisions made by clerks – not physicians. With less available health care, we will see increased costs to the patients, employers, labor organizations and others who purchase insurance in New Jersey.

“It is quite obvious that this was a pre-determined and politically
motivated decision,” added Kornett. “We trust that the Superior Court of the State of New Jersey will take a very close look at the far-reaching implications and impacts of this merger and decide in the favor of New Jersey patients.”

Under New Jersey law, the proposed acquisition must complete a seven-prong test. Bakke said she found that none of the seven statutory disqualifiers existed in this filing or public hearing. These include:

• If the acquired company will be able to continue to maintain its license as an HMO in New Jersey;
• Whether the acquisition would substantially lessen competition in the New Jersey health insurance market or create a monopoly;
• If the financial condition of both merging companies will be jeopardized due to a merger;
• Whether a merger will create changes in the corporate structure of both companies, which would be unfair or unreasonable to the acquired company’s policyholders; or if the merger is not in the public’s best interest;
• The new leadership spurred from a merger must prove to be competent and possess the requisite ability to run the newly formed company; and
• The merger must not be hazardous or prejudicial to New Jersey consumers.

The department found that the merger would result in various efficiencies that would enable a combined entity to achieve lower costs in reimbursement rates and administration than it could have achieved as separate companies. This could allow the combined company to offer health plans at a lower price, according to officials.

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