Insurance Commissioner Kreidler Backs Sale of Wash. Health Insurer

January 3, 2006

The acquisition of a Washington-based health care service contractor as part of a national merger involving 10 states was approved recently by Insurance Commissioner Mike Kreidler’s office.

The acquisition of PacifiCare of Washington by UnitedHealth Group of Minnetonka, Minn., was contingent on a list of conditions, including the companies’ commitment that the cost of the merger would not be borne by Washington consumers.

“This agreement ensures that the cost of the merger won’t appear in the form of premium increases or be borne by Washington consumers in any manner,” Kreidler said. “Equally significant,” he added, “the agreement establishes that Washington consumers will be afforded similar benefits and advantages that accrue to the residents of the other nine states involved in the national merger.”

Additionally, the companies agreed to commit at least $1 million for healthcare programs that will reportedly benefit Washington residents and communities.

“On the less positive side,” Kreidler said, “the merger continues what I view as a disturbing drift toward merger and acquisition in the private health care sector over the past 10 to 15 years. This trend lessens competition and ultimately doesn’t serve the long term public interest.”

The most recent quarterly statement filed by PacifiCare disclosed that the company has 70,500 policyholders in Washington. The two companies represent about 7 percent of the health care market in the state.

The approval followed a six-month review of the companies’ application by the agency and a public meeting at the agency offices in Tumwater on Monday. Agency staff concluded the meeting with a recommendation that the application be approved.

As approved by Kreidler’s office, PacifiCare of Washington will be maintained and operated as a separate entity under the UnitedHealth Group ownership for the immediate future.

Because UnitedHealth Group is currently the target of a potential multi-state market conduct examination into problems related to the prompt processing and payment of claims, the agreement calls for the companies to establish a $1 million escrow account that would be used to pay restitution to Washington subscribers and providers, if needed.

The two companies will not be permitted to integrate management and operations until the market conduct issues are resolved to the agency’s satisfaction.

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