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U.S. Asked to Block Planned HMO Merger : Health care: In letter to Justice Dept., three consumer groups cite concerns about United HealthCare, MetraHealth.

August 10, 1995|From Bloomberg Business News

WASHINGTON — Three of the nation's largest consumer groups asked the Justice Department on Wednesday to block a proposed merger between United HealthCare Corp. and MetraHealth Cos., arguing that it would erode competition.

United HealthCare announced in June that it would purchase MetraHealth for $1.65 billion in cash and stock, making it the largest U.S. managed-care company. The merger is being reviewed by the Justice Department's antitrust division.

"As consumer advocates, we are concerned that health care conglomerates, such as the one created by the proposed merger of United and MetraHealth, will lead to rationing of care, higher costs for patients and a decline in health care quality," said former U.S. Sen. Howard Metzenbaum (D-Ohio), chairman of the Consumer Federation of America.

That group, Citizen Action and Public Citizen sent a letter to Assistant Atty. Gen. Anne K. Bingaman, chief of the antitrust division, asking her to ensure that the merger doesn't increase prices and erode health care choices.

With previous health care mergers, the Justice Department and the Federal Trade Commission looked at the impact on competition in specific markets where the companies operated, not the overall size of the merger. In regional markets where there were conflicts, the regulators pushed for spinoffs or divestitures to maintain competition.

United HealthCare, the second-largest health maintenance organization in the United States, operates in 25 states. MetraHealth, a joint venture of Metropolitan Life Insurance Co. and Travelers Group Inc., operates in all 50 states and serves about 58,000 companies.

The combined company would have annual revenue of more than $8 billion and more than 40 million people enrolled in its programs. In June, United HealthCare said the addition of MetraHealth's assets would leave it with $2.3 billion in cash after the purchase, a war chest that could be used for more acquisitions.

"In some states or regions of the country, the merger could create an entity with immense market power to squeeze consumers and providers alike," the letter to Bingaman says.

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