SACRAMENTO — State regulators Monday approved UnitedHealth Group Inc.'s planned $8.1-billion acquisition of PacifiCare Health Systems Inc. after executives gave assurances that the costs of the deal would not be borne by Cypress-based PacifiCare's customers.
The go-ahead from the California Department of Insurance and the California Department of Managed Health Care moves the companies a step closer to completing a deal that would create a healthcare heavyweight covering 34 million people nationwide, including 12 million current PacifiCare members.
State Insurance Commissioner John Garamendi said the clincher was a pledge by UnitedHealth, the nation's second-largest health insurer, to provide $50 million in charitable contributions and $200 million in investments to improve services to low-income people living in communities with little access to quality medical care.
The $250 million is about equivalent to the amount that the merged company would spend on bonuses, accelerated stock options and other perks for executives of the two health insurers.
The agreement, especially a stipulation that PacifiCare will pay no dividends to its parent company for four years, "provides meaningful and substantial benefits to California consumers," said Garamendi, who oversees PacifiCare's insurance business.
The commissioner said he would monitor Minnesota-based UnitedHealth's business practices in California to ensure that all current products and services remained available and that complaints from patients did not increase.
Garamendi said the restrictions placed on the deal closely followed the template of last year's approval of a $21-billion acquisition of Thousand Oaks-based WellPoint Health Networks -- the parent of Blue Cross of California -- by Anthem Inc. of Indianapolis. Garamendi required the new company, the country's largest health maintenance organization now called WellPoint Inc., to commit $265 million in contributions, grants and investments for low-income communities.
Cindy Ehnes, whose Department of Managed Health Care regulates HMO activities, stressed that the accord "contains the strongest protections permitted by California law to protect the pocketbooks of consumers and ensures that PacifiCare maintains its ability to provide comprehensive healthcare to California employers and enrollees."
The proposed merger now has been ratified by six states and still needs approvals from four states and antitrust regulators at the Justice Department.
