Justice Dept. sues to block UnitedHealth merger

By Geoff Dornan

Appeal Capitol Bureau

Nevada Attorney General Catherine Cortez Masto said Monday a tentative deal is in place that will allow UnitedHealth Group to acquire Sierra Health Services.

Nevada and the federal government have sued in Washington, D.C., and Las Vegas federal district courts to block the merger. The core of the settlement deal, said Masto, is that UnitedHealth divest itself of its Southern Nevada business within 45 days.

Masto said United is negotiating with Humana, which was chosen because it is a company large enough to enter the Las Vegas market and grow, ensuring that one company doesn't control the market in the long-term. She said if the Humana deal falls through, the settlement is off and the parties go back to court.

But United spokesman Tyler Mason issued a statement late Monday saying they have reached an agreement with Humana to transfer some 25,000 customers in Southern Nevada to that company. Humana officials confirmed that.

After the merger was proposed, state and federal officials sued, arguing that combining the two companies would give UnitedHealth control of 94 percent of the Medicare Advantage health market in the Las Vegas area. A U.S. Justice Department statement on the plan charged that would have resulted in higher prices, fewer choices and a reduction in the quality of Medicare Advantage plans for senior citizens in Las Vegas.

Medicare Advantage plans were created as an alternative allowing seniors to enroll in private Medicare plans instead of traditional Medicare.

The other key element of the deal, Masto said, is that United not enter exclusive contracts with providers and use other of what she described as "major tools" to eliminate competition.

Thomas Barnett, assistant attorney general in charge of the antitrust division, said the divestiture would ensure seniors and others will continue to benefit from competition between companies offering Medicare Advantage programs in southern Nevada.

"We are committed to preserving competition in the health insurance industry because this competition spurs insurers to lower prices, enhance services and offer innovative new products," Barnett said in a statement.

The final piece of the deal, Masto said, is that United will pay a Nevada attorney general's special fund $15 million over the next five years to provide funding for a variety of organizations, including state mental health services, family resource centers, immunizations, community health nursing and funding for the Nevada 2-1-1 phone service.

United's Mason said the total value of the merger will be about $2.65 billion.

United CEO Jonathan Bunker said the merger will be good for Nevada health care customers and the professionals who provide their care.

"With greater resources and advanced technology, we can now build upon our legacy by providing more options for our members and expanded access to the largest national network of hospitals, physicians and other care providers," he said in announcing completion of the deal.

The merger was the subject of several Nevada Insurance Commission hearings before it was approved.

Dr. Bill Plested, past president of the American Medical Association, testified at one of those hearings that United has "an unblemished record of putting profit before patients." He said the company has been sued and fined in several states for its practices.

Gov. Jim Gibbons weighed in as well, urging the Justice Department to carefully examine the proposed merger before allowing it. Gibbons said a similar merger of PacifiCare and UnitedHealth two years ago resulted in nearly 133,000 violations of that state's laws and regulations, "as well as many improper claim denials."

"Far too many Californians were negatively affected by the PacifiCare and UnitedHealth merger, costing both consumers and physicians millions of dollars out of their own pockets," he wrote in a letter to the Justice Department.

• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.