Decision due on $2.6 billion merger of Sierra Health Services, UnitedHealth

CARSON CITY — Monday is the deadline for a decision by Nevada regulators on a proposed $2.6 billion health merger of Sierra Health Services, Nevada’s largest health insurer, and Minnesota-based UnitedHealth Group Inc.

State Insurance Commissioner Alice Molasky-Arman is required by law to make her decision within a month after final hearings on the deal.

The last hearing was July 27 in Las Vegas.

During the hearings, company officials sought to reassure regulators that Las Vegas-based Sierra Health would retain its own leadership and expand services without raising rates.

Critics, including the American Medical Association and the Nevada State Medical Association, argued that UnitedHealth reimburses health care providers at rates lower than Medicaid and Medicare while providing poor customer service.

The opponents also said the merger would put a single entity in control of 80 percent of the HMO market in Nevada. Sierra officers say that’s misleading because there is no distinct HMO market in the state, and the combined companies would control less than 30 percent of Nevada’s commercial health insurance market.

Witnesses at the hearings included Dr. William Plested, immediate past president of the AMA, who said “robber barons” behind the merger have a record of putting profits ahead of patients.

The state attorney general’s Bureau of Consumer Protection added that the acquisition, announced last March, could result in the most concentrated insurance market in the country.

Besides UnitedHealth and Sierra Health representatives, merger backers included the Nevada Alliance for Retired Americans and Consumers for Competitive Choice, and most Sierra Health stockholders, who would get $43.50 in cash for each share held.

With regulatory hurdles cleared, the deal could close by the end of the year. Besides a go-ahead from Nevada, UnitedHealth needs approval from the Justice Department, California and Arizona.

Sierra Health has 310,000 members in employer-sponsored plans in Nevada and another 320,000 people in plans for retirees and government workers.

The company posted 2006 profit of $140.5 million on revenue of $1.72 billion.

The merger would put UnitedHealth in a fast-growing region and would be its first health insurance acquisition in over a year.

UnitedHealth has bought out several regional health insurers in recent years, including Oxford Health Plans and Mid Atlantic Medical Services in 2004 and PacifiCare Health Systems and John Deere Health Care in 2005.

But questions about UnitedHealth’s stock options practices plunged it into a year of turmoil that led its former chairman and chief executive, William McGuire, to step down in late 2006.

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