Executive Summary

United/Oxford Acquisition

United HealthGroup Incorporated, a Minnesota general business corporation, filed a Form A filing on May 8, 2004 (supplemented through May 25, 2004), with the Department of Banking and Insurance to acquire control of Oxford Health Plans (NJ), Inc., a New Jersey domiciled HMO, for a total purchase price of $4.98 billion. Following acquisition by United, Oxford will merge with Ruby Acquisition LLC, a newly-formed limited liability company, and Oxford's separate corporate existence will cease. Ruby LLC will be renamed Oxford LLC. Oxford will continue to operate its HMO in New Jersey.

Under New Jersey law, the Commissioner of Banking and Insurance shall approve an acquisition of control of a domestic insurer (including HMOs) unless he or she finds that one or more of seven statutory disqualifying factors exist. These disqualifiers are designed to protect the public interest by ensuring the financial stability of the merged entities. After a thorough review, the Commissioner found that none of the seven statutory disqualifiers exist in this proposed acquisition and thus the merger could proceed.

The Department examined this disqualifying factor in the context of an increasingly concentrated commercial health insurance market, which has seen the larger health care companies becoming more dominant in size and market share. While this trend has resulted in fewer entities, those entities must deliver a variety of plan choices and must commit significant resources to be able to provide this variety of plans, establish provider networks, and support the systems needed to contain administrative costs.

The statute states that the acquisition shall not be disapproved where the market shares exceed the relevant thresholds if the acquisition will yield substantial economies of scale or economies in resource utilization that cannot feasibly be achieved in any other way, and the public benefits arising from those economies exceed the public benefits that would arise from not lessening competition.

To that end, the Department found that the merger would result in various efficiencies that would enable the combined entity to achieve lower costs than it could have achieved absent the transaction, thus allowing it to offer health plans at a lower price, most notably more favorable reimbursement rates for Oxford members using out-of-area providers and other network related savings, and rationalization of administrative functions. The Department did not receive any information from which it may be reasonably concluded that such efficiencies would not occur.

Commissioner's Order

Hearing Officer's Report