Merger critics target execs

Published on

The Orange County Register (California)

SANTA ANA — Most people who spoke at a public hearing Thursday on the proposed merger of health insurers PacifiCare Health Systems Inc. and UnitedHealth Group Inc. said they favored the combination, but a couple of swine stole most of the media attention.

Jerry Flanagan, an activist with the Foundation for Taxpayer and Consumer Rights in Santa Monica, brought a pair of pigs to illustrate what he called a “pork-out” by top PacifiCare executives, who stand to earn $ 230 million in cash and stock if the merger is completed before Feb. 1.

PacifiCare, based in Cypress, announced in July that it had agreed to be purchased by Minnesota-based UnitedHealth for $ 8.1 billion. The purchase would give UnitedHealth an immediate and commanding presence in the burgeoning market for senior care. PacifiCare is the nation’s second-largest provider of Medicare HMOs with 757,000 senior members.

UnitedHealth has 345,000 seniors in its Medicare plans.

The California Department of Managed Health Care organized the hearing to get comments from residents and business owners on the proposed merger. The DMHC is just one of three state agencies that must approve the deal. In addition, the transaction requires federal antitrust approval.

Flanagan posed with his pigs for television and newspaper cameras outside the hearing, which was in Santa Ana City Council chambers.

He briefly entered the hearing room holding a pig before he was politely asked by a police officer to remove the animal.

Flanagan told DMHC officials that they shouldn’t approve the merger unless both companies “guarantee that patients will not face rate increases to pay for any costs associated with the merger, including financing costs and executive bonuses.” Robert Sheehy, chief executive of United Healthcare, a subsidiary of UnitedHealth, said all payments to PacifiCare executives will come from UnitedHealth‘s reserves. No PacifiCare ratepayer money will be used to fund the payments, he said.

James Frey, president of PacifiCare of California, a subsidiary of PacifiCare, said the insurer’s customers will benefit from the introduction of electronic membership cards that UnitedHealth is already using. The cards, which can be swiped through a credit card terminal at doctor’s offices, instantly provide information on a member’s eligibility for benefits. Starting next year, the cards will enable access to and updating of a patient’s health records, Frey said.

PacifiCare will remain in Cypress under the same top management, Frey said.

The merger could result in the elimination of 200 out of about 5,600 PacifiCare jobs in California, he said.

Speaking in support of the merger was Joe Randolph, chief financial officer of St. Joseph Health System in Orange, which provides care through 14 hospitals and other facilities.

“From a provider’s perspective, what I like about this merger is that PacifiCare will maintain its local presence and leadership while gaining access to United’s advanced technology to work more effectively with physicians and hospitals,” Randolph said.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases