In a deal symptomatic of the economics driving modern medicine, UnitedHealth Group Inc. Friday announced plans to sell 225,000 California policyholders to Blue Shield of California for $40 million.
The proposed transfer drew immediate fire from the Foundation for Taxpayer and Consumer Rights, a Santa Monica-based group pushing for health insurance reforms.
“This is one of the most outrageous moves I have ever seen,” said Jamie Court, advocacy director for the activist group. “This is the equivalent of treating patients like slaves who can be sold to a new master.”
Minnetonka, Minn.-based UnitedHealth decided to sell the policyholders as part of an effort to boost profits. The business sold to Blue Shield broke even last year. Nationwide, UnitedHealth earned $568 million on revenues of $19.3 billion last year.
“We needed to make a business decision and we thought this was the best possible scenario, from a membership perspective,” UnitedHealth spokesman Roger Cruzen.
The deal primarily affects UnitedHealth policyholders whose medical insurance is purchased through small- and medium-sized California businesses with fewer than 2,000 workers.
The new insurer conceivably could change terms of coverage, including copayments for office visits. Blue Shield also will require new members to choose doctors that belong to its health maintenance organization.
Nine out of 10 doctors that belong to UnitedHealth also belong to Blue Shield. All but a small fraction of the hospitals in UnitedHealth network also belong to Blue Shield.
UnitedHealth will continue to cover about 700,000 Californians whose medical insurance is secured through large employers with multistate operations. But the new arrangement will require those 700,000 Californians with continuing UnitedHealth coverage to choose their doctors and hospitals from Blue Shield‘s approved network of providers. Their copayments won’t change.
San Francisco-based Blue Shield, California’s second largest not-for-profit health plan behind Kaiser, will receive an undisclosed fee from UnitedHealth for providing access to its network of doctors. Blue Shield has about 2.1 million members and $3.5 billion in revenue.
Friday’s developments won’t affect American Association of Retired Persons members who supplement their Medicare coverage through UnitedHealth.
The deal still needs the approval of California’s Department of Managed Care, which assumed oversight of the health maintenance organizations, or HMOs, July 1.
“We aren’t going to prejudge this,” said Daniel Zingale, the department’s director. “We will expect to see evidence of how Californians will receive high-quality health care under this proposal.”
Seth Jacobs, Blue Shield‘s general counsel, said the organization is confident that the deal will win government approval. “No one will be forced into Blue Shield,” Jacobs said. “If (a UnitedHealth
policyholder) doesn’t like us, they can always go someplace else.”
The Foundation for Taxpayer and Consumer Rights might file a lawsuit seeking to block the deal if regulators approve it, Court said.
Blue Shield and UnitedHealth officials predicted most of the affected policyholders will be pleased with the deal because it will provide a broader selection of doctors. Blue Shield has about 42,000 doctors in its network versus 32,000 in UnitedHealth‘s California network.
Any patient in the midst of a treatment by a UnitedHealth doctor who doesn’t belong to Blue Shield will continue to be covered after the deal, Jacobs said. Blue Shield also intends to enlist some UnitedHealth doctors that don’t belong to its network.
This isn’t the first time that UnitedHealth has jettisoned policyholders that aren’t generating enough profit. Earlier this year, the company sold about 160,000 members in Oregon and Washington to several other HMOs.
Including the deal announced Friday, UnitedHealth is getting rid of about 380,000 policyholders that generate about $500 million in annual revenues.
UnitedHealth‘s reorganization on the West Coast makes financial sense because the company seemed unlikely to increase its market share, said Joseph France, a health insurance analyst for CS First Boston in New York. UnitedHealth‘s California HMO is the eighth largest in the state, France said, and “that is not a prescription for making profits.”