LAWRENCEVILLE, N.J., July 22 /PRNewswire/ -- The Medical Society of New Jersey (“MSNJ”) today completed a second filing to urge the Commissioner of the New Jersey Department of Banking & Insurance to reject the proposed $37 billion merger of Oxford Health Plans and United Healthcare. MSNJ believes that the merger will impair the delivery of health care services for more than 1.4 million New Jerseyans currently insured by these companies.
MSNJ encouraged the New Jersey DOBI Commissioner to apply more restrictive New Jersey guidelines to determine whether a merger will substantially lessen competition and be hazardous or prejudicial to the insurance buying public (New Jersey Stat. Ann. 17: 27A-2(d)). In a report accompanying MSNJ’s filing, noted healthcare economist Stephen Foreman, PhD, JD, MPA, determined that the New Jersey healthcare market is already highly concentrated among few companies, with substantial barriers to entry for outside insurers. Foreman also concluded that the merger would likely produce even higher health insurance premiums for employers and financial benefit for the insurance companies’ senior management, while patient access to care and physician reimbursement would likely decrease.
The projected statewide market share of the merged entity approaches 20%, although it will be significantly greater in New Jersey’s six northern counties (Bergen, Essex, Passaic, Sussex, Union, Morris) where the vast majority of Oxford’s and United’s insured base is currently located.
“MSNJ has already filed suits against both Oxford and United because of their unfair and deceptive business practices that interfere with the patient/physician relationship,” said S. Manzoor Abidi, MD, MSNJ President. “Their merger would intensify their power over patients and providers, leading to even more one-sided contracts and medical decisions made by clerks - not physicians. These corporate giants make money by delaying needed services, not by readily paying for care.”
On July 13, Oxford and United testified before New Jersey regulators that the proposed merger will result in significant efficiencies and savings - savings that will be passed on to patients in the form of lower premiums and enhanced services. Previous mergers, such as the 1999 merger of Aetna and Prudential, have proven this to be untrue, and have actually created inefficiencies and diseconomies of scale. Currently United spends about 19% on administrative expenses, while Oxford spends 11% - or closer to the state average. Since Oxford is the smaller of the two entities, projections are that the administrative expenses will remain on the high side, which means money deterred from providing patient care.
Senior management at both companies currently enjoy tremendous financial benefits, and stand to gain greatly through a merger. In 2003, United’s CEO received $7.6 million in salary, bonus and other compensation, along with 1.3 million stock options. The company’s COO received $3.4 million in direct compensation and 600,000 stock options. In 2002, Oxford’s CEO sold stock options for a gain of $76 million. Last year, he took away $1.7 million in salary and other income, along with 275,000 stock options. Upon approval of a merger, the stock options may become vested, realizing tens of millions of dollars.
“When it comes to insurer behavior, it’s best to follow the money,” said Dr. Abidi. “One must ask the question whether this transaction is more about shareholder value and executive compensation than providing quality healthcare to patients. We encourage the New Jersey Insurance Commissioner to take every day allowed to thoroughly analyze the far-reaching implications and impacts of this merger.”
Medical Society of New Jersey
CONTACT: Matthew Stanton, MBI GluckShaw, +1-973-735-0528, Cell:+1-973-699-3115, for Medical Society of New Jersey
