Human Capital & Careers

Managed-Care Outfits Merge, Again

The already soaring cost of health benefits could climb even higher if new mergers choke competition.
Stephen TaubOctober 15, 2004

Corporate health-care costs may once again climb to new heights as managed-care industry consolidation continues.

On Thursday, officials at Coventry Health Care Inc. said they agreed to buy First Health Group Corp. for $1.8 billion in stock and cash. Coventry currently has members throughout the mid-Atlantic region and the Midwest, while First Health operates in all 50 states.

The combination creates a national health-benefits company capable of providing health insurance and administrative services to a broad array of commercial and government clients, according to management.

In another big merger earlier this year, UnitedHealth Group Inc. bought Oxford Health Plans. Whats’ more WellPoint Health Networks and Anthem Inc. have announced plans to unite — which would create the nation’s largest health insurer.

Yesterday, in yet another reminder that some health insurers are financially fit, UnitedHealth Group said third-quarter earnings surged 47 percent. Meanwhile, corporations are being consistently hit with double-digit health-care cost increases.

That upward cost trend trend isn’t likely to abate if further consolidation of the managed-care industry erodes competition and gives the large surviving insurers the market-strength to push through new price hikes.