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Unitedhealthcare to Acquire Business in New York, New Jersey

UnitedHealthcare has reached an agreement with Health Net Inc., to acquire its subsidiaries in Connecticut, New York and New Jersey in a deal that could total $630 million.

medical-caseThe move comes nearly a week after Los Angeles, Calif.-based Health Net lost its Tricare multi-billion dollar contracts with the Department of Defense, who replaced the company and Humana Inc. as vendors with Aetna and UnitedHealth Group, starting next year.

Health Net, which serves 578,000 members in the three states, said the transaction helps it “realize the value in our Northeast health plans.”

“We now can focus our resources on our health plans in the West,” said Jay Gellert, Health Net’s president and CEO, in a statement. “At the same time, we are committed to meeting our Northeast members’ needs as we continue to operate in the Northeast during the post-closing transition period.”

UnitedHealthcare, a UnitedHealth Group company, said it expects the transaction, which is subject to regulatory approvals another closing conditions, to be complete within 12 months.

Gellert added that after assessing “several alternatives” for its Northeast plans, Health Net felt the deal with UnitedHealthcare was in the best interest of its members, given the Minneapolis, Minn.-based company’s “national scale, strong local relationships, and a very broad range of products.”
Jeff Alter, UnitedHealthcare’s Northeast Region CEO, said the insurer “looks forward to continuing to advance the health and well-being” of Health Net’s Northeast members.

“We have a long, successful history of serving people in the Northeast and are committed to responding to local market needs while also providing people with access to the innovative health care products, programs and technology applications of a company with national scale,” he said.
After completion of the acquisition, UnitedHealthcare will transfer $290 million to Health Net, with another $160 million transferred over the following two years as the business transitions, according to the companies.

Health Net will continue to serve commercial, Medicare and Medicaid members following the close of the transaction and prior to their renewal with UnitedHealthcare.

UnitedHealthcare also will pay Health Net $60 million at the conclusion of the acquisition for its Medicare business, the Medicaid business and the renewal rights for the commercial membership. It will also pay Health Net additional consideration on a per member basis as Health Net members shift to UnitedHealthcare, which could total $120 million, if all members make the move.

Health Net has indicated it could see an estimated net negative impact of $20 million at the conclusion of the acquisition. It expects to see revenues from its Northeast operations in 2009 at $2.7 billion, according to the company.

UnitedHealthcare has a national network of more than 590,000 health care professionals, 4,900 hospitals and 61,000 pharmacies.

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