Sierra Health deal is trouble, congressional panel says

A proposed takeover of Nevada's largest health insurance company could make coverage too expensive for small - business owners, hit doctors in the pocketbook and ultimately reduce quality of and access to health care for patients, members of Congress said in a letter calling for the Justice Department to scrutinize the deal.

"If the (Justice Department) fails to take adequate steps to ensure the marketplace remains competitive in Nevada, a dangerous precedent will be set for evaluating future health insurance mergers across the nation," the letter said.

The action by federal officials is the highest - profile opposition to date to the proposed merger between UnitedHealth Group and Sierra Health Services, which was announced in March and is being investigated because of antitrust concerns by the Justice Department and the Nevada attorney general's office.

Rep. Nydia Velazquez, D- N.Y., chairwoman of the House Committee on Small Business, sent the letter to the Justice Department on Wednesday to express concern about such consolidation, "which is associated with higher health plan costs and premiums."

It followed an Oct. 25 hearing at which consumers, members of the medical community and small - business owners expressed worries about health care mergers.

Such takeovers leave small businesses with fewer choices and doctors with lower payments, the letter said. The takeover of Sierra Health - with 630,000 patients in Nevada - by United, a national titan that covers 70 million Americans, would create a "tremendous" level of market concentration, it said.

In spite of the investigations and the growing opposition, many observers see the deal as a for e gone conclusion - Justice Department officials can't recall blocking a single health care merger. Many antitrust experts say conditions, including a requirement that many patients be turned over to competitors, might make the deal acceptable to regulators.

The Sierra Health-United merger is being watched closely nationwide because it would be an extreme case of domination through consolidation.

Larry Matheis, executive director of the Nevada State Medical Association, one of many groups opposing the merger, said the letter from Congress shows that local concerns are growing into a chorus of national voices.

"The proposed merger in Nevada is being looked at and scrutinized nationally because it's something that will be repeated in community after community and in state after state," Matheis said.

Sharon Powers, president and chief executive of the North Las Vegas Chamber of Commerce, applauded Congress for pushing the Justice Department to look closely at the deal. Powers represents about 900 business owners, most with fewer than 50 employees, and they're concerned about the takeover .

"Our opinion is that competition is good for the marketplace," Powers said. "Competition keeps everybody's prices in check and services in check. It's what our economy is based on."

Health insurance, a primary small - business expense, has climbed annually by double-digit percentage increases - up to 40 percent in some cases.

United spokesman Tyler Mason said small businesses will benefit from the merger because United will offer additional solutions and products for the fast - growing Las Vegas market.

Peter O'Neill, Sierra Health spokesman, pointed out that the ability to raise premiums and change benefits is regulated by Nevada.

"There is a formal safeguard in there for small businesses so that insurance companies don't do the kinds of things that those detractors against the merger are concerned about," he said.

O'Neill took exception to Congress ' using the argument that health maintenance organizations and preferred provider organizations are separate markets.

Merger opponents - including the congressional committee and the Nevada attorney general's office - say combining the two companies would give United a monopoly in the HMO market, leverage it could use to boost profits.

But United and Sierra Health officials say HMOs and PPOs must be considered together and when they are , the companies have a significantly lower share of the market. They argue that this gives consumers many insurance options and negates United's ability to throw its weight around to boost profits.

Nevada Insurance Commissioner Alice Molasky-Arman, after a lengthy investigation, sided with the companies by lumping together the HMO and PPO markets , but said consolidating the Medicare HMO market could create a monopoly for United. She left any decision about the Medicare market to the Justice Department.

Justice officials would not comment for this story, other than to say their investigation is ongoing.