Connecticut’s largest physicians’ lobby is suing the state Insurance Department to overturn agency approval of the $510 million merger of Health Net’s Northeast operations with UnitedHealth Group.
In the suit filed in New Britain Superior Court, the Connecticut State Medical Society and two member physicians allege that the agency failed to independently verify UnitedHealth’s assertions about the merger, and did not fairly weigh the society’s testimony and evidence as to their concerns about the deal.
The suit also claims that the insurance department had “bias in favor” of UnitedHealth during a public hearing on the merger in November.
Calls seeking comment from UnitedHealth were not immediately returned.
Insurance agency spokesman Dawn McDaniel issued a statement: “Our lawyers are in the process of reviewing the lawsuit. We expect that the Attorney General [Richard Blumenthal] will represent us vigorously.”
In December, Blumenthal said his office was investigating the acquisition on antitrust grounds, adding that he was gathering information about the deal and asked for a meeting with representatives of both companies.
It’s unclear what actions, if any, Blumenthal has taken on the matter since.
The medical society says it was forced into court.
“CSMS has pursued this course of action because the physicians of Connecticut, together with their patients, were not adequately served by the [Department of Insurance] review process,” said Matthew Katz, CSMS executive vice president. “We believe further due diligence is necessary.”
The insurance department approved UnitedHealthcare’s acquisition of Health Net in December, saying the deal will improve consumer choice in Connecticut.
UnitedHealth agreed to buy Health Net’s northeastern licensed subsidiaries, which have 578,000 members in Connecticut, New York and New Jersey.
Under the deal, UnitedHealth agreed to purchase the rights from Health Net to assume its commercial members as they renew coverage. UnitedHealth said it also will pay Health Net $60 million for its Medicare and Medicaid businesses.
The CSMS, and several other consumer advocacy groups, raised multiple concerns about the deal, including that it will lead to further consolidation in the Connecticut market, creating an “anticompetitive effect.”
They are also concerned that UnitedHealth could “cherry pick,” Health Net customers that they offer coverage to, since they are only proposing to buy renewal rights from Health Net.
The medical society sought the insurance department’s approval to intervene at a November public hearing on the merger, but the agency denied the request.
As an intervenor, the medical society would have been allowed to cross-examine hearing witnesses.
In approving the merger, Insurance Commissioner Thomas Sullivan said the “transaction strengthens, not weakens, consumer choice and security,” in Connecticut.
“A year ago, Health Net announced it was initiating a strategic review of its Northeast business options, including leaving the state,” Sullivan said in a December press release. “If Health Net did not partner with another company, Heath Net policyholders would have been left to secure replacement coverage on their own without the benefit of UnitedHealthcare’s commitment to offer each policyholder renewal coverage.”
In its suit, the CSMS alleges that hundreds of pages of evidence it provided in the case were unlikely to have been read or given the required “weight of legal argument” by the insurance department as required in state regulations.
The medical society also alleges inconsistencies and factual misrepresentations made by UnitedHealth witnesses regarding the medical landscape of the state that were never investigated or verified by the insurance department prior to the approval of the transaction.
