In an unusual twist, rivals Health Net Inc. and UnitedHealth Group Inc. are on the same team for the time being, as Health Net attempts to convince commercial policyholders to stay with the insurance carrier even as it readies to sell their accounts to UnitedHealth.
In mid-July, UnitedHealth Group agreed to pay $410 million to acquire Health Net”™s book of health insurance members in the Northeast and supporting operations, including in Connecticut.
The deal could have major ramifications on the companies”™ respective work forces in Fairfield County, with Health Net having its Northeast headquarters in Shelton and UnitedHealth affiliate Oxford Health Plans based in Trumbull. But the deal could be even more profound for its customers, as corporate human-resources personnel begin poring over their health insurance choices for the upcoming January enrollment period.
Health Net is scheduled to receive up to $120 million in additional compensation depending on how many of its commercial customers renew with UnitedHealth. The deal complicates the choices of Health Net customers as they head into the traditional fall renewal season. In addition to the uncertainty surrounding federal and state overhauls of health care and insurance, the largest carrier doing business in Connecticut, Anthem Blue Cross & Blue Shield, signaled its intention to raise rates sharply for individual policyholders.
According to a report released this month by Families USA, insurance premiums in Connecticut grew at seven times the typical family income between 2000 and 2007, with workers bearing a larger share of the increase than employers.
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In response, state Attorney General Richard Blumenthal is seeking new regulations governing how insurance carriers set rates.
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For Health Net, the need to maintain its Northeast numbers comes even as the U.S. Department of Defense awarded the TriCare insurance contract for Connecticut and other Northern states to Hartford-based Aetna Inc. Health Net is protesting that award on grounds that competitive details of its bid were posted online before the contract was awarded, though the company said it has no way of knowing whether the alleged breach damaged its chances at winning the $16 billion contract.
Health Net had 193,000 members in Connecticut as of June 30, down roughly 3,000 members from the three months earlier, but off 38,000 from a year ago and the intervening renewal period traditionally at year”™s end.
Health Net more than offset its Connecticut attrition with big gains in New York, however, where it added 21,000 members in the span of a year to give it 251,000 total. And in New Jersey, the company padded its membership rolls with a net gain of 8,000 people, giving it 133,000 in all.
“We see slight membership declines, but that”™s what everyone in the sector is seeing,” said Jay Gellert, CEO of Health Net, in a conference call this month with analysts.
Health Net spent the second quarter paying down its “claims inventory” due doctors and hospitals for care incurred by Health Net members. The company”™s claims payouts were impacted by the fact that most of its exposure to swine flu was concentrated in the Northeast where the disease stuck heaviest.
The Northeast impacted earnings per share between 6 cents and 9 cents a share, Gellert said, with the company reporting a 38-cent per share profit in the second quarter, or $40 million.
“In actuality I think we expected to do better the rest of the year,” Gellert said. “The second half of the year performs better, and even with some flu impact we expect better performance.”