PHIL GALEWITZ AP Business Writer
AP Online
12-10-1998
NEW YORK (AP) _ Aetna Inc. paid $1 billion Thursday for the struggling health care business of Prudential Insurance Co. in a deal that would make it the largest HMO in the country.
Aetna, which has previously bought HMO companies U.S. Healthcare and NYLCare, will have 9.7 million members under a deal that is subject to regulatory approval in the states where it operates.
The largest health maintenance organization prior to the Aetna deal was California-based Kaiser Permanente, with 8.5 million members.
Aetna shares fell $1.63 to $79.19 during a down day on the New York Stock Exchange on Thursday.
At a time when many HMOs are losing money, Aetna is hoping its increased size will reduce expenses and lead to bigger profits.
For Prudential, the sale rids it of a money-losing unit and allows it to focus on selling life insurance, property insurance and financial services.
The effect on consumers, doctor and hospitals could be less positive, as Aetna gains more negotiating leverage that could be used to raise premiums to the insured and pay less to health providers.
Aetna officials said the deal will give them funds to improve patient care and provide consumers with a greater range of doctors and hospitals to choose from.
``This puts Aetna and United (Healthcare) in one class and every other HMO in another,'' said John Erb, a health consultant with Gallagher Benefit Services.
Erb questioned whether bigger means better for Aetna, given that Prudential lost hundreds of millions of dollars in the HMO business. In the past, HMO mergers have had mixed results.
In several deals, including Aetna's purchase of U.S. Healthcare in 1996, HMOs have had difficulty integrating operations. The result has been delays in payments to doctors and hospitals and lapses in customer service. And many have failed to cut costs as promised.
Consumer groups say they have difficulty supporting a colossal-sized health plan.
``We don't see prices drop or paperwork get any easier,'' said Charlie Inlander, president of the People's Medical Society in Allentown, Pa. ``The bigger they get the less personal the business has become.''
Copyright 1998 The Associated Press All Rights Reserved.
AP Online
12-10-1998
NEW YORK (AP) _ Aetna Inc. paid $1 billion Thursday for the struggling health care business of Prudential Insurance Co. in a deal that would make it the largest HMO in the country.
Aetna, which has previously bought HMO companies U.S. Healthcare and NYLCare, will have 9.7 million members under a deal that is subject to regulatory approval in the states where it operates.
The largest health maintenance organization prior to the Aetna deal was California-based Kaiser Permanente, with 8.5 million members.
Aetna shares fell $1.63 to $79.19 during a down day on the New York Stock Exchange on Thursday.
At a time when many HMOs are losing money, Aetna is hoping its increased size will reduce expenses and lead to bigger profits.
For Prudential, the sale rids it of a money-losing unit and allows it to focus on selling life insurance, property insurance and financial services.
The effect on consumers, doctor and hospitals could be less positive, as Aetna gains more negotiating leverage that could be used to raise premiums to the insured and pay less to health providers.
Aetna officials said the deal will give them funds to improve patient care and provide consumers with a greater range of doctors and hospitals to choose from.
``This puts Aetna and United (Healthcare) in one class and every other HMO in another,'' said John Erb, a health consultant with Gallagher Benefit Services.
Erb questioned whether bigger means better for Aetna, given that Prudential lost hundreds of millions of dollars in the HMO business. In the past, HMO mergers have had mixed results.
In several deals, including Aetna's purchase of U.S. Healthcare in 1996, HMOs have had difficulty integrating operations. The result has been delays in payments to doctors and hospitals and lapses in customer service. And many have failed to cut costs as promised.
Consumer groups say they have difficulty supporting a colossal-sized health plan.
``We don't see prices drop or paperwork get any easier,'' said Charlie Inlander, president of the People's Medical Society in Allentown, Pa. ``The bigger they get the less personal the business has become.''
Copyright 1998 The Associated Press All Rights Reserved.
