Insurers seek to team up on managed care

March 23, 1994|By New York Times News Service

NEW YORK -- Reaching for greater size and economic power in the rapidly changing managed health care market, Travelers Inc. and Metlife said yesterday that they were in the process of exploring "possible alliances among their health care operations."

By joining their forces, the two New York-based companies would get closer to the big leagues of managed care, although they would still be considerably behind the largest national health insurers, Kaiser Permanente, Prudential, Cigna and Aetna.

In a brief written statement after a number of reports that the two companies were discussing the possibility of merging their health care businesses, Metlife, a unit of Metropolitan Life Insurance Co., and Travelers said the talks were "exploratory." They added that "it would be premature to speculate on the outcome, if any."

If the two combine, the new company would have about 980,000 members in health maintenance organizations and 4 million more in other types of managed-care groups, including discount networks for physicians and hospitals.

As the cost of traditional health insurance has soared, millions of people have switched to the cheaper managed-care plans, and companies have been scrambling to attract members.

The combined company would have branches around the country, and that geographical reach would make it more attractive to large national employers.

Industry analysts said an alliance would benefit both sides, but Michael W. Blumstein at Morgan Stanley in New York said an agreement was "not imminent," although it would fit into Travelers' "strategy of looking at alliances and joint ventures to bolster their competitive position."

Stephen D. Brink, a health care actuary in Milwaukee with Milliman & Robertson, a national health care consulting firm, said that forging a combination was attractive because the alternative -- creating a national network of health service providers from scratch -- would be "extremely difficult and very expensive."

"Size matters," said Kevin Morley, who heads research on corporate debt at CS First Boston in New York.

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