Aetna to purchase New York Life plans Acquisition will make insurer third largest in Baltimore-D.C. area

Health insurance

March 17, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

Aetna Inc.'s purchase of New York Life's health plans, announced yesterday, will strengthen Aetna in the Baltimore-Washington region, where it will be the third largest health insurer with more than 1 million subscribers.

But customers will see no immediate difference. Aetna plans to take its time merging its networks and products with New York Life's health plans, which are called NYLCare.

"The integration will be on a market-by-market basis over a two to two-and-a-half-year period, with the smaller markets assimilated earlier," said Molly Knorr, general manager for the Baltimore market for Aetna U.S. Healthcare, Aetna's health unit.

Aetna said it will pay $1.05 million for NYLCare, in the latest

consolidation among managed-care companies. Aetna is looking to concentrate in health. New York Life is now focused on life insurance and annuities.

The deal would add 2.2 million subscribers nationally to Aetna's 13.7 million.

NYLCare has 479,000 HMO members and about 125,000 in indemnity and other plans in Maryland, the District of Columbia and Virginia. Aetna has about 75,000 HMO members in the region, but 541,000 in indemnity and other health plans.

Eventually, Knorr said, Aetna plans to consolidate the hospital and provider networks, and offer more choices to its subscribers. Until the deal closes -- expected in the third quarter -- the plans will not be sure how much their networks overlap. Aetna U.S. Healthcare has 74 hospitals and 16,505 doctors in its mid-Atlantic network; NYLCare has 77 hospitals and 14,120 physicians.

The mid-Atlantic market has seen several managed-care consolidations over the last few years.

Aetna, traditionally strong in indemnity plans, bought U.S. Healthcare, an aggressive managed-care company, in April 1996 and the local plans were merged over time.

That process was completed by the beginning of this year -- barely in time for the company to start thinking about bringing NYLCare into its fold.

In January 1997, United HealthCare Corp. completed its absorption of Chesapeake Health Plan, a 20-year-old, 80,000-member Baltimore HMO. Chesapeake was combined with the health book of business of Metropolitan Life and Travelers Insurance, also acquired by United, creating United HealthCare of the Mid-Atlantic.

Two months ago, Blue Cross Blue Shield of Maryland and its District of Columbia counterpart announced they had combined under a new holding company, CareFirst Inc. Over the next year or so, they will combine products and health networks for their 2.3 million subscribers.

"I don't think this is the end of it," Knorr said of the consolidations in this region. However, she added, "If you look at the players, a number have a national presence. So those decisions will be driven more" at the corporation level than by the mid-Atlantic market.

Dr. Bernard J. Mansheim, chief operating officer of United HealthCare of the Mid-Atlantic, said he thought the market was already "reasonably consolidated at the present time." National players who are strong in this market, he said, are CIGNA, Kaiser, Prudential and United.

Rockville-based Mid Atlantic Medical Services Inc., with 1.6 million members in HMO and preferred-provider plans, still is larger than any national player in the region.

Aetna's shares closed yesterday at $84.5625, up 25 cents. New York Life is a mutual company owned by its policyholders.

Pub Date: 3/17/98

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