UnitedHealthcare/PacifiCare health systems

CRA economists provided consulting services and expert testimony for United regarding its acquisition of PacifiCare, helping to secure regulatory approval from the DOJ and 10 state regulatory agencies. The DOJ investigation focused on three areas: the effect of the merger on the price of health insurance sold to small employers; the ability of the merged company to reduce payments to physicians below competitive levels; and United’s agreement in California to rent a provider network from CareTrust, a subsidiary of Blue Shield of California. With respect to sell-side issues, CRA’s expert demonstrated that any attempt by the combined company to exercise market power would be limited by consumer demand for broad provider networks and out-of-network benefits currently offered by many health plans. On the buy-side, our CRA expert then showed that monopsony power cannot be a concern if there is no evidence that the merger would confer market power in the sale of health insurance.