UnitedHealth/Sierra Health Insurance Merger Settlement

The Attorney General entered into a settlement with UnitedHealth Group (United) and Sierra Health Services (Sierra), regarding United’s acquisition of Sierra involving the sale of health insurance in the Las Vegas, Nevada area. Below is a description of the settlement so you can learn about some of the settlement terms.

    What is this settlement about?

    In 2007, the Attorney General investigated United’s proposed purchase of its competitor, Sierra, to understand whether it violated federal and state antitrust laws. As a result of that investigation, the Attorney General filed a lawsuit in February 2008 alleging that the merger illegally reduced competition in the Medicare Advantage insurance market in the Las Vegas area. Medicare Advantage is a program administered by the federal government which provides private health insurance to seniors. Around the time of the investigation, United and Sierra accounted for about 94% of this market in the Las Vegas area. Their competition resulted in consumers saving thousands of dollars annually, benefiting from lower prices, attractive benefits and high quality health care. If the merger would have occurred as originally proposed, the Attorney General believes these cost savings and benefits would have been lost to Las Vegas area seniors.

      Given these concerns, the Attorney General worked with the United States Department of Justice to require United and Sierra to sell-off United’s entire Medicare Advantage business in the Las Vegas area in order to gain approval to purchase Sierra. The Attorney General also required additional relief to improve the quality and delivery of health care services to Nevadans. These requirements are reflected in the settlement that the Attorney General entered into with United and Sierra in February 2008, which the Court approved in October 2008. The Court also approved an amended settlement in June 2011.

        What did the settlement provide?

        The settlement, which was effective until October 7, 2013, generally required the following:

        • United sold its Medicare Advantage business in the Las Vegas area.
        • United and Sierra could not pass on the costs of the merger, such as the purchase price United paid to purchase Sierra, to their health insurance customers.
        • United and Sierra provided a $15 million charitable contribution to various Nevada organizations and agencies.
        • United and Sierra participated in new programs, the Nevada Physician Council and the Nevada Health Care Summit, that studied and recommended ways to improve health care in Nevada.
        • When United and Sierra entered into contracts with Nevada health care providers (for example, physicians and hospitals), they complied with certain restrictions, such as bans on “most favored nation” and “all products” contract terms.
        • United and Sierra adhered to changes in its contract with University Medical Center, the only public hospital in the Las Vegas area. For instance, United and Sierra simplified billing and claims dispute processes, extended current rate terms, and changed the way it reimbursed the hospital so late fees were avoided if there were delays in payment.
        • United and Sierra assisted the Governor’s Office of Consumer Healthcare Assistance with its work, such as when that agency helps Nevadans understand various health care plans and resolves their complaints with health insurers.
        • Sierra was prohibited from using a United database, known as Ingenix. Many health insurers used this database to determine the reimbursement rates they paid to people insured by them who sought health care from providers that did not participate in the insurers’ provider networks. This database was criticized nationwide for establishing unfair lower reimbursement rates, thus increasing patients’ out-of-pocket expenses when they saw “out-of-network” providers.
        • United and Sierra complied with certain notification requirements when they raised the rates they charged their Nevada small employer customers.
        • When United and Sierra provided third party administrative support to Nevada large employers, United and Sierra could not access those employers’ confidential rate data and use that data to United’s and Sierra’s competitive advantage.
        • United and Sierra notified the Attorney General of future acquisitions that involve Nevada companies, which would then be subject to new investigations.

          How did the settlement impact Nevada consumers?

          All of the settlement terms described above impacted Nevada consumers of health care insurance in that the terms sought to maintain or improve local health care and health care plan benefits. For instance, the sell-off of United’s earlier Medicare Advantage health insurance plans helped preserve the competition in this market that existed prior to United’s acquisition of Sierra, so that prices and benefits remained competitive, and choices continued to exist after the acquisition. Also, the charitable contribution funded local health care services that in many cases would have been substantially reduced or eliminated without these funds. These services are described below.

            Who received the funds from the settlement's charitable contribution?

            The settlement provided the following Nevada and local government agencies with $15 million in charitable contributions over the course of 5 years:

            • University Medical Center received about $7.2 million to improve health care delivery and fund infrastructure improvements for the benefit of Southern Nevadans who are uninsured or underinsured.
            • University of Nevada, Las Vegas received $500,000 for graduate level nursing scholarships.
            • Nevada’s Department of Health and Human Services received about $4.5 million to restore funding for various health and wellness programs, such as the Nevada Family Resource Centers, the Nevada Autism Program, and Fetal Alcohol Clinics.
            • The Southern Nevada Health District received $2 million to provide immunizations in the Las Vegas area, as well as home visits for eligible families that are having a baby for the first time.
            • The Governor’s Office of Consumer Healthcare Assistance received$625,000 to fund small employer education on health insurance coverage options and consumer advocacy before Nevada’s Division of Insurance.
            • The Nevada Division of Insurance received $350,000 to pay for audits of insurers.

              How did the settlement impact Nevada health care providers, such as physicians?

              The settlement provisions that most directly impacted Nevada health care providers were the following:

              • “Most favored nation” clause prohibition in Nevada health care provider contracts
              • “All products” clause prohibition in Nevada health care provider contracts
              • Exclusivity prohibition in Nevada health care provider contracts
              • Nevada health care provider rate disclosure prohibition

                Also, although the Nevada Physician Council’s and Nevada Health Care Summit’s ultimate goals were improving the quality and delivery of health care to Nevadans, many of the issues studied by these programs focused on health care provider issues.

                  What is a “most favored nation” clause in a contract? What did the settlement prohibit here?

                  United and Sierra could not enter into a new or revised contract with a Nevada health care provider that contained a “most favored nation” clause. In this context, a “most favored nation” clause required the provider to charge United or Sierra the same or a lower rate that the provider charges to one of United’s or Sierra’s competitors. United’s or Sierra’s competitors included another health insurer or a large self-insured employer.

                    A “most favored nation” clause can be written in different ways. Examples of a prohibited “most favored nation” clause might be written as follows:

                      “Provider agrees that the rates reflected in this agreement’s Rate Schedule are equal to or lower than the lowest rate it charges another third party payer. If not, Provider agrees to accept payment in full from Payer at the same or lower rate charged another third party payer for the services covered in the Rate Schedule.”

                        “Provider shall charge another third party payer as much as or more than the rate charged to Payer for the same services covered in this agreement’s Rate Schedule.”

                          There was a limited circumstance, however, when United and Sierra could enforce a “most favored nation” clause in a contract they had with a Nevada health care provider. If the provider’s contract was in place before February 2008 and already contained a “most favored nation” clause, United and Sierra could enforce the clause. However, if that contract was replaced with a new one by October 7, 2013, then the new contract could no longer contain a “most favored nation” clause.

                            What is an “all products” clause in a contract? What did the settlement prohibit here?

                            United and Sierra could not enter into or enforce an “all products” clause in any contract they had with a Nevada health care provider. In this context, an “all products” clause would require that if the provider wanted to participate in a particular United or Sierra provider network (for example, one of their commercial provider networks), then the provider would also have to participate in another United or Sierra provider network (for example, another of their commercial provider networks or Sierra’s Medicare Advantage provider network).

                              An “all products” clause can be written in different ways. An example of a prohibited “all products” clause might be written as follows:

                                “Provider agrees to participate in the products listed in this agreement’s Product Participation Schedule. Payer reserves the right to reflect other products in the Product Participation Schedule during the term of the agreement, of which Provider also agrees to participate in.”

                                  What was the settlement term that prohibited exclusivity in a Nevada health care provider contract?

                                  The settlement only prohibited a certain kind of exclusivity contract between United and Sierra with a Nevada health care provider when the contract violated antitrust laws. This occurred when the provider only provided its services (or nearly all of its services) to United or Sierra.

                                    What was the Nevada Physician Council?

                                    United and Sierra established a Nevada Physician Council, whereby a group of Nevada physicians (appointed by the Attorney General and United and Sierra) met with United and Sierra representatives to discuss issues that concern the Nevada physician community. These issues included:

                                    • Quality and delivery of health care to Nevada consumers
                                    • Physician contracting practices (but not current or future rates, rate plans, or its components)
                                    • Contracting with health care facilities
                                    • Determination of evidence based medicine
                                    • Authorization requirements
                                    • Claims processing
                                    • Quality assurance and related staffing issues

                                      The Nevada Physician Council sought collaborative solutions on these issues by establishing goals and benchmarks on them that United and Sierra would voluntarily comply with. The Council also could prepare regulatory proposals to the Nevada Division of Insurance on these issues, as well as propose new laws for Nevada legislators to consider.

                                        What was the settlement term that prohibited Nevada health care provider rate disclosures?

                                        United and Sierra could not require a Nevada health care provider to disclose to United or Sierra the rates the provider charged to United’s or Sierra’s competitors. The competitors included other health insurers and large self-insured employers. However, because United is also in the business of providing third party claims administration support to large self-insured employers, an exception was permitted when United’s business units responsible for this administrative work needed the rate data to process their work. However, these United business units could not disclose the rate data to other United employees they did not work with, in particular the United or Sierra employees that negotiated rates with Nevada providers.

                                          How did the settlement impact Nevada large employers that purchased health insurance?

                                          Nevada large employers benefited from the settlement through the protection of their confidential rate data. Many large Nevada employers are self-insured and contracted with United for United to provide third party administration support services, such as processing bills incurred when the employer’s employees seek health care and analyzing claim data. These large employers, however, also competed against United and Sierra for the business of Nevada health care providers, and, in turn, independently negotiated their own rates with such providers. Yet, because United’s business units that provided administrative support to the large employers needed the large employers’ rate data to do their work, it would have been problematic for those United units to share the rate data with other United or Sierra employees they did not directly work with. Hence, the settlement prevented this from occurring, as well as prohibited United or Sierra from using the rate data in its own negotiations with Nevada health care providers under these circumstances. Moreover, United could only use the confidential information belonging to these Nevada large employers (not limited to rate information) only as permitted under the agreements United had with these employers, unless they consented otherwise.

                                            How did the settlement impact Nevada small employers that purchased health insurance?

                                            The settlement provision that most directly impacted Nevada small employers involved notification requirements for United and Sierra to comply with. United and Sierra were required to notify their Nevada small employer customers, generally those with 2 to 50 full-time employees, of their intent to raise the rates they charged these employers 60 days before the increased rate went into effect. Also, United and Sierra could not impose a penalty on a small employer customer if that employer chose to terminate their United or Sierra health insurance contract because of the rate increase.

                                              Are more details available concerning this settlement? Can you explain the settlement more?

                                              Please review the original settlement, or our 2008 press materials (press release, executive summary). You may also review the amended settlement, a related settlement that alleged United’s violation of the original settlement given conduct involving Fiserv Nevada, and our 2011 press release on this. Beyond this, you may want to seek the advice of private legal counsel. We cannot provide legal advice to the public. To clarify, the information provided here is not legal advice.

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