N.Y. City Loses Quick Bid to Block Health Insurers’ Merger

By Marty Tallon | November 15, 2006

A judge on Tuesday refused a request by New York City officials to immediately stop the merger of two nonprofit insurance companies that provide coverage to city workers because it violates antitrust laws.

U.S. District Judge Kenneth M. Karas said he did not believe the city would suffer irreparable harm if he permitted the merger to go forward Wednesday while he takes a longer look at the facts of the case and the legal history of similar mergers.

In a statement made after the hearing, city lawyer Michael Cardozo said the city would look for other health care providers “who can offer comparable — but less expensive — health care benefits.”

On Monday, the city filed a lawsuit to block the pending merger of Group Health Inc. and the HIP Health Plan of New York, saying the union would create a virtual monopoly in the public service health care sector.

The merger, which has been approved by the Department of Justice and state insurance regulators, would control more than 90 percent of the city’s municipal health care market and 100 percent of the low-cost market, the city said in a release.

It asked the judge to issue an immediate restraining order to block the merger from going forward while lawyers submitted arguments and evidence to prove their positions.

Before his ruling, the judge listened to arguments Tuesday.

City lawyer John Low-Beer said an immediate order was necessary to protect competition in the insurance industry. He said the two companies had “been competing vigorously for business” before deciding to merge.

“For this product we want to buy, there is no other seller who comes close in price,” he said.

GHI lawyer Stephen M. Axinn said the merger was announced 14 months ago and the city delayed challenging it, hopeful that the federal government would stop it.

“This is none of their business,” he said. “This is not an anticompetitive transaction. This is a pro-competitive situation.”

Axinn said the combined companies would save money on office expenses and pass those savings along to customers.

He said the merged entity would be better able to compete against insurance giants that are 50 times its size.

HIP lawyer Bruce Schneider said there was no need to temporarily block the transaction, especially since the contracts with the city do not expire until the end of June.

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