United Health To Acquire Humana Inc. (Published 1998) (2024)

The United Healthcare Corporation, one of the nation's largest health insurers, agreed yesterday to buy Humana Inc. for $5.5 billion, further shrinking the number of competitors in the industry and narrowing the choices of managed-care plans for consumers.

The combination of the health plans, with more than 10 million members across the country, would dominate the South Florida market. It would be the strongest insurer in Chicago and some other Midwestern cities.

Both companies said the agreement would strengthen their ability to offer services that patients want and provide nationwide coverage for big employers. But some health-benefits consultants called such a combination part of a consolidation trend that was unsettling for many Americans in managed-care arrangements.

''Humana was a very aggressive player,'' said John Erb, a consultant in Boca Raton, Fla., with Arthur J. Gallagher & Company. ''They gave the Blue Cross and United a run for their money. Now, that competition will dry up. There will be diminished choices for employers and consumers.''

Both United and Humana recently reported strong financial results, after their success in raising this year's premiums. But like other health insurers, they are under more pressure to produce profits as consumers demand fewer restrictive rules, governments propose tighter regulations, and hospitals and physicians balk at some economizing.

Managed-care companies also face a squeeze on Government payments for Medicare for the elderly and disabled, and Medicaid for low-income people. United Healthcare, based in Minnetonka, Minn., outside Minneapolis, and Humana, of Louisville, Ky., have a combined 902,000 Medicare members and 1.2 million Medicaid members.