Large HMO to Purchase Insurer in Irvine, Offer Cheaper Rates for Both : Coverage: Firm created by merger of WellPoint and UniCare will offer health-care and workers’ compensation insurance in one ‘seamless’ package.
In the third such pairing in California since April, a large health-maintenance organization is buying a workers’ compensation insurance company.
WellPoint Health Networks Inc., California’s largest for-profit HMO, said Monday it will purchase UniCare Financial Corp. in Irvine for about $154 million.
The new company, which will operate under the UniCare name, will offer a “seamless” package of health-care and workers’ compensation insurance, which employers now usually buy separately. Such packages are less expensive for both employer and employee, said Leonard Schaeffer, WellPoint’s chief executive.
The blend of the two types of insurance is a step toward what some experts see as the future of health care: illness, job injury and auto accident insurance rolled into one package. Such packages--so-called 24-hour health coverage--would be allowed under legislation proposed in Washington by President Clinton and in Sacramento by Insurance Commissioner John Garamendi.
“Down the road, we think that’s a possibility,” Schaeffer said.
UniCare, with 1992 revenue of $146 million, employs about 325 people in the Southland. No UniCare jobs will be lost as a result of the sale, said Russell Leatherby, the company’s chief executive.
Reforms to the California workers’ compensation law passed earlier this year made it easier for companies to offer workers’ compensation insurance that is blended with the managed care model of an HMO.
Two other large HMOs have formed agreements with workers’ compensation insurers in recent months.
In April, FHP International Inc. of Fountain Valley contracted with Insurance Co. of the West in San Diego to offer a new insurance product that blends managed care with workers’ compensation. And in August, Foundation Health Corp. of Rancho Cordova in Northern California completed the purchase of Business Insurance Corp. and its operating subsidiary, California Compensation Insurance Co. (CalComp) in Marin County.
Studies show that HMO-style care can save 30% to 40% of the costs involved in workers’ compensation claims, said Edwin H. Gordon, a health-care analyst with Morgan Stanley in New York. They do so, he said, by supplying workplace safety experts. Also, an injured worker uses the HMO’s facilities or a doctor the HMO approves, increasing efficiency.
More such pairings will occur in the coming months as signals from Sacramento and Washington encourage workers’ compensation insurers to move toward a managed-care model, predicted Thomas D. Sargent, senior vice president with Conning & Co. in New York, which specializes in the insurance industry.
The merger of UniCare with WellPoint is expected to close later this year or early in 1994, subject to the approval of state and federal regulators as well as UniCare shareholders.
UniCare’s stock soared almost 40% on Monday, or $7.875, to close at $27.625 in trading on the New York Stock Exchange.
WellPoint’s stock dipped, losing 25 cents a share to close at $26.25 in trading on the New York Stock Exchange. Analyst Gordon noted that several managed-care stocks dropped on Monday, however, because of uncertainty about federal health-care reform.
