Health insurer revisits Aetna takeover bid

By DANIEL RIORDAN

Southern Cross Healthcare has gone back to the Commerce Commission with a revised application to acquire Aetna Health (NZ), after its first application was turned down.

The new bid includes an undertaking that Southern Cross would divest some of Aetna's health insurance policies.

Just how many and what kind of policies Southern Cross plans to divest is not spelt out.

Last Friday, the commission cited dominance concerns in the health insurance market - one of several in which Southern Cross plays a leading role - in saying no.

Southern Cross also provides travel insurance, owns 13 hospitals and is involved in workplace injury prevention and claims processing.

US-owned Aetna's business includes health services to the Health Funding Authority and programmes to manage workplace injuries.

With Southern Cross the market leader in health insurance and Aetna a clear number two, the pair holding a combined market share close to 80 per cent, industry pundits and consumer groups were not surprised that the commission turned down the first application.

They believe the real target for Southern Cross is Aetna's more advanced computer systems.

Also at stake are its high-value contracts providing specialised administrative services for doctors.

Southern Cross' new application comes closer to making that target explicit. One highly placed industry source said the company would probably have succeeded initially had it gone to the commission making clear that those were its ultimate targets.

"But I guess they decided to go for the butcher's, knowing they could come back later."

He said one of the keys for the commission in its deliberations would be the strength of Southern Cross' assurances to offload Aetna policies, and how many and how profitable those policies might be.

Southern Cross chief executive Roger Bowie was unavailable for comment last night.

He said in a statement that he was disappointed about the continued uncertainty for Aetna staff and policyholders, but had full confidence in the commission's process.

Aetna chief executive Steve Goldberg was also unavailable.

He said in a statement that the two organisations would continue to compete until the commission approved the "merger."