Southern Cross-Aetna merger on critical list

By DANIEL RIORDAN

The Commerce Commission has turned down Southern Cross Healthcare's second application to acquire Aetna Health (NZ).

The commission said the company's promise to divest a number of Aetna's medical insurance policies did not satisfy its concerns about market dominance.

The decision comes less than three weeks after the Commerce Commission knocked back the first application.

It said then that a merged entity would have too high a combined market share in the health insurance market.

Southern Cross is by far the biggest player in that market, with Aetna a clear number two.

The pair hold a combined market share close to 80 per cent.

Industry pundits and consumer groups were not surprised the commission turned down the first application.

Southern Cross also provides travel insurance and owns 13 hospitals.

It is also 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.

Southern Cross' ultimate target is believed to be Aetna's more advanced computer systems.

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

Southern Cross' second unsuccessful application came closer to making that target explicit.

Whether it will try a third time is unclear.

Executives of Southern Cross and Aetna were unavailable for comment last night.