United States v. UnitedHealth Group Incorporated; Proposed Final Judgment and Competitive Impact Statement, 12762-12774 [E8-4393]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 73, Number 47 (Monday, March 10, 2008)]
[Notices]
[Pages 12762-12774]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-4393]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. UnitedHealth Group Incorporated; Proposed Final 
Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a Complaint, proposed Final 
Judgment, Hold Separate and Asset Preservation Stipulation and Order, 
and Competitive Impact

[[Page 12763]]

Statement have been filed with the United States District Court for the 
District of Columbia in United States v. UnitedHealth Group 
Incorporated, Civil Case No. 08-0322. On February 25, 2008, the United 
States filed a Complaint alleging that the proposed acquisition by 
UnitedHealth Group Incorporated (``United'') of Sierra Health Services, 
Inc. (``Sierra'') would violate Section 7 of the Clayton Act, 15 U.S.C. 
18. The Complaint alleges that the acquisition would substantially 
reduce competition between the two largest health insurers selling 
Medicare Advantage health insurance plans to senior citizens in the Las 
Vegas, Nevada area, resulting in higher prices, less choice, and a 
reduction in the quality of Medicare Advantage plans sold to the 
Medicare-eligible population.
    The proposed Final Judgment filed with the Complaint requires the 
parties to divest United's individual Medicare Advantage business in 
the Las Vegas area to a purchaser that will remain a viable competitor 
in the market. Copies of the Complaint, proposed Final Judgment, and 
Competitive Impact Statement are available for inspection at the 
Department of Justice, Antitrust Division, Antitrust Documents Group, 
325 7th Street, NW., Room 215, Washington, DC 20530 (202-514-2481), on 
the Department of Justice's Web site at https://www.usdoj.gov/atr, and 
at the Office of the Clerk of the United States District Court for the 
District of Columbia. Copies of these materials may be obtained from 
the Antitrust Division upon request and payment of the copying fee set 
by Department of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, and responses thereto, will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Joshua H. Soven, Chief, Litigation I Section, Antitrust Division, 
U.S. Department of Justice, 1401 H Street, NW., Suite 4000, Washington, 
DC 20530 (202-307-0001).

Patricia A. Brink,
Deputy Director of Operations, Antitrust Division.
United States District Court for the District of Columbia, United 
States of America, 1401 H Street, NW. - Suite 4000, Washington, DC 
20530, Plaintiff,

v.

UnitedHealth Group Incorporated, 9900 Bren Road East, Minnetonka, MN 
55343, and Sierra Health Services, Inc., 2724 North Tenaya Way, Las 
Vegas, NV 89128, Defendants.

Civil No. 1:08-cv-00322

Judge: Ellen S. Huvelle

Filed: 2/25/2008

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this civil action to 
enjoin UnitedHealth Group Incorporated (``United'') from acquiring 
Sierra Health Services, Inc. (``Sierra''), and alleges as follows:
    1. Unless enjoined, United's proposed acquisition of Sierra will 
substantially increase concentration in an already highly concentrated 
market that is no broader than Medicare Advantage health insurance 
plans sold to senior citizens (``seniors'') and other Medicare-eligible 
individuals in Clark and Nye Counties, Nevada, (``the Las Vegas 
area''). As defined by Federal law, Medicare Advantage plans consist of 
Medicare Advantage health maintenance organization plans (``MA-HMO''), 
Medicare Advantage preferred provider organization plans (``MA-PPO''), 
and Medicare Advantage private fee-for-service plans (``MA-PFFS''). See 
42 U.S.C. 1395w-21(a)(2). United and Sierra together account for 
approximately 94 percent of the total enrollment in Medicare Advantage 
plans in the Las Vegas area, which total accounts for approximately 
$840 million in annual commerce.
    2. Congress created the Medicare Advantage program as a private 
market alternative to government-provided traditional Medicare. In 
establishing the Medicare Advantage program, Congress intended that 
vigorous competition among private Medicare Advantage insurers would 
lead insurers to offer seniors richer and more affordable benefits than 
traditional Medicare, provide a wider array of health insurance 
choices, and be more responsive to the demands of seniors.
    3. The acquisition will decrease competition substantially among 
Medicare Advantage plans in the Las Vegas area and eliminate 
substantial head-to-head competition between United (through the 
PacifiCare health insurance business that United acquired in 2005) and 
Sierra in the provision of such plans. The competition between United 
and Sierra has, for years, benefited thousands of seniors. Through 
competition, United's and Sierra's plans provide seniors with 
substantially greater benefits than those available under traditional 
Medicare alternatives, saving seniors thousands of dollars in yearly 
health care costs. The proposed acquisition will end that competition, 
eliminating the pressure that these close competitors place on each 
other to maintain attractive benefits, lower prices, and high-quality 
health care.
    4. United's acquisition of Sierra is likely to reduce competition 
substantially in the sale of Medicare Advantage plans in the Las Vegas 
area in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. 
Accordingly, the United States seeks an order permanently enjoining the 
transaction.

I. Jurisdiction and Venue

    5. The United States files this Complaint pursuant to Sections 15 
and 16 of the Clayton Act, as amended, 15 U.S.C. 25 and 26, to prevent 
and restrain the defendants from violating Section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18.
    6. United and Sierra are engaged in interstate commerce and in 
activities that substantially affect interstate commerce. The Court has 
jurisdiction over this action pursuant to Section 15 of the Clayton 
Act, as amended, 15 U.S.C. 25, and 28 U.S.C. 1331, 1337.
    7. United and Sierra transact business and are found in the 
District of Columbia. Venue is proper under 15 U.S.C. 22 and 28 U.S.C. 
1391(c).

II. The Defendants and the Proposed Transaction

    8. United is a corporation organized and existing under the laws of 
Minnesota and has its principal place of business in Minnetonka, 
Minnesota. United is the largest health insurer in the United States, 
providing health insurance and other services to more than 70 million 
people nationwide. In 2007, United reported revenues of approximately 
$75 billion.
    9. United's Medicare Advantage products are sold under the Secure 
Horizons and AARP brands. United provides health insurance to 
approximately 27,800 Medicare Advantage enrollees in the Las Vegas 
area. Approximately 26,000 of these enrollees are individual enrollees 
whose enrollment is not affiliated with an employer or other group. The 
remainder are group retirees who enrolled in a United Medicare 
Advantage plan through an employer or other group.
    10. In the Las Vegas area, United has a well-established managed-
care network that United uses to provide services to enrollees in its 
MA-HMO plans. Health care services provided by HealthCare Partners, 
LLC, The Physicians IPA, Inc., and Summit Medical Group are an integral 
part of United's managed-care network in the Las Vegas area.
    11. Sierra is a corporation organized and existing under the laws 
of Nevada and has its principal place of business in Las Vegas, Nevada. 
Sierra is the largest health insurer in Nevada,

[[Page 12764]]

providing health insurance and other services to more than 655,000 
people. In 2007, Sierra reported revenues of $1.9 billion.
    12. Sierra sells Medicare Advantage plans under the Senior 
Dimensions, Sierra Spectrum, Sierra Nevada Spectrum, and Sierra Optima 
Select brands. Sierra provides health insurance to approximately 49,500 
Medicare Advantage enrollees in the Las Vegas area.
    13. Sierra owns Las Vegas's largest medical group, Southwest 
Medical Associates, Inc. (``SMA''), which employs approximately 250 
physicians and other health care professionals. SMA provides care 
almost exclusively to Sierra members and provides a substantial portion 
of the care delivered to Sierra's Medicare Advantage members.
    14. On March 11, 2007, United and Sierra entered into a merger 
agreement, whereby United agreed to acquire all outstanding shares of 
Sierra. The transaction is valued at approximately $2.6 billion.

III. The Medicare Advantage Insurance Market

    15. The federal government provides and facilitates the provision 
of health insurance to millions of Medicare-eligible citizens through 
two types of programs: traditional Medicare (also known as Original 
Medicare) and Medicare Advantage. Under traditional Medicare, a 
beneficiary receives hospital coverage under Medicare Part A and can 
elect to receive coverage for physician and out-patient services under 
Part B. For Part A, the government charges no monthly premium if the 
beneficiary was in the workforce and paid Medicare taxes, but for Part 
B, the government deducts a monthly premium (currently $96.40 for most 
beneficiaries) from beneficiaries' Social Security checks. In addition, 
beneficiaries must pay deductibles and/or co-insurance for doctor 
visits and hospital stays. If beneficiaries want to limit potentially 
catastrophic out-of-pocket costs, they need to purchase a separate 
Medicare Supplement plan. For prescription drug coverage, seniors 
enrolled in traditional Medicare must purchase Medicare Part D drug 
coverage for an additional premium.
    16. In contrast, Medicare Advantage plans are offered by private 
insurance companies. These companies compete to offer the most 
attractive Medicare Advantage benefits to enrollees in a region. Most 
successful Medicare Advantage plans, including those in the Las Vegas 
area, offer substantially richer benefits at lower costs to enrollees 
than traditional Medicare, including lower co-payments, lower co-
insurance, caps on total yearly out-of-pocket costs, prescription drug 
coverage, vision coverage, health club memberships, and other benefits 
that traditional Medicare does not cover.
    17. An insurance company that seeks to offer a Medicare Advantage 
plan in a region must submit a bid to the Centers for Medicare and 
Medicaid Services (``CMS'') for each Medicare Advantage plan that it 
intends to offer. The bid must provide the insurer's anticipated costs 
per member to cover the basic Medicare Part A and Part B benefits. 
Those costs, including an anticipated profit margin, are compared to a 
Medicare benchmark that reflects, in part, the government's likely cost 
of covering the beneficiaries. If the insurer's bid for Medicare 
benefits is lower than the benchmark, the Medicare program retains 25 
percent of the savings and the insurer must use the other 75 percent to 
provide supplemental benefits or lower premiums to enrollees. 
Accordingly, the lower the insurer's projected costs, the more benefits 
seniors enrolled in the insurer's plan will have available to them.
    18. A sufficient number of seniors in the Las Vegas area would not 
switch away from Medicare Advantage plans to traditional Medicare in 
the event of a small but significant reduction in benefits under the 
plans, or a small but significant increase in price, to render the 
benefit decrease or price increase unprofitable. Accordingly, in the 
Las Vegas area, the sale of Medicare Advantage plans is a relevant 
product market and a line of commerce under Section 7 of the Clayton 
Act, 15 U.S.C. 18.

IV. Relevant Geographic Market

    19. Residents in the Las Vegas area (Clark and Nye Counties) may 
only enroll in Medicare Advantage plans that CMS approves for the 
county in which they live. Consequently, they could not turn to 
Medicare Advantage plans elsewhere in the state or in other regions in 
response to a reduction in competition between Sierra and United in the 
Las Vegas area. Accordingly, the Las Vegas area is a relevant 
geographic market or section of the country within the meaning of 
Section 7 of the Clayton Act.

V. Market Concentration

    20. The market for Medicare Advantage plans is highly concentrated 
and would become significantly more concentrated as a result of the 
proposed acquisition. Sierra accounts for approximately 60 percent of 
Medicare Advantage enrollees in the Las Vegas area. United accounts for 
approximately 34 percent. If consummated, the merger would give United 
a 94 percent market share. The Herfindahl-Hirschman Index (``HHI'') (a 
standard measure of market concentration defined and explained in 
Appendix A) for the Las Vegas area Medicare Advantage market indicates 
that the market is highly concentrated. The proposed merger would 
increase concentration by 4,080 points, from 4,756 to 8,836.
    21. Sierra and United (through PacifiCare) have accounted for well 
over 90 percent of Medicare Advantage enrollment in the Las Vegas area 
for each of the past seven years.

VI. Anticompetitive Effects

    22. Under the Medicare Advantage program, private competition for 
Medicare-eligible individuals has produced substantial benefits for 
consumers throughout the country, including in the Las Vegas area.
    23. Sierra and United have competed vigorously with each other to 
improve their Medicare Advantage plans and attract members. They 
monitor each other's benefits to stay competitive and consider each 
other to be very important competitors.
    24. United and Sierra compete against each other for newly 
Medicare-eligible individuals, try to attract members from each other, 
and seek to avoid losing members to each other, by offering plans with 
zero premiums, reducing co-payments, eliminating deductibles, improving 
drug coverage, offering desirable fitness benefits, and attempting to 
make their provider networks more attractive to potential members. Such 
competition will be lost in the Las Vegas area if the proposed 
acquisition is completed, to the substantial detriment of tens of 
thousands of seniors. After the acquisition, the combined United/Sierra 
will not have the same incentive to improve benefits as the two 
separate companies do today, and likely will raise prices or reduce 
benefits and services.
    25. Competition from existing providers of Medicare Advantage plans 
and new entrants is unlikely to prevent anticompetitive effects. Such 
firms face substantial cost, reputation, and distribution disadvantages 
that will likely make them unable to prevent United from raising prices 
or reducing benefits and services.
    26. Accordingly, the proposed transaction likely will substantially 
lessen competition in violation of Section 7 of the Clayton Act.

[[Page 12765]]

VII. Violations Alleged

    27. United's acquisition of Sierra would likely substantially 
lessen competition in the sale of Medicare Advantage health insurance 
in the Las Vegas area, in violation of Section 7 of the Clayton Act, 15 
U.S.C. 18.
    28. The proposed transaction would likely have the following 
effects, among others:
    (a) Lessening substantially actual and potential competition in the 
sale of Medicare Advantage insurance;
    (b) eliminating actual and potential competition between United and 
Sierra in the sale of Medicare Advantage insurance;
    (c) increasing prices for Medicare Advantage insurance above those 
that would prevail absent the acquisition; and
    (d) decreasing the level of benefits and service associated with 
Medicare Advantage insurance to levels below those that would prevail 
absent the acquisition.

VIII. Prayer for Relief

    The United States requests that this Court:
    1. Adjudge the proposed acquisition to violate Section 7 of the 
Clayton Act, 15 U.S.C. 18;
    2. Permanently enjoin and restrain the defendants from carrying out 
the Agreement and Plan of Merger between United and Sierra dated March 
11, 2007, or from entering into or carrying out any agreement, 
understanding, or plan by which United would merge with or acquire 
Sierra, its capital stock, or any of its assets;
    3. Award the United States the costs of this action; and
    4. Award the United States such other relief as the Court may deem 
just and proper.

Respectfully submitted,

Thomas O. Barnett (DC Bar  426840)
Assistant Attorney General
Antitrust Division

Deborah A. Garza (DC Bar  395259)
Deputy Assistant Attorney General
Antitrust Division

Patricia A. Brink
Deputy Director of Operations
Antitrust Division

Joshua H. Soven (DC Bar  436633)
Chief, Litigation I Section
Antitrust Division

Joseph Miller (DC Bar  439965)
Assistant Chief, Litigation I Section
Antitrust Division

Peter J. Mucchetti (DC Bar  463202)
Mitchell H. Glende
N. Christopher Hardee (DC Bar  458168)
Tiffany C. Joseph-Daniels
Barry J. Joyce
Ryan M. Kantor
John P. Lohrer (DC Bar  438939)
Richard S. Martin
Natalie A. Rosenfelt
Michelle Seltzer (DC Bar  475482)

Trial Attorneys, U.S. Department of Justice, Antitrust Division, 
Litigation I Section, 1401 H Street, NW., Suite 4000, Washington, DC 
20530, (202) 353-4211, (202) 307-5802 (fax).

Dated: February 25, 2008.

APPENDIX A

Herfindahl-Hirschman Index

    ``HHI'' means the Herfindahl-Hirschman Index, a commonly 
accepted measure of market concentration. It is calculated by 
squaring the market share of each firm competing in the market and 
then summing the resulting numbers. For example, for a market 
consisting of four firms with shares of 30%, 30%, 20%, and 20%, the 
HHI is 2600 (302 + 302 + 202 + 202 = 2600). The HHI takes into 
account the relative size distribution of the firms in a market and 
approaches zero when a market consists of a large number of small 
firms. The HHI increases both as the number of firms in the market 
decreases and as the disparity in size between those firms 
increases.
    Markets in which the HHI is between 1000 and 1800 points are 
considered to be moderately concentrated, and those in which the HHI 
is in excess of 1800 points are considered to be highly 
concentrated. See Horizontal Merger Guidelines 1.51 (revised Apr. 8, 
1997). Transactions that increase the HHI by more than 100 points in 
concentrated markets presumptively raise antitrust concerns under 
the guidelines issued by the U.S. Department of Justice and Federal 
Trade Commission. See id.

Certificate of Service

    I hereby certify that I served a copy of the foregoing Complaint, 
proposed Final Judgment, Competitive Impact Statement, Hold Separate 
and Asset Preservation Stipulation and Order, and Explanation of 
Consent Decree Procedures via e-mail and first class, United States 
mail on February 25, 2008.
    For Defendant Unitedhealth Group, Inc.:

Robert E. Bloch, Esq., Mayer, Brown, Rowe & Maw, LLP, 1909 K Street, 
NW., Washington, DC 20006-1101.

Steven L. Holley, Esq., Sullivan & Cromwell, LLP, 125 Broad Street, New 
York, NY 10004.

    For Defendant Sierra Health Services, Inc.:

Arthur N. Lerner, Esq., Crowell & Moring, LLP, 1001 Pennsylvania Ave. 
NW., Washington, DC 20004.

Peter J. Mucchetti, Attorney, Litigation I Section, U.S. Department of 
Justice--Antitrust Division.

Final Judgment

    Whereas, plaintiff, United States of America, filed its Complaint 
on February 25, 2008, and the United States and Defendant UnitedHealth 
Group Incorporated and Defendant Sierra Health Services, Inc., by their 
respective attorneys, have consented to the entry of this Final 
Judgment without trial or adjudication of any issue of fact or law and 
without this Final Judgment constituting any evidence against or 
admission by any party regarding any issue of fact or law;
    And whereas, Defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court; and whereas, the 
essence of this Final Judgment is the prompt and certain divestiture of 
certain rights and assets by Defendants to ensure that competition is 
not substantially lessened in the sale of Medicare Advantage Plans to 
senior citizens and others in the Las Vegas, Nevada area;
    And whereas, the United States requires Defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And whereas, Defendants have represented to the United States that 
the divestiture required by this Final Judgment can and will be made, 
and that Defendants will not later raise any claim of hardship or 
difficulty as grounds for asking the Court to modify any of the 
provisions of this Final Judgment;
    Now Therefore, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is ordered, Adjudged, and decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of, and each of 
the parties to, this action. The Complaint states a claim upon which 
relief may be granted against Defendants under Section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18.

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' means the entity to whom the Divestiture Assets are 
divested.
    B. ``Clark County'' means Clark County, Nevada.
    C. ``Clark County CMS Plans'' means the individual Medicare 
Advantage plans offered under CMS Plan Nos. H2949-002, H2949-009, and 
H2949-012, but does not include any Series 800 Medicare Advantage plans 
offered to retirees through commercial customers or contracts.
    D. ``Clark and Nye County CMS Plans'' means the Clark County CMS 
Plans and the Nye County CMS Plans.

[[Page 12766]]

    E. ``CMS'' means the Centers for Medicare and Medicaid Services, an 
agency within the U.S. Department of Health and Human Services.
    F. ``Divestiture Assets'' means all tangible and intangible assets 
dedicated to the administration, operation, selling, and marketing of 
the Clark and Nye County CMS Plans, including (1) all of United's 
rights and obligations under United's Medicare Contract No. H2949 with 
CMS relating to the Clark and Nye County CMS Plans, including the right 
to offer the Medicare Advantage plan to individual enrollees pursuant 
to the bids and Evidence of Coverage filed with CMS in 2007 for the 
2008 contract year, and the right to receive from CMS a per member per 
month capitation payment in exchange for providing or arranging for the 
benefits enumerated in the bids and Evidence of Coverage, and (2) 
copies of all business, financial and operational books, records, and 
data, both current and historical, that relate to the Clark County CMS 
Plans or the Nye County CMS Plans. Where books, records, or data relate 
to the Clark County CMS Plans or the Nye County CMS Plans, but not 
solely to these Plans, United shall provide excerpts relating to these 
Plans. Nothing herein requires United to take any action prohibited by 
the Health Insurance Portability and Accountability Act of 1996 
(HIPAA).
    G. ``Evidence of Coverage'' means the document that outlines an 
enrollee's benefits and exclusions under a Medicare Advantage Plan.
    H. ``HealthCare Partners'' means JSA Healthcare Nevada, LLC, a 
Nevada limited liability company, and its affiliated entities, 
including HealthCare Partners, LLC and Summit Medical Group.
    I. ``Humana'' means Humana Inc., a Delaware corporation with its 
headquarters in Louisville, Kentucky.
    J. ``Las Vegas Area'' means Clark County and Nye County.
    K. ``Medicare Advantage Line of Business'' means the operations of 
United that implement and administer the Clark and Nye County CMS 
Plans.
    L. ``Medicare Advantage Plan'' means Medicare Advantage health 
maintenance organization plans, Medicare Advantage preferred provider 
organization plans, and Medicare Advantage private fee-for-service 
plans, as defined by 42 U.S.C. 1395w-21(a)(2).
    M. ``Nye County'' means Nye County, Nevada.
    N. ``Nye County CMS Plans'' means the individual Medicare Advantage 
plans offered under CMS Plan Nos. H2949-007 and H2949-011, but does not 
include any Series 800 Medicare Advantage plans offered to retirees 
through commercial customers or contracts.
    O. ``PIPA'' means The Physicians IPA, Inc., a Nevada non-profit 
corporation based in Las Vegas, Nevada.
    P. ``Provider Network'' means all health care providers, including 
physicians, hospitals, ancillary service providers, and other health 
care providers with which United contracts for the provision of covered 
medical services for United's Medicare Advantage Plans in the Las Vegas 
area.
    Q. ``Sierra'' means Defendant Sierra Health Services, Inc., a 
Nevada corporation with its headquarters in Las Vegas, Nevada, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their respective 
directors, officers, managers, agents, and employees.
    R. ``Transaction'' means the merger contemplated by the Agreement 
and Plan of Merger dated as of March 11, 2007, by and among United, 
Sapphire Acquisition, Inc. and Sierra.
    S. ``United'' means Defendant UnitedHealth Group Incorporated, a 
Minnesota corporation with its headquarters in Minnetonka, Minnesota, 
its successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their respective 
directors, officers, managers, agents, and employees.

III. Applicability

    A. This Final Judgment applies to United and Sierra, and to all 
other persons in active concert or participation with any of them who 
receive actual notice of this Final Judgment by personal service or 
otherwise.
    B. If, prior to complying with Section IV and VI of this Final 
Judgment, Defendants sell or otherwise dispose of all or substantially 
all of their assets or of lesser business units that include the 
Divestiture Assets, they shall require the purchaser to be bound by the 
provisions of this Final Judgment. Defendants need not obtain such an 
agreement from the Acquirer of the assets divested pursuant to this 
Final Judgment.

IV. Divestiture of the Divestiture Assets

    A. Defendants are ordered, within forty-five (45) calendar days 
after the filing of the Complaint in this matter, to divest the 
Divestiture Assets in a manner consistent with this Final Judgment to 
an Acquirer acceptable to the United States in its sole discretion and 
on terms acceptable to the United States in its sole discretion, 
including any agreement for transitional support services entered into 
pursuant to Section IV(J) of this Final Judgment. The United States, in 
its sole discretion, may grant one or more extensions of this time 
period, not to exceed sixty (60) calendar days in total, and shall 
notify the Court in each such circumstance. Defendants shall accomplish 
the divestiture of the Divestiture Assets as expeditiously as possible 
and in such a manner as will allow the Acquirer to be a viable, ongoing 
business engaged in the sale of Medicare Advantage Plans in the Las 
Vegas Area.
    B. If applications for approval have been filed with CMS and the 
appropriate other governmental units within twenty (20) calendar days 
after the filing of the Complaint in this matter, but these required 
approvals have not been issued before the end of the period permitted 
for Divestiture in Section IV(A), the United States may extend the 
period for Divestiture until five (5) business days after all necessary 
government approvals have been received.
    C. The Divestiture shall be accomplished in such a way as to 
satisfy the United States, in its sole discretion, that the Divestiture 
Assets can and will be used by the Acquirer as part of a viable, 
ongoing business engaged in the sale of Medicare Advantage Plans in the 
Las Vegas Area. Defendants must demonstrate to the sole satisfaction of 
the United States that the Divestiture will remedy the competitive harm 
alleged in the Complaint. The Divestiture shall be:
    (1) Made to an Acquirer that, in the United States's sole judgment, 
has the intent and capability (including the necessary managerial, 
operational, technical, and financial capability) to compete 
effectively in the sale of Medicare Advantage Plans in the Las Vegas 
Area; and
    (2) Accomplished so as to satisfy the United States, in its sole 
discretion, that none of the terms of any agreement between Defendants 
and the Acquirer gives Defendants the ability unreasonably to raise the 
Acquirer's costs, to lower the Acquirer's efficiency, or otherwise to 
interfere with the Acquirer's ability to compete effectively.
    D. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Divestiture Assets.
    E. Defendants shall provide to the Acquirer, the United States, and 
any Monitoring Trustee, information relating to the personnel primarily 
involved in the operation of the Divestiture Assets to enable the 
Acquirer to make offers of employment to those persons.

[[Page 12767]]

Defendants shall not interfere with any negotiations by the Acquirer to 
employ any of those persons. For a period of two (2) years from the 
filing of the Complaint in this matter, Defendants shall not hire or 
solicit to hire any such person who was hired by the Acquirer, unless 
the Acquirer has notified such person that the Acquirer does not intend 
to continue to employ the person.
    F. Defendants shall assist the negotiation of and entry into 
agreement(s) between the Acquirer and HealthCare Partners that will 
allow members of the Clark and Nye County CMS Plans to have continued 
access to substantially all of United's Provider Network as of January 
2008 on terms no less favorable than United's agreements as of January 
2008.
    G. Upon completing the Divestiture and through March 31, 2010, 
Defendants shall have no agreements with HealthCare Partners or PIPA 
that provide for access by United to HealthCare Partners or PIPA in 
connection with enrollees in any type of individual Medicare Advantage 
plan of Defendants in the Las Vegas Area.
    H. Upon completing the Divestiture and through March 31, 2009, 
Defendants shall not use the AARP brand, or any other substantially 
similar brand, name, or logo, for any type of individual Medicare 
Advantage plan of Defendants in the Las Vegas Area. Upon completing the 
Divestiture and through March 31, 2010, Defendants shall not use the 
SecureHorizons brand, or any other substantially similar brand, name, 
or logo, for any type of individual Medicare Advantage plan of 
Defendants in the Las Vegas Area.
    I. At the Acquirer's option, and subject to approval by the United 
States, Defendants will allow the Acquirer to license and use the 
SecureHorizons brand, and any other substantially similar brand, name, 
or logo, with the Divestiture Assets for twelve months upon completing 
the Divestiture.
    J. At the Acquirer's option, and subject to approval by the United 
States, Defendants will provide transitional support services for 
medical claims processing, appeals and grievances, call-center support, 
enrollment and eligibility services, access to form templates, pharmacy 
services, disease management, Medicare risk-adjustment services, 
quality-assurance services, and such other transition services that are 
reasonably necessary for the Acquirer to operate the Divestiture 
Assets. Defendants shall not provide such transitional support services 
for more than twelve months from the date of the completion of the 
Divestiture unless the United States shall otherwise approve.
    K. To ensure an effective transition and transfer of enrollees in 
the Clark and Nye County CMS Plans to the Acquirer, Defendants shall 
cooperate and work with the Acquirer in transition planning and 
implementing the transfer of the Divestiture Assets.
    L. Defendants will communicate and cooperate fully with the 
Acquirer to promptly identify and obtain all consents of government 
agencies necessary to divest the Divestiture Assets.
    M. Defendants will communicate and cooperate fully with the 
Acquirer to work in good faith with CMS to select a novation process 
that is efficient and minimizes any potential disruption and confusion 
to enrollees in the Clark and Nye County CMS Plans.
    N. United shall warrant to the Acquirer that, since January 1, 
2007, United has operated the Divestiture Assets in all material 
respects in the ordinary course of business consistent with past 
practices except for the global capitation agreement that United 
entered into with HealthCare Partners effective January 1, 2008. United 
shall also warrant that there has not been (a) any material loss or 
change with respect to the Divestiture Assets; (b) any event, 
circumstance, development, or change that has had a material adverse 
effect on the Divestiture Assets; or (c) any change by United of its 
accounting or actuarial methods, principles, or practices that is 
relevant to the Divestiture Assets.
    O. Defendants shall comply with all laws applicable to the 
Divestiture Assets.
    P. Defendants shall not take any action having the effect of 
delaying the authorization or scheduling of health care services 
provided to enrollees in the Clark and Nye County CMS Plans in a manner 
inconsistent with Defendants' past practice with respect to the Clark 
and Nye County CMS Plans.
    Q. Defendants shall not make any material change to the customary 
terms and conditions upon which it does business with respect to the 
Medicare Advantage Line of Business that would be expected, 
individually or in the aggregate, to have a materially adverse effect 
on the Medicare Advantage Line of Business.
    R. United shall identify its top ten independent insurance agents, 
general agents, producers, and brokers (collectively, ``Brokers'') that 
have entered into a Broker contract with respect to the Medicare 
Advantage Line of Business along with the corresponding number of 
enrollees produced by each such Broker. United will introduce the 
Acquirer to any such Broker for the purpose of the Acquirer having an 
opportunity, at the Acquirer's option, to negotiate an agreement with 
the Broker to market and sell the Clark and Nye County CMS Plans after 
the completion of the Divestiture.
    S. Defendants shall first attempt to sell the Divestiture Assets to 
Humana.
    T. If Defendants fail to divest the Divestiture Assets by May 15, 
2008, at the discretion of the United States, United shall be required 
to submit all necessary filings to CMS to ensure that the Divestiture 
Assets remain a viable, ongoing business, offering the same Medicare 
Advantage Plans that United offered in 2008 with comparable benefits 
and premiums.

V. Appointment of Monitoring Trustee

    A. Upon the filing of this Final Judgment, the United States may, 
in its sole discretion, appoint a Monitoring Trustee, subject to 
approval by the Court.
    B. The Monitoring Trustee shall have the power and authority to 
monitor Defendants' compliance with the terms of this Final Judgment 
and the Hold Separate and Asset Preservation Stipulation and Order 
entered by this Court and shall have such powers as this Court deems 
appropriate. Subject to Section V(D) of this Final Judgment, the 
Monitoring Trustee may hire at the cost and expense of United any 
consultants, accountants, attorneys, or other persons, who shall be 
solely accountable to the Monitoring Trustee, reasonably necessary in 
the Monitoring Trustee's judgment.
    C. Defendants shall not object to actions taken by the Monitoring 
Trustee in fulfillment of the Monitoring Trustee's responsibilities 
under any Order of this Court on any ground other than the Monitoring 
Trustee's malfeasance. Any such objections by Defendants must be 
conveyed in writing to the United States and the Monitoring Trustee 
within ten (10) calendar days after the action taken by the Monitoring 
Trustee giving rise to the Defendants' objection.
    D. The Monitoring Trustee shall serve at the cost and expense of 
United, on such terms and conditions as the United States approves. The 
compensation of the Monitoring Trustee and any consultants, 
accountants, attorneys, and other persons retained by the Monitoring 
Trustee shall be on reasonable and customary terms commensurate with 
the individuals' experience and responsibilities.
    E. The Monitoring Trustee shall have no responsibility or 
obligation for the operation of Defendants' businesses.
    F. Defendants shall assist the Monitoring Trustee in monitoring

[[Page 12768]]

Defendants' compliance with their individual obligations under this 
Final Judgment and under the Hold Separate and Asset Preservation 
Stipulation and Order. The Monitoring Trustee and any consultants, 
accountants, attorneys, and other persons retained by the Monitoring 
Trustee shall have full and complete access to the personnel, books, 
records, and facilities relating to the Divestiture Assets, subject to 
reasonable protection for trade secret or other confidential research, 
development, or commercial information or any applicable privileges. 
Defendants shall take no action to interfere with or to impede the 
Monitoring Trustee's accomplishment of its responsibilities.
    G. After its appointment, the Monitoring Trustee shall file monthly 
reports with the United States and the Court setting forth the 
Defendants' efforts to comply with their individual obligations under 
this Final Judgment and under the Hold Separate and Asset Preservation 
Stipulation and Order. To the extent such reports contain information 
that the trustee deems confidential, such reports shall not be filed in 
the public docket of the Court.
    H. The Monitoring Trustee shall serve until the divestiture of all 
the Divestiture Assets is finalized pursuant to either Section IV or 
Section VI of this Final Judgment and any agreement(s) for transitional 
support services described in Section IV(J) herein have expired.

VI. Appointment of Trustee

    A. If Defendants have not divested the Divestiture Assets within 
the time period specified in Section IV(A), Defendants shall notify the 
United States of that fact in writing. Upon application of the United 
States, the Court shall appoint a trustee selected by the United States 
and approved by the Court to effect the divestiture of the Divestiture 
Assets.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Divestiture Assets. The 
trustee shall have the power and authority to accomplish the 
divestiture to an Acquirer acceptable to the United States at such 
price and on such terms as are then obtainable upon reasonable effort 
by the trustee, subject to the provisions of Sections IV, VI, and VII 
of this Final Judgment, and shall have such other powers as this Court 
deems appropriate. Subject to Section VI(D) of this Final Judgment, the 
trustee may hire at the cost and expense of Defendants any investment 
bankers, attorneys, or other agents, who shall be solely accountable to 
the trustee, reasonably necessary in the trustee's judgment to assist 
in the divestiture.
    C. Defendants shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
Defendants must be conveyed in writing to the United States and the 
trustee within ten (10) calendar days after the trustee has provided 
the notice required under Section VII.
    D. The trustee shall serve at the cost and expense of Defendants, 
on such terms and conditions as the United States approves, and shall 
account for all monies derived from the sale of the assets sold by the 
trustee and all costs and expenses so incurred. After approval by the 
Court of the trustee's accounting, including fees for its services and 
those of any professionals and agents retained by the trustee, all 
remaining money shall be paid to Defendants and the trust shall then be 
terminated. The compensation of the trustee and any professionals and 
agents retained by the trustee shall be reasonable in light of the 
value of the Divestiture Assets and based on a fee arrangement 
providing the trustee with an incentive based on the price and terms of 
the divestiture and the speed with which it is accomplished, but 
timeliness is paramount.
    E. Defendants shall assist the trustee in accomplishing the 
required divestiture. The trustee and any consultants, accountants, 
attorneys, and other persons retained by the trustee shall have full 
and complete access to the personnel, books, records, and facilities 
relating to the Divestiture Assets, and Defendants shall develop 
financial and other information relevant to such business as the 
trustee may reasonably request, subject to reasonable protection for 
trade secret or other confidential research, development, or commercial 
information. Defendants shall take no action to interfere with or to 
impede the trustee's accomplishment of the divestiture.
    F. After its appointment, the trustee shall file monthly reports 
with the United States and the Court setting forth the trustee's 
efforts to accomplish the divestiture ordered under this Final 
Judgment. To the extent that such reports contain information that the 
trustee deems confidential, such reports shall not be filed in the 
public docket of the Court. Such reports shall include the name, 
address, and telephone number of each person who, during the preceding 
month, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, any interest in the Divestiture Assets, and 
shall describe in detail each contact with any such person. The trustee 
shall maintain full records of all efforts made to divest the 
Divestiture Assets.
    G. If the trustee has not accomplished the divestiture ordered 
under this Final Judgment within six months after its appointment, the 
trustee shall promptly file with the Court a report setting forth (1) 
the trustee's efforts to accomplish the required divestiture, (2) the 
reasons, in the trustee's judgment, why the required divestiture has 
not been accomplished, and (3) the trustee's recommendations. To the 
extent that such reports contain information that the trustee deems 
confidential, such reports shall not be filed in the public docket of 
the Court. The trustee shall at the same time furnish such report to 
the United States which shall have the right to make additional 
recommendations consistent with the purpose of the trust. The Court 
thereafter shall enter such orders as it shall deem appropriate to 
carry out the purpose of the Final Judgment, which may, if necessary, 
include extending the trust and the term of the trustee's appointment 
by a period requested by the United States.

VII. Notice of Proposed Divestiture

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, Defendants or the trustee, whichever is then 
responsible for effecting the divestiture required herein, shall notify 
the United States and any Monitoring Trustee of any proposed 
divestiture required by Section IV or VI of this Final Judgment. If the 
trustee is responsible, it shall similarly notify Defendants. The 
notice shall set forth the details of the proposed divestiture and list 
the name, address, and telephone number of each person not previously 
identified who offered or expressed an interest in or desire to acquire 
any ownership interest in the Divestiture Assets, together with full 
details of the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from Defendants, 
the proposed Acquirer, any other third party, or the trustee, if 
applicable, additional information concerning the proposed divestiture, 
the proposed Acquirer, and any other potential Acquirer. Defendants and 
the trustee shall furnish any additional information requested within 
fifteen (15) calendar days of the receipt of the request, unless the 
parties shall otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from Defendants, the 
proposed Acquirer, any

[[Page 12769]]

third party, and the trustee, whichever is later, the United States 
shall provide written notice to Defendants and the trustee, if there is 
one, stating whether or not it objects to the proposed divestiture. If 
the United States provides written notice that it does not object, the 
divestiture may be consummated, subject only to Defendants' limited 
right to object to the sale under Section VI(C) of this Final Judgment. 
Absent written notice that the United States does not object to the 
proposed Acquirer or upon objection by the United States, a divestiture 
proposed under Section IV or Section VI shall not be consummated. Upon 
objection by Defendants under Section VI(C), a divestiture proposed 
under Section VI shall not be consummated unless approved by the Court.

VIII. Financing

    Defendants shall not finance all or any part of any Purchase made 
pursuant to Section IV or VI of this Final Judgment.

IX. Hold Separate and Preservation of Assets

    Until the divestiture required by this Final Judgment has been 
accomplished, Defendants shall take all steps necessary to comply with 
the Hold Separate and Asset Preservation Stipulation and Order entered 
by this Court. Defendants shall take no action that will jeopardize any 
divestiture ordered by this Court.

X. Affidavits and Records

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, and every thirty (30) calendar days thereafter until 
the divestiture has been completed under Section IV or VI, Defendants 
shall deliver to the United States and any Monitoring Trustee an 
affidavit as to the fact and manner of its compliance with Section IV 
or VI of this Final Judgment. Each such affidavit shall include the 
name, address, and telephone number of each person who, during the 
preceding thirty (30) calendar days, made an offer to acquire, 
expressed an interest in acquiring, entered into negotiations to 
acquire, or was contacted or made an inquiry about acquiring, any 
interest in the Divestiture Assets, and shall describe in detail each 
contact with any such person during that period. Each such affidavit 
shall also include a description of the efforts Defendants have taken 
to solicit buyers for the Divestiture Assets, and to provide required 
information to prospective Acquirers, including the limitations, if 
any, on such information. Assuming that the information set forth in 
the affidavit is true and complete, any objection by the United States 
to information provided by Defendants, including limitation on 
information, shall be made within fourteen (14) calendar days of 
receipt of such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, Defendants shall deliver to the United States and any 
Monitoring Trustee an affidavit that describes in reasonable detail all 
actions that Defendants have taken and all steps that Defendants have 
implemented on an ongoing basis to comply with Section IX of this Final 
Judgment. Defendants shall deliver to the United States and any 
Monitoring Trustee an affidavit describing any changes to the efforts 
and actions outlined in Defendants' earlier affidavits filed pursuant 
to this section within fifteen (15) calendar days after the change is 
implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest the Divestiture Assets until one year after such 
divestiture has been completed.

XI. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time authorized representatives of the United States 
Department of Justice, including persons retained by the United States, 
shall, upon written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, and on 
reasonable notice to Defendants, be permitted:
    (1) To access during Defendants' office hours to inspect and copy, 
or at the United States's option, to require that Defendants provide 
hard copy and electronic copies of, all books, ledgers, accounts, 
records, data, and documents in the possession, custody, or control of 
Defendants, relating to any matters contained in this Final Judgment; 
and
    (2) to interview, either informally or on the record, Defendants' 
officers, employees, or agents, who may have their individual counsel 
present, regarding these matters. The interviews shall be subject to 
the reasonable convenience of the interviewee and without restraint or 
interference by Defendants.
    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendants shall submit written reports, or responses to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person other 
than an authorized representative of the executive branch of the United 
States, which includes CMS, except in the course of legal proceedings 
to which the United States is a party (including grand jury 
proceedings), or for the purpose of securing compliance with this Final 
Judgment, or as otherwise required by law.
    D. If at the time information or documents are furnished by 
Defendants to the United States, Defendants represent and identify in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure, and Defendants mark each pertinent page of 
such material, ``Subject to claim of protection under Rule 26(c)(7) of 
the Federal Rules of Civil Procedure,'' then the United States shall 
give Defendants ten (10) calendar days notice prior to divulging such 
material in any legal proceeding (other than grand jury proceedings).

XII. No Reacquisition

    Defendants may not reacquire any part of the Divestiture Assets 
during the term of this Final Judgment provided, however, that this 
Final Judgment shall not prohibit Defendants from offering individual 
Medicare Advantage Plans in the ordinary course of business otherwise 
in conformity with this Final Judgment.

XIII. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XIV. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry.

XV. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, including making copies available to the 
public of this Final Judgment, the Competitive Impact Statement, and 
any comments thereon

[[Page 12770]]

and the United States's responses to comments. Based upon the record 
before the Court, which includes the Competitive Impact Statement and 
any comments and response to comments filed with the Court, entry of 
this Final Judgment is in the public interest.
    Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16.
    Date
    United States District Judge
    U

Competitive Impact Statement

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact 
Statement relating to the proposed Final Judgment submitted for entry 
in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    Defendants entered into an Agreement and Plan of Merger dated March 
11, 2007, whereby UnitedHealth Group, Inc. (``United'') agreed to 
acquire all outstanding shares of Sierra Health Services, Inc. 
(``Sierra''). The United States filed a civil antitrust Complaint on 
February 25, 2008 seeking to enjoin the proposed acquisition. The 
Complaint alleges that the proposed acquisition likely will 
substantially lessen competition in the sale of Medicare Advantage 
plans in Clark and Nye Counties, Nevada (``the Las Vegas area''), in 
violation of Section 7 of the Clayton Act (``Section 7''), 15 U.S.C. 
18. As defined by federal law, Medicare Advantage plans consist of 
Medicare Advantage health maintenance organization (``MA-HMO'') plans, 
Medicare Advantage preferred provider organization (``MA-PPO'') plans, 
and Medicare Advantage Private Fee-for-Service (``MA-PFFS'') plans. See 
42 U.S.C. 1395w-21(a)(2).
    When the Complaint was filed, the United States also filed a Hold 
Separate and Asset Preservation Stipulation and Order (``Hold Separate 
Order'') and proposed Final Judgment. The proposed Final Judgment, 
which is explained more fully below, would permit United to complete 
its acquisition of Sierra but would require the divestiture of certain 
assets (the ``Divestiture Assets'') relating to United's Medicare 
Advantage line of business in the Las Vegas area and injunctive relief 
sufficient to preserve competition in the sale of Medicare Advantage 
plans in the Las Vegas area.
    Until the divestiture of the Divestiture Assets has been 
accomplished, the Hold Separate Order requires Defendants to take all 
steps necessary to preserve the Divestiture Assets and ensure that 
Sierra operates as an independent, ongoing, economically viable, 
competitive business held entirely separate, distinct and apart from 
United's other operations. Further, until the divestiture of the 
Divestiture Assets, Defendants must take all steps necessary to ensure 
that United's Medicare Advantage line of business in Las Vegas will be 
maintained and operated as an ongoing, economically viable and active 
line of business; that competition between United and Sierra in the 
sale of Medicare Advantage plans in the Las Vegas area is maintained 
during the pendency of the ordered divestitures; and that Defendants 
preserve and maintain the Divestiture Assets associated with United's 
Medicare Advantage line of business in the Las Vegas area. The Hold 
Separate Order thus ensures that competition is protected pending 
completion of the required divestitures and that the assets are 
preserved so that relief will be effective.
    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. Description of the Events Giving Rise to the Alleged Violations

A. The Defendants and the Proposed Transaction

    United is a Minnesota corporation and has its principal place of 
business in Minnetonka, Minnesota. United is the largest health insurer 
in the United States, providing health insurance and other services to 
more than 70 million people nationwide. In 2007, United reported 
revenues of approximately $75 billion. United provides health insurance 
to approximately 27,800 Medicare Advantage enrollees in the Las Vegas 
area under the Secure Horizons and AARP brands.
    United has a well-established managed-care network in the Las Vegas 
area that it uses to provide services to enrollees in Medicare 
Advantage plans. Health care services provided by HealthCare Partners, 
LLC (``HealthCare Partners''), The Physicians IPA, Inc., and Summit 
Medical Group are an integral part of this network.
    Sierra is a Nevada corporation with its principal place of business 
in Las Vegas, Nevada. Sierra is the largest health insurer in Nevada, 
providing health insurance and other services to more than 655,000 
people. In 2007, Sierra reported revenues of $1.9 billion. Sierra 
provides health insurance to approximately 49,500 Medicare Advantage 
enrollees in the Las Vegas area. It sells Medicare Advantage HMO 
products under the Senior Dimensions brand. Sierra sells Medicare 
Advantage preferred provider organization (``PPO'') plans under the 
Sierra Spectrum and Sierra Nevada Spectrum brands. Sierra also sells 
MA-PFFS plans under the Sierra Optima Select brand.
    Sierra owns the largest medical group in Las Vegas, Southwest 
Medical Associates, Inc. (``SMA''), which employs approximately 250 
physicians and other health care professionals. Sierra uses SMA to 
provide a substantial portion of the care delivered to Sierra's 
Medicare Advantage members, particularly HMO and PPO members.
    On March 11, 2007, United and Sierra entered into an Agreement and 
Plan of Merger whereby United agreed to acquire all outstanding shares 
of Sierra. The transaction is valued at approximately $2.6 billion. The 
transaction would give United a 94 percent share of Medicare Advantage 
enrollees in the Las Vegas area.

B. The Relevant Product Market is No Broader Than the Sale of Medicare 
Advantage Health Insurance in the Las Vegas Area

    The Complaint alleges that United's proposed acquisition of Sierra 
is likely to substantially lessen competition in a market no broader 
than the sale of Medicare Advantage health insurance plans to senior 
citizens (``seniors'') and other Medicare-eligible individuals in the 
Las Vegas area, in violation of Section 7 of the Clayton Act. Due in 
large part to the lower out-of-pocket costs and richer benefits that 
many Medicare Advantage plans offer seniors over traditional Medicare, 
seniors in the Las Vegas area would not likely switch away from 
Medicare Advantage plans to traditional Medicare in sufficient numbers 
to make an anticompetitive price increase or reduction in quality 
unprofitable.
    In a product market that consists of all Medicare Advantage plans, 
the parties have a combined market share of approximately 94 percent. 
In a product market of Medicare Advantage coordinated-care plans (MA-
HMO and MA-PPO plans), the parties have a

[[Page 12771]]

combined market share of approximately 99 percent.\1\
---------------------------------------------------------------------------

    \1\ There may be a narrower product market that consists of 
Medicare Advantage coordinated-care plans, but the Division did not 
need to determine whether such a product market exists to conclude 
that the merger is likely to substantially lessen competition and to 
identify an appropriate remedy for the reduction in competition that 
otherwise would have resulted from the merger.
---------------------------------------------------------------------------

1. Healthcare Options for Seniors
    The federal government facilitates the provision of health 
insurance to millions of Medicare-eligible citizens through two types 
of programs: (1) government-provided traditional Medicare (also known 
as Original Medicare) and (2) privately-provided Medicare Advantage.
    Under traditional Medicare, a beneficiary receives hospital 
coverage under Medicare Part A and can elect to receive coverage for 
physician and out-patient services under Part B. For Part A, the 
government charges no monthly premium if the beneficiary was in the 
workforce and paid Medicare taxes. For Part B, the government deducts a 
monthly premium (currently $96.40 for most beneficiaries) from 
beneficiaries' Social Security checks. In addition, beneficiaries must 
pay deductibles and/or co-insurance for doctor visits and hospital 
stays. If beneficiaries want to limit potentially catastrophic out-of-
pocket costs, they need to purchase a separate Medicare Supplement 
plan. For prescription drug coverage, seniors enrolled in traditional 
Medicare must purchase Medicare Part D drug coverage for an additional 
premium.
    Medicare Advantage plans are offered by private insurance 
companies. In establishing the Medicare Advantage program, Congress 
intended that vigorous competition among private insurers would lead 
insurers to offer seniors richer and more affordable benefits, provide 
a wider array of health-insurance choices, and be responsive to the 
demands of seniors. In fact, most successful Medicare Advantage plans, 
including those in the Las Vegas area, offer substantially richer 
benefits at lower costs to enrollees than traditional Medicare.
2. CMS Regulation of Medicare Advantage Plans
    An insurance company that seeks to offer a Medicare Advantage plan 
in a region must submit a bid to the Centers for Medicare and Medicaid 
Services (``CMS'') for each Medicare Advantage plan that it intends to 
offer. The bid must provide the insurer's anticipated costs per member 
to cover the basic Medicare Part A and Part B benefits. Those costs, 
including an anticipated profit margin, are compared to a Medicare 
benchmark that reflects, in part, the government's likely cost of 
covering the beneficiaries. If the insurer's bid for Medicare benefits 
is lower than the benchmark, the Medicare program retains 25 percent of 
the savings and the insurer must use the other 75 percent to provide 
supplemental benefits or lower premiums to enrollees. Accordingly, the 
lower the insurer's projected costs, the more benefits seniors enrolled 
in the insurer's plan will have available to them.
    CMS's role in approving bids for Medicare Advantage plans does not 
displace or reduce competition among participating health insurance 
companies. Rather, the structure of the Medicare Advantage program 
encourages insurers to compete against each other to attract Medicare 
beneficiaries by providing low prices and more benefits.
3. Medicare Advantage Plans Provide Better Benefits Than Traditional 
Medicare
    As stated above, many Medicare Advantage plans, including the 
United and Sierra plans offered in the Las Vegas area, provide 
substantially richer benefits at lower costs to enrollees than 
traditional Medicare. They offer lower co-payments, lower co-insurance, 
caps on total yearly out-of-pocket costs, prescription drug coverage, 
vision coverage, health club memberships, and other benefits that 
traditional Medicare does not cover.
    A sufficient number of seniors in the Las Vegas area would not 
switch away from Medicare Advantage plans to traditional Medicare in 
the event of a small but significant reduction in benefits under the 
plans, or a small but significant increase in price, to render the 
benefit decrease or price increase unprofitable. Accordingly, the sale 
of Medicare Advantage plans is a relevant product market and a line of 
commerce in the Las Vegas area under Section 7 of the Clayton Act.

C. The Las Vegas Area Is a Relevant Geographic Market

    Medicare-eligible residents in the Las Vegas area (Clark and Nye 
Counties) may only enroll in Medicare Advantage plans that CMS approves 
for the county in which they live. Consequently, they could not turn to 
Medicare Advantage plans elsewhere in the United States. Because 
Medicare-eligible residents in the Las Vegas area cannot purchase 
substitute Medicare Advantage plans sold in other geographic areas, the 
Las Vegas area is a relevant geographic market within the meaning of 
Section 7 of the Clayton Act.

D. Anticompetitive Effects of the Proposed Transaction

    The relevant market is highly concentrated and would become 
significantly more concentrated as a result of the proposed 
acquisition. Sierra accounts for approximately 60 percent of Medicare 
Advantage enrollees in the Las Vegas area. United accounts for 
approximately 34 percent. If consummated without divestiture relief, 
the merger would give the merged company a 94 percent market share.
    The acquisition of Sierra by United would eliminate substantial 
head-to-head competition between United and Sierra that for years has 
benefited thousands of seni