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Health care giants plan to merge

One of the nation's largest operators of health maintenance organizations, United Healthcare Corp., agreed Monday to buy Metrahealth, a more traditional health insurance company with 10-million customers.

The new company would be the nation's largest provider of health care plans.

The deal would mean that millions of people accustomed to the freedoms allowed by old-fashioned health plans would get their insurance from a company that has made its reputation by offering more restrictive health plans.

And the merger would continue a move toward larger health care companies that are in a better position to offer lower prices because they have the size to demand lower prices from doctors and hospitals.

Metrahealth, based in McLean, Va., was created just last year from a merger of the health insurance businesses of Metropolitan Life and Travelers.

The company, which is still consolidating Travelers' and MetLife operations in the Tampa Bay area, has about 365 employees locally, about 60 less than when the two operations were separate. Dennis Milewski, a Metrahealth spokesman, said it was too early to speculate on the effect of the latest merger.

Fewer than 5 percent of Metrahealth's customers belong to health maintenance organizations, which tightly control the list of doctors to whom their members can go and the treatments those doctors provide, while another 18 percent are in HMOs that provide some freedom to select doctors outside the plan. More than half of Metrahealth's customers are still in traditional insurance plans.

United Healthcare, based in Minnetonka, Minn., provides full medical coverage for nearly 4-million people and specialty coverage such as mental-health services for 27-million more.

It has grown into one of the nation's biggest HMO companies by moving into Midwestern and Southeastern cities and offering health plans particularly to workers at medium-sized or small companies and in government jobs.

United recently opened an HMO regional office in Tampa, which runs its CAC-United HealthCare Plans of Florida.

With the $1.65-billion deal for Metrahealth, United Healthcare will invade the Northeast, Southwest, West Coast and rural America. Among the employers offering Metrahealth plans are 40 of the nation's largest companies, as well as tens of thousands of smaller ones. Metrahealth also offers policies to individuals.

Some of the people covered under Metrahealth's old plans may choose to join United Healthcare HMOs already up and running in their city, or to be organized soon.

But many other people do not want to belong to an HMO, at least not yet. United Healthcare will offer these people other kinds of health plans.

For example, United Healthcare's fastest-growing product is an HMO that aims to offer members some of the freedom of choice of a traditional plan. Members can choose any doctor, including those not on the HMO list, if they pay extra for the privilege.

HMOs, which collect a flat fee in exchange for meeting a person's medical needs, have won an increasing share of the health insurance business in recent years, much of it at the expense of traditional insurers like Metropolitan Life or Travelers.

_ Staff writer Sarah Cohen contributed to this report.