Justice Officials Demand Aetna Shed
                   Some Operations in Prudential Deal

                   By NANCY ANN JEFFREY
                   Staff Reporter of THE WALL STREET JOURNAL

                   The Justice Department has demanded Aetna Inc. divest itself of some
                   operations in Texas as a condition of approving the company's pending $1
                   billion acquisition of the health-care unit of Prudential Insurance Co. of
                   America, according to people familiar with the matter.

                   The government Friday told the Hartford, Conn., insurance company that
                   it must shed some of the combined health-plan operations in Dallas and
                   Houston, the people said. Aetna is leaning toward agreeing to the
                   conditions, these people added, although discussions with the Justice
                   Department still are under way. Details about the value of any divested
                   operations or how they would be shed weren't available.

                   After the deal was announced late last year, Aetna Chairman and Chief
                   Executive Richard Huber said he expected it to clear the Justice
                   Department antitrust review without having to give up any operations. In
                   recent months, as the government's review of the deal dragged on, Mr.
                   Huber softened that position to signal greater receptivity to shedding some
                   businesses in certain markets to get approval.

                   An Aetna spokeswoman said the government's view of the deal was "in
                   line with our expectations," and talks were in the final stages. A Justice
                   Department spokesman declined to comment.

                   The combined operations of Aetna's Aetna U.S. Healthcare unit and
                   Prudential HealthCare would create a behemoth providing health-care
                   benefits to about 22 million people -- one in every 10 Americans. Aetna
                   currently provides health-care coverage to about 16 million Americans.

                   The proposed acquisition provoked the ire of groups such as the American
                   Medical Association, which wanted the Justice Department to challenge it,
                   arguing it would give Aetna too much power over physicians and be bad
                   for consumers. Opposition was especially fierce in Texas, where Aetna
                   has long had an antagonistic relationship with doctors. The Texas Medical
                   Association, along with some county medical societies, opposed the deal.
                   The state association said it would give Aetna about a 60% share of the
                   commercial HMO market in Houston and a 40% to 50% share of the
                   commercial HMO market in Dallas.

                   Last week, Aetna officials went to Washington to put their case before the
                   Justice Department. They made two main arguments: that the Justice
                   Department should assess market concentration in terms of the entire
                   health-insurance market, as opposed to only the HMO market, and that
                   being a large player could potentially benefit consumers by reducing
                   health-care costs, according to people familiar with the matter.

                   --John R. Wilke contributed to this article.
 
 
 
 

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