NEW YORK, N.Y., November 16 – New York City filed suit in Manhattan federal court in an attempt to block the merger of New York health care giants HIP and GHI, according to New York City corporation counsel Michael A. Cardozo, however The New York Times reported that merger took place as scheduled after a ruling by Judge Kenneth M. Karas on the matter.

GHI and HIP announced their intention to merge on September 29, 2005, with GHI stating that the combined companies would create the largest health insurer based in New York State.

Cardozo said in a statement that a merger would create a virtual monopoly in the public service health care sector. He explained that the merged company would control more than 90 percent of the citys municipal health care market and 100 percent of the low-cost municipal market, and he argued that such control would result in higher premiums due to the lack of competition.

Cardozo defined the low-cost market as one that has no payroll deductions to the employee. HIP currently has a 23 percent share of that market while GHI has a 77 percent share, he noted.

The city filed its legal complaint in U.S. District Court for the Southern District, and the case was assigned to Karas, Cardozo said. The complaint, he explained, sought relief under the federal Clayton and Sherman Acts, and New York States Donnelly Act.

But a New York Times story, written by Richard Prez-Pea, stated that Karas refused to grant a temporary restraining order, which would have blocked the merger. He did leave the option open for the city to argue its case again, possibly in January.

The story quotes Karas as saying of the citys virtual monopoly argument, I think at this stage, that claim is simply too speculative.

Additionally, related to the merger, A.M. Best Co. placed the financial strength rating of B+ (Very Good) of HIP and its subsidiaries " HIP Insurance Company of New York and ConnectiCare, Inc. " under review with negative implications. The rating agency said that, although GHI and HIP plan to function as separate entities under EmblemHealth Inc. (previously known as HIP Foundation), there are concerns that HIPs capital may be used to support GHIs operations, which could put an additional strain on HIPs already deteriorated capital position.