One of the nation's largest HMO companies, United Healthcare Corp., said yesterday that it plans to buy one the largest traditional health insurers, MetraHealth Cos., which was formed early this year when MetLife and Travelers pooled their health insurance operations.

The deal "underscores that {traditional} indemnity insurance is an obsolete product," said HMO analyst Douglas Sherlock. "HMO companies will dominate the health care market." United, based in Minneapolis, said it would pay $1.65 billion in cash and stock for MetraHealth, which is based in McLean.

United's main objective appeared to be capturing MetraHealth's traditional insurance customers to increase the odds of enrolling them in United's health maintenance organizations, analysts said.

United chief executive William W. McGuire said "an increasing number of MetraHealth's non-HMO customers are expected to take advantage of United HealthCare's HMO products" but added that "the success of the merger is not dependent on this."

Although many observers view traditional health insurance, which offers an unrestricted choice of doctors and imposes few if any controls on medical costs, as a vanishing business, McGuire predicted that it would survive and said that his own company would benefit from being able to offer it.

United is the nation's largest publicly traded HMO company, although even after its takeover of MetraHealth its revenue and HMO enrollment would lag behind that of Kaiser Foundation Health Plan Inc., a not-for-profit organization. United provides comprehensive health benefits to 3.8 million people and more specialized benefits such as mental health services to 27 million people.

MetraHealth provides health benefits to 10.7 million people, including 5.3 million who receive traditional insurance and 449,000 who are enrolled in HMOs. Some analysts and industry insiders consider MetraHealth a relatively weak player in the rapidly changing industry. Enrollment in its health plans has eroded by about 5 percent since Metropolitan Life Insurance Co. and Travelers Insurance Co. announced a year ago that they would combine their group health insurance businesses.

"They had an excellent shot at making it in the long run, but . . . they had a tough challenge ahead of them," said Joseph J. Martingale, a principal at the firm Towers Perrin Co., which advises corporations on employee benefits. "It was very difficult for them to compete" because potential clients could not be certain as to how the company would develop, Martingale said.

MetraHealth's health plans, which have 82,000 people in the Washington area, are still operating under the names of MetraHealth's parent companies.

The takeover, which is subject to regulatory approval, would complete Travelers' exit from the health insurance business. Once a major player in health insurance, it plans to focus on financial services. In contrast, MetLife would take most of its share of the payment for MetraHealth in United stock.

MetraHealth will go ahead with plans to move its headquarters staff of 54 people from McLean to Reston next month. MetraHealth spokeswoman Virginia Quarti said she had "no idea" how, if at all, the deal would affect those jobs. However, MetraHealth chief executive Kennett L. Simmons would withdraw from management and take a seat on United's board of directors, the companies said.