Three Big Health Care Mergers Could Be Bad for California Consumers

Posted: June 23, 2016

by John Hansen

DOL Concerned About Sentinel-Health Net, Aetna-Humana and Anthem-Cigna Mergers

California Commissioner, Dave Jones, commented on May 17 in Sacramento, “I’m skeptical. All the literature says that big mergers haven’t helped, but have caused premiums to go up.” Health care mergers mean less competition and less competition often means higher prices and lower quality of care.

Requirements for the Centene-Health Net Merger

The Centene-Health Net merger involves two California health plans, so the approval for the health care merger had to come from the California Department of Insurance (DOL). The DOL and Dave Jones, the California Commissioner of Insurance, imposed certain conditions on the merger.

Centene-Health Net required a commitment to the distribution network, namely the California health insurance agents. Jones added, “I said Health Net must sell health products in California commercial markets including individual, small group and large group.” Also, they were required to make financial commitments toward growing their block of business in California.

The DOL’s Advisory Role Regarding the Other Two Health Care Mergers

The other two mergers, Anthem-Cigna and Aetna-Humana, involve health insurers based largely outside of California. Dave Jones said, “They don’t have a domicile in California, so I don’t have direct authority.” The commissioner was noticeably frustrated by this fact. These two health care mergers could have a huge impact on health insurance for California, so he felt that they should be under the jurisdiction of the California Department of Insurance.

However, for that to be the case, the law would need to change. Jones argued that the law needs to be changed. “We need to modify the definition of commercial domiciliary.” Currently, the definition says that 35% of the national market must be here in California for the DOL to have jurisdiction. Jones said, “We need to lower that threshold…We need more direct say.” Some might argue this to be a power grab by the California Insurance Commissioner, and it is that, but Dave Jones feels that this would give him the authority he needs in order to protect California consumers.

Jones added that he will make a recommendation to the Federal Department of Justice and to the Trade Commission regarding these health care mergers. Both of these federal departments are primarily looking to the California Commissioner and the California Department of Insurance for information to help them make decisions regarding the approval of these mergers.

The Commissioner says that the question is, “What’s right for California consumers?” The parties involved in these health care mergers will need to demonstrate that the mergers will not cause premiums to go up and that ultimately they will be best for consumers and the health insurance marketplace.