Was Health Net-Centene Merger Approval A One-Off, Or Tone-Setting for Anthem, Aetna Deals?

Did California regulators' approval of the Centene and Health Net merger give a preview of how reviews of Anthem's proposed consolidation with Cigna will go down? Let's hope not. Conditions for Health Net were a world away from what regulators will find in the Anthem-Cigna deal. (More on those hearings here.)  
 
The Health Net approval included a lot of promises, some potentially good, but is missing key protections against unreasonable rates.   
 
Last week, the Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI) approved the deal between Centene and Health Net with certain stipulations:
-- Health Net’s headquarters will remain in California, meaning California regulators maintain ultimate authority over future changes;
-- The new company must build a California call center, hopefully improving customer service, not to mention creating new California jobs;
-- And the company must improve its health care system and provide financial assistance to underserved communities.
 
Consumer Watchdog had urged the departments to impose serious conditions to protect Californians. Some of those conditions were included:
-- California policyholders will not have to pay any costs of the merger - except for associated severance payments (we're not sure why golden parachutes should be the responsibility of CA policyholders);
-- Health Net commits to maintain and grow its commercial line of business;
-- And Centene and Health Net commit to providing sufficient networks and timely access to medical providers and hospitals.
 
However the deal doesn't prevent the merged company from hiking prices on consumers. Health Net has a history of proposing rates, at CDI and DMHC, that regulators and independent actuaries found to be “unreasonable." Although some of these rates were ultimately reduced, Health Net is under no obligation under current law to respond to regulators’ findings or make rates reasonable. California regulators do not have the power to deny unjustified rate increases, and since 2012, Californians have paid at least $385 million in unreasonable premium hikes. The companies would not commit that future rate increases would be reasonable.
 
California Insurance Commissioner Dave Jones suggests that the merger might actually increase competition in California, because it would give the smaller Health Net more resources to try and compete with its much bigger competitors, Anthem and Kaiser. Let's hope he's right. The departments can't unwind the deal, so only time will tell if the combined companies will live up to their promises.

Capitol Watchdog is owned and operated by nonprofit Consumer Watchdog. For more information about Consumer Watchdog visit http://www.consumerwatchdog.org

 
 

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