Merger Watch

Is bigger really better?

Consolidation in the health industry often means fewer choices and competition, with no benefit for patients or the public. Health insurance companies should not be allowed to get bigger unless they get better. Health Access is closely monitoring mergers and seeking strong consumer protections and other conditions to ensure that these mergers are in the interest of California consumers and the health system on which we all rely.

In seeking regulatory approval for these mergers, the burden is on the merging companies to show that consumers will actually benefit in the form of lower premiums, lower out-of-pocket costs, higher quality care, and reduced health disparities.

With several pending insurance mega-mergers pending, insurers must be required to comply with strong, enforceable conditions to ensure consumers receive the benefits promised by company executives and should be required to address any existing problems relating to cost, quality, and customer service.

Nonprofit Hospital Mergers – Maintaining Charity Care

Nonprofit hospitals seeking to sell or change ownership must get approval from the Attorney General (AG), who evaluates whether the transaction will have a significant effect on the availability or accessibility of health care services to the affected community. The AG often requires hospitals to maintain their charity care programs as a condition of approving the transaction, along with other conditions to ensure essential health care services are available to the community. A number of hospitals have gone back and asked the AG to allow them to reduce their charity care obligations. Health Access opposes these requests because charity care continues to be a needed and valued part of the safety net.

Anthem-Cigna

Anthem, one of the largest insurers in the state and nation, proposes to acquire Cigna for $48.3 billion. This merger would consolidate the national health insurance market from five major companies to just three. California regulators are reviewing this merger.

Centene-Health Net

Centene proposal to acquire Health Net for $6.8 billion was approved by both the DCI and DMHC in March of 2016. This merger will allow Centene to have a significant presence in California, gain entry into our commercial market and Covered California and drastically increase its participation in the Medi-Cal program by nearly sevenfold.

Aetna-Humana

Aetna is proposing to acquire Humana, a large player in the Medicare Advantage market. Aetna has a troubling track record in California’s commercial market, including imposing unreasonable rate increases on small business purchasers. This merger raises concerns about its effects on California’s commercial market, where most of Aetna’s California business is based. The merger will also impact the Medicare marketplace, resulting in less competition and fewer options for California consumers.

Blue Shield-Care1st

The merger between Blue Shield of California and Care1st was completed in November 2015. Blue Shield, a large California-based insurer, purchased Care1st, a Medi-Cal managed care health plan in Southern California. Blue Shield’s acquisition of Care1st enabled Blue Shield to participate in California’s Medi-Cal program for the first time. In addition to our concerns about consumer protections, the Blue Shield-Care1st merger raises questions about Blue Shield’s nonprofit status and assets, including the $4.2 billion it holds in excess reserves and if those assets are subject to charitable trust obligations.

Nonprofit Hospital Mergers – St. Joseph-Providence Hospitals

St. Joseph and Providence are two major Catholic hospital chains with facilities throughout California. Health Access has requested the Attorney General to ensure that all existing hospital services remain open for at least ten years, require existing reproductive health services to be maintained, and more robust charity care to meet ongoing access and affordability needs of communities served by these hospitals. We also raise concerns about how this merger might lead to higher prices and less competition.

Nonprofit Hospital Mergers – Daughters of Charity Health System

In December 2015, the Attorney General granted conditional approval of a change of control and governance of the nonprofit Daughters of Charity Health System (DOCHS), allowing BlueMountain Capital Management to operate DOCHS’ six hospitals and gain a right to purchase the chain. Health Access advocated for strong conditions to ensure the hospitals and current services remain open for ten years and charity care is maintained.

The Attorney General previously granted conditional approval of the sale of DOCHS to Prime Healthcare, a for-profit company. Health Access opposed this merger unless it included strong conditions to ensure DOCHS’ hospitals and services would remain open to the community. Prime Healthcare subsequently backed out of the deal.

For more information about Health Access’ work on mergers, please contact:
Tam Ma, Policy Counsel, tma@health-access.org