Consumer Advocates Raise Concerns About Aetna-Humana Mega-Merger at CDI Hearing

On April 27, the California Department of Insurance held a hearing on the proposed merger of Aetna and Humana. This hearing takes place after a public meeting held by the Department of Managed Health Care (DMHC) in January.

This hearing comes on the heels of a Senate Health Committee hearing this month on SB 932 (Hernandez), a bill that ensures that mergers and consolidations in California’s health care marketplace do not have a negative impact on cost, quality, and access to care for California consumers. Currently, two of four major health insurance mergers have been finalized by the state of California; Blue Shield of California acquired Care1st last year and Centene’s proposal to acquire Health Net was approved with conditions by state regulators in March. The Aetna-Humana merger is one of two mergers still pending, along with Anthem-Cigna. Other hospital and health mergers have also taken place, including the Daughters of Charity Health System purchase by an investment firm in 2015.

Tam Ma, Health Access California’s Policy Counsel, provided comment on behalf of California consumers, raising questions about Aetna’s track record in California and if they should be allowed to have even greater market share. Specifically, she made the case that to ensure that this merger—and others— is in the public interest, insurers should not be allowed to get bigger unless they commit to getting better, sharing skepticism about whether bigger is actually better for consumers.

Lack of Consumer Protections a Concern

In her testimony, Tam Ma focused on Aetna’s track record in California’s commercial market and its lack of respect for California law as well as basic consumer protections.

  • Routine Medical Survey: Through DMHC’s most recent Routine Medical Survey, Aetna was found to have three major deficiencies, of which one had still not been corrected three years later. Although Aetna reported they have corrected this deficiency, it is disappointing it took them 3 years to do something as basic as posting information about consumer rights on its website.
  • Enforcement actions:  Aetna has been the subject of numerous enforcement actions by DMHC, most of which stem from its poor handling of patient grievances, from which it has had 45 violations since 2011. Aetna has accumulated over $100,000 in fines in the last year alone and in 2014 was fined $200,000 for failing to process claims and provider disputes in a timely manner.
  • Unreasonable rate increases: Aetna has proceeded with 7 rate increases that both DMHC and CDI have found to be unreasonable. As a result, small businesses had to pay more than they should have for care. Should this merger be approved, it must be conditioned on the promise that Aetna will not continue to engage in price gouging.
  • Reducing Market Competition: According to an analysis by Cattaneo and Stroud, the Aetna-Humana merger is likely to reduce competition in the Medicare market in eight California counties, including Fresno, Kern, Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura. These are among the most populous counties in California and are home to 24 million consumers, 60% of the state’s population.

Consumers Union, CALPIRG and the Greenlining Institute raised similar issues and questions as Health Access, including concerns about unreasonable rate increases, skepticism about passing savings along to consumers, concerns with low consumer satisfaction scores and unease with Aetna’s lack of attention to diversity and health disparities.

Consumers Union predicts that the $1.25 billion in synergies is more likely to go to increased profits than to reduced premiums or improved service. They also made the case that Aetna’s claim that market turbulence forced it to adopt steep rate increases despite the regulators’ misgivings, but changes in the marketplace have affected all the plans while Aetna stands out for resisting transparency and failing to provide relevant information to the regulators. Further, with increased market power from a merger, there is no reason to believe that the larger company would improve its responsiveness to regulators or sensitivity to consumer rate burdens. Therefore, Aetna’s extreme history of resistance around rate review should be factored into this deal, if this merger is approved at all. Lastly, Consumers Union made that case that consumers need assurances that the newly combined plan will lift up consumer interests and improve their lot rather than leaving consumers carrying the weight of this deal.

CALPIRG reinforced the issue of Aetna going ahead with charging rates deemed unreasonable by state regulators, and reviewed findings of a study they recently published. Aetna had one of the worst track records on this issue–many other insurer were more likely to roll back or retract a rate hike found unreasonable by a regulator.

The anti-competitive effects of this merger, coupled with Aetna’s poor track record, make it likely that quality will continue to go down while prices continue to go up for consumers. Consumer advocates pressed that it is unlikely that Aetna will pass along efficiencies and cost savings to consumers and other purchasers if they have repeatedly pursued unreasonable rate increases.

The Greenlining Institute focused its concerns on Aetna’s lack of attention to supporting diversity and addressing health disparities, arguing that Aetna must acknowledge the need for greater diversity at all levels of their business, especially among executive and board-level management. They questioned Aetna’s commitment to its own “Racial & Ethnic Equality” initiative considering only 14 percent of executive positions and 15 percent of its board of directors are people of color. Additionally, only 31 percent of Aetna’s employees are people of color. Aetna cannot adequately meet the needs of Californians unless they reflect the populations that they serve.

Further, Greenlining urged Aetna to provide concrete assurances that they will train, recruit, and hire a diverse workforce that reflects California and build its supplier diversity network with small, minority-owned businesses, which are a key engine of economic development for communities of color. However, from 2013-2014, Aetna took a significant step backwards by decreasing its investments in diverse suppliers by over $1.1 million, resulting in an overall decrease from 0.77% diverse spending in 2013 to 0.07% in 2014. Additionally, Aetna ceased its partnerships with African-American small businesses and also terminated its contracts with Women Business Enterprises. Even more disappointing, Aetna did not partner with any Disabled Veteran Business Enterprises, LGBT Business Enterprises, or Multi-Certified Business Enterprises in 2013 or 2014. Given that California represents the largest market for diverse businesses, this record is embarrassing and unacceptable.

Greenlining also focused their comments on Aetna’s need to invest significant resources towards upstream, preventive health improvements in underserved communities. For example, they must focus investments towards vital community health resources such as affordable housing, environmental improvements, jobs and workforce development, grants to community-based organizations, and other strategies that target the root cause of poor health. If this merger proceeds without a clear commitment to improving health and economic outcomes for communities of color, then California will continue to suffer from systemic barriers that have led to such blatant health and wealth disparities.

The Community Reinvestment Coalition made complementary comments, particularly on the issue of how Aetna invests in California, and whether it uses the COIN program to target investments.

Health Access and other consumer advocates concluded by urging state regulators and policymakers to conduct a thorough assessment of Aetna’s track record on consumer protections and unreasonable rate increases, along with recommendations for conditions that must be included for this merger to bring any benefit to consumers.

If you or your organization would like to submit comments about this merger or the larger questions at stake concerning mergers in general, you have until Friday, April 29, 5:00 pm to submit your comments to