CA Assembly Passes Bill to Increase Oversight Over Health Plan Mergers

With concerns about rising premiums, fewer choices, and competition in health insurance, today the California Assembly passed legislation to institute stronger state oversight over health plan mergers.
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For immediate release: Monday, January 29, 2018

For more information, contact:
Anthony Wright, executive director, Health Access California, 916-870-4782 (cell)

CA ASSEMBLY PASSES BILL TO STRENGTHEN STATE OVERSIGHT OVER HEALTH PLAN MERGERS

* Now Heading to the State Senate, AB 595 (Wood) Would Give Department of Managed Health Care (DMHC) Increased Authority to Ensure Mergers Are Good for Consumers; Reject Mergers that Adversely Impact Competition and the Public Interest

* Five Insurers Control 90% of Market – Further Consolidation Would Likely Result in Fewer Choices and Higher Prices for Millions of Californians in Private Coverage

* Bill Would Impact Mergers like Proposed Aetna-CVS Merger if Filed After Enactment; Recent Proposed Mega-Mergers (Anthem-Cigna, Aetna-Humana, HealthNet-Centene, BlueShield-Care1st, etc.) Revealed Gaps in State’s Authority.

SACRAMENTO, CA—With concerns about rising premiums, fewer choices, and competition in health insurance, today the California Assembly passed legislation to institute stronger state oversight over health plan mergers. The bill, AB 595 (Wood), protects Californians from changes to the health plan market that may lead to negative outcomes for consumers. Economic studies show that past health insurer mergers led to premium increases and have no demonstrable effect on improving health care quality.

“Bigger is often not better for consumers, and the state must be able to scrutinize health industry mergers and ensure they are actually good for patients and the public interest,” said Tam Ma, Legal and Policy Director of Health Access California, the statewide health care consumer advocacy coalition, which is sponsoring the bill. “AB 595 protects the millions of Californians who could be negatively affected when a health plan with a bad record seeks even more market power.”

AB 595 strengthens the Department of Managed Health Care’s (DMHC) oversight over health plan mergers by:

Requiring health plans seeking to merge to get prior approval from DMHC;

Allowing DMHC to reject mergers that negatively impact competition;

Requiring health plans to get better if they are allowed to get bigger: If DMHC approves a merger, it must be conditioned on the health plan improving quality and reducing health disparities.

Ensuring the merged entity can comply with all of the consumer protections in Knox-Keene Act (financial solvency, access to care, network adequacy, handling of consumer complaints, claims processing, etc); and

Increasing transparency and public participation in the merger review process.

Although California has a relatively more competitive insurance market than other states, three companies now control nearly 80% of the market and the top five insurers control over 90% of the market. With health insurance markets already highly consolidated, mergers are likely to result in fewer choices and higher prices for the millions of California consumers enrolled in private coverage. Private insurance premiums and out-of-pocket spending are already high and projected to grow. Health insurance premiums for family coverage have seen a cumulative 216% increase since 2002, compared to a 37% increase in overall prices. Current law gives regulators some oversight over insurer mergers, but they are insufficient to fully protect consumers.

California has seen a number of proposed health plan mergers in recent years: Blue Shield-Care 1st, Centene-Health Net, Aetna-Humana, and Anthem-Cigna. While the U.S. Department of Justice has blocked the latter two mergers, the industry is expected to further consolidate, as the recently announced Aetna-CVS merger suggests. DMHC, which regulates health coverage for 96% of covered lives in California, needs to be able to scrutinize these deals and ensure they are good for California consumers.

AB 595 now moves to the state Senate.

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