Increased Oversight Over Health Plan Mergers Passes Assembly Appropriations Committee

Legislation to institute stronger state oversight over health plan mergers passed the Assembly Appropriations Committee this morning.
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For immediate release: Thursday, January 18, 2018

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

CA LEGISLATION STRENGTHENING STATE OVERSIGHT OVER HEALTH PLAN MERGERS PASSES ASSEMBLY APPROPRIATIONS COMMITTEE

* AB 595 (Wood) Gives Department of Managed Health Care (DMHC) Increased Authority to Ensure Mergers Are Good for Consumers; Ability to Reject Mergers that Adversely Impact Competition

* Five Insurers Control 90% of Market – Any Further Consolidation Is Likely to Result in Fewer Choices and Higher Prices for the 14 Million Californians in Private Coverage

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

SACRAMENTO, CA—Legislation to institute stronger state oversight over health plan mergers passed the Assembly Appropriations Committee this morning. 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 not necessarily bigger for consumers, and the state must be able to scrutinize mergers and ensure they are actually good for patients and the public interest,” said Anthony Wright, executive 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 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 must pass the Assembly floor by January 31st in order to move into the Senate.

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