Groups Says California Should Reject the Anthem-Cigna Merger

Consumer Watchdog called on Insurance Commissioner Dave Jones to reject a proposed merger of Anthem and Cigna. Carmen Balber with Consumer Watchdog said, “Insurance industry consolidation has gone too far in California, costing consumers in the form of higher prices, reduced benefits, narrower networks, and fewer choices. It is no longer believable to claim that making the few insurance giants larger could benefit consumers. It’s time to draw a line in the sand. The only action that truly protects California policyholders is for the Dept. of Insurance to reject the Anthem-Cigna deal.” Nine metro areas in California will be among the hardest-hit in the nation if the merger is approved, and nearly every major population center in the state could be affected, according to an American Medical Association analysis using federal merger guidelines,” she said.

The following is a summary of a statement prepared by Consumer Watchdog: If the Anthem-Cigna merger proceeds, Anthem will gain a near-monopoly in the self-insured market at 69% of the market, meaning higher costs and less options for large companies that pay Anthem or Cigna to administer their health plans and employ nearly 4 million Californians. A merged Anthem-Cigna would surpass Kaiser to become the largest insurer in the state. Regulators cannot exact enough concessions from the companies to protect consumers from the negative impacts of an Anthem-Cigna merger.

Consumer Watchdog recommends these conditions for approving the merger:

  • Anthem should commit to not implementing rate hikes that regulators find to be unreasonable.
  • Anthem should be prohibited from upstreaming profits to its parent company while increasing premiums.
  • Anthem should have to disclose details of any administrative services payments to its parent company out of state. This would allow the public to determine whether the payments have been inflated to hide upstreaming of California policyholder money to shareholders.
  • Anthem should not be allowed to remove reserves from California or otherwise require California policyholders to pay for severance, retention, or other compensation packages for executives in connection with the merger.
  • Anthem should immediately submit its provider networks for review.
  • Anthem should commit to expanding network size for all plans that give consumers access to less than 50% of providers in the area.
  • Anthem’s filings with the Dept. of Insurance should be public documents. Grants of confidentiality should only be allowed sparingly, with explanation of the sensitive nature of the withheld documents, if at all.
  • Anthem should be subject to steep penalties for violating any provision of these undertakings, and revocation of approval if there is a pattern of violations.

Centene Completes Acquisition Of Health Net

Centene Corp. completed its acquisition of Health Net. Health Net is now a wholly owned subsidiary of Centene and is no longer a publicly traded company. Michael Neidorff, CEO of Centene said, “We are now the largest Medicaid managed care organization in the country. Centene expanded its government program offerings to include Medicare Advantage, as well as those offered through contracts with the Depts. of Defense and Veterans Affairs. Neidorff said, “The acquisition increases our scale across health insurance marketplaces while maintaining Health Net’s presence in the California commercial market.” He said that Centene also benefits from greater scale and a stronger financial profile.

California Insurance Commissioner Dave Jones said, “After thorough review…I concluded that this transaction provides an opportunity to bring new capital and resources from a major national health insurer largely outside of California to enable a California health insurer to continue to compete and offer consumers additional choices in California’s individual, small group, and large group commercial health insurance market.”

The following are conditions for the commissioner’s approval of the merger:

  1. Merger costs will not be imposed on California policyholders.
  2. Health Net will maintain and grow its commercial line of business in the small group and large group health insurance markets.
  3. Health Net Life will continue to offer products through Covered California.
  4. Centene and Health Net Life must provide sufficient networks of medical providers and timely access to medical providers and hospitals.
  5. Centene and Health Net Life must improve the quality of care delivered through their health insurance.
  6. An adequate distribution channel for Health Net health insurance must be maintained.
  7. Senior management for Health Net’s California operations must remain in California. Restrictions are placed on Centene’s ability to move Health Net Life out of state.
  8. Centene will make a $200 million infrastructure investment by establishing a California call center.
  9. Centene and Health Net will invest an additional $30 million in California’s low- and moderate-income neighborhoods, with investments prioritized for health facilities.

Jones said, “There are many reasons to be skeptical about health insurance mergers…Studies show that health insurance prices increased after mergers. This merger and the condition of the companies involved, however, present circumstances which led me to conclude that, with strong and comprehensive conditions, this merger was in the best interest of Californians.

Jones added, “Health Net Life Insurance, despite its name, is a health insurance company. Health Net Life has had declining market share and declines in covered lives in its commercial health insurance business. The merger with Centene provides Health Net Life with access to additional capital and resources to…compete successfully in a California market dominated by three much larger health insurers (Kaiser, Anthem Blue Cross of California, and Blue Shield of California) and several other national health insurers (United Health Care, Aetna, CIGNA).”

Network Regs Go Into Effect Immediately

Emergency regulations go into effect immediately to establish stronger requirements for health insurers to create and maintain medical provider networks. In 2014, many health insurers reduced or narrowed their medical provider networks and/or shifted to offering exclusive provider organization health insurance products with no out-of-network benefits. Consumers said they had trouble getting appointments with doctors; they had to go long distances to get in-network medical care; or they went to doctors who appeared in their health insurer’s provider directory, but were not in the health insurer’s medical provider network.

California Insurance Commissioner Dave Jones said, “Some consumers have been forced to pay huge out-of-network charges when their health insurer fails to provide adequate medical providers in their network or when care is provided by out-of-network providers without even informing or asking the consent of the patient. This emergency regulation is necessary to make sure that health insurers establish and maintain adequate medical provider networks to meet the health care needs of their policyholders, to make sure medical provider directories are accurate, and to stop the practice of surprising consumers with huge charges for out-of-network providers who provide care without first informing the patient and getting their consent.”

The emergency regulations require health insurers to do the following:
• Include enough primary care physicians who accept new patients in order to accommodate enrollment growth.
• Include enough primary care providers and specialists with admitting and practice privileges at network hospitals.
• Consider the frequency and type of treatment that’s needed to provide mental health and substance use disorder care when creating the provider network.
• Adhere to and monitor new appointment wait time standards.
• Prevent surprise bills by requiring medical facilities to inform patients that an out-of-network medical provider will participate in the non-emergency procedure or care, before the care is provided, so that the patient can decline the participation of the out-of-network provider if they so choose.
• Report information about the networks and changes to the networks to the Dept. of Insurance on an ongoing basis.
• Provide accurate provider network directories to the Department and make them available to policyholders and the public.
• Make arrangements to provide out-of-network care at in-network prices when there are insufficient in-network care providers.

Last Updated 08/10/2022

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