California Insurance Commissioner Weighs In Against Aetna-Humana Deal

June 28, 2016

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Source: California Healthline

California’s insurance commissioner on Thursday recommended that federal officials block Aetna Inc.’s proposed $37 billion acquisition of Humana Inc., saying the deal would suppress market competition and harm consumers.

The official opinion of Dave Jones came just three days after California’s other health insurance regulator, the Department of Managed Health Care, approved the planned transaction. Just a week ago, Jones urged the federal government to block another mega-merger, Anthem Inc.’s $54 billion offer for Cigna Corp, also on competitive grounds.

Jones said an Aetna-Humana tie-up would reduce competition in commercial health insurance markets that are already highly concentrated.

“The Aetna and Humana merger has anticompetitive impacts that will likely result in increased prices, decreased availability of health insurance products, and decreased quality and access to healthcare,” Jones said.

He said the merger would combine the nation’s third and fifth largest health insurance companies, by market value.

Aetna officials downplayed the recommendation by Jones.

“We received approval earlier this week from the Department of Managed Health Care, the only regulatory agency in the state with official oversight of our acquisition,” said Anjie Coplin, an Aetna spokeswoman.

Jones does not have the authority to block the national insurance merger, but his recommendation could influence the U.S. Department of Justice, which has the final say.

When the Department of Managed Health Care signed off on the Aetna-Humana merger Monday, it noted Aetna’s agreement to keep rate increases to a minimum and improve the quality of patient care.

As a condition of the DMHC’s approval, Aetna also promised to spend nearly $50 million on community investment projects, which include expansion of its Fresno-based service center and support of dental services for low-income communities.

“But these undertakings do not eliminate the anti-competitive effects of the merger,” said Jones, who is a candidate for state attorney general in 2018.

He noted that the DMHC‘s merger reviews do not weigh anti-trust concerns and are limited to managed care policies in California.

Jones said the deal would also have a serious negative impact on millions of seniors who rely on commercially-administered Medicare insurance policies, known as Medicare Advantage plans. Combined, Aetna-Humana would have 26 percent of all Medicare Advantage enrollees in the country. That’s more than any other insurer, Jones said.

The commissioner also cited his concern that Aetna and Humana officials have not guaranteed consumers will see any of the $1.25 billion the companies expect to save annually as a result of the merger.

Consumer advocates, who have actively spoken out against the mergers, are urging the U.S. Department of Justice to accept the commissioner’s recommendations and reject the transaction.

“There is no upside for consumers from this deal,” said Carmen Balber, executive director of Santa Monica-based Consumer Watchdog. “Aetna has overcharged policyholders millions, just in the last few years,” she said, pointing to the company’s 11 rate hikes since 2012. “Yet Aetna and Humana won’t commit that future rates would be justified.”

Aetna officials expect the deal, if approved by federal regulators, to close in the second of half of this year.

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