California regulators approve merger between Centene and Health Net subject to key conditions sought by consumer advocates

Experts

Staff Attorney

Tuesday, March 22, 2016

Merger Will Require Strong Oversight By Regulators to Ensure Consumers Benefit

SACRAMENTO, CA — The Department of Managed Healthcare and the California Department of Insurance announced today that they are approving the proposed merger between Centene, Corp. and Health Net, Inc., subject to a number of conditions designed to protect consumers from potential pitfalls of the deal. While these conditions offer some protection for consumers from unjustified health insurance premium rates and require the newly merged plan to improve its services, state regulators must monitor the insurer closely to ensure compliance, according to Consumers Union, the policy and advocacy division of Consumer Reports.

“The benefits of health plan mergers overall are clear for the insurers, but not for consumers,” said Dena Mendelsohn, Staff Attorney at Consumers Union. “We know from past experience that market consolidation usually comes with higher prices. State regulators will need to ensure that Centene and Health Net hold up their end of the bargain to make health coverage affordable and high quality.”

In July, 2015, Centene and Health Net announced their plan to merge with Missouri-based Centene acquiring the California-based Health Net, Inc. This merger is subject to approval by both DMHC and the California Department of Insurance (CDI), each of whom reviewed the proposed merger separately. Consumers Union questioned whether consolidation of the health plans was in the best interest of consumers, and testified on current quality issues and the risk that the newly merged plan may actually eliminate some insurance products offered in California.

As announced by both DMHC and CDI today, approval of the merger of Centene and Health Net comes with a number of contractual obligations, including:

  • A commitment to maintain key officials and personnel in California, as well as an obligation on Centene to increase its proficiency in the California commercial health plan market.
  • An agreement to sustain and grow its health plan products offered in California, including those offered through Covered California.
  • Quickly resolving on-going plan performance issues and improving quality scores by 2019.
  • Creating and making publicly available an accurate and complete provider directory by July 2016.
  • Community investments—such as grants to support consumer assistance programs, programs designed to improve health outcomes in underserved areas of California, and contributions aimed at strengthening the Medi-Cal health care delivery system—totaling approximately $140 million as well as investments of $200 million for providing new jobs in an economically distressed community in California.
  • An obligation for the merged company to come to the table with DMHC to resolve any issues regarding proposed premium rate increases that the Department considers unreasonable or unjustified.

The agreements announced today evidence that many of the consumer concerns were heard by DMHC and CDI. Affordability concerns remain, however, and whether consumer interests are truly protected in the coming years depends on ongoing enforcement by the department. “We recognize that improvement takes time,” noted Ms. Mendelsohn, “and we look to the regulators to continue to pressure these and other plans to continuously improve starting on day one.”

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Contact:  Michael McCauley, mmccauley@consumer.org, 415-431-6747, ext 7606