Division of Insurance

Tuesday, March 01, 2016 12:15 PM

Mergers in health insurance: the DOI's role

by Marguerite Salazar, Colorado Insurance Commissioner, Head of the Division of Insurance

The two mergers announced last year – Aetna-Humana and Anthem-Cigna – have generated much national coverage. That’s not surprising, as the U.S. Department of Justice’s Antitrust Division and the Federal Trade Commission review these large mergers for their impact on competition in all states.

While the national angle is important, the states are also looking at these transactions. It is critical that Coloradans understand how the Colorado Division of Insurance (DOI) reviews the mergers, as each is treated differently under state law.

Aetna-Humana
As neither company is domiciled in Colorado, the entities only had to file a Form E notification with the Division. The Form E is a pre-merger notification, which includes information on the statewide competitive impact, as well as the effect on competition in all lines of insurance. The DOI initially had 30 days to review.

For Aetna-Humana, the Form E was filed on Oct. 8, 2015. After considering the statewide impact to all lines of insurance and evaluating the minor product overlap among the two entities, the Division determined that the transaction did not violate competitive standards.

In the states where these companies are domiciled (Connecticut for Aetna; Kentucky for Humana), those states’ departments of insurance take a larger role in the review. The companies must file a Form E and a Form A, which provides detailed information on the acquiring party’s financial condition and its post-merger intentions. Each state of domicile reviews the merger using standard procedures to ensure policyholders are protected from a financially weak acquiring party.

The domiciliary states’ departments of insurance have the authority to review the transaction and its impact to the companies’ financial health, including their ability to meet reserve requirements and to maintain obligations to policyholders. Essentially, the departments of insurance where these companies are domiciled have greater authority to conduct a more detailed review of the merger.

Ultimately, any newly merged company will still have to meet all Colorado licensing requirements, rate filing requirements and network adequacy requirements, as well as all notice requirements, should the company want to stop offering some plans and begin offering new products. And, the newly merged entity still has to meet current obligations to its members.

Anthem-Cigna
The key distinction with the Anthem-Cigna merger is that both companies are domiciled in Colorado, meaning the DOI will take a larger role, including a review of the Form A filing. We have received the Form A filing for this transaction and it is available on the DOI notices webpage at www.colorado.gov/pacific/dora/node/112251. For several reasons, including the fact that this merger is pending with the federal entities, the Division has not yet received the Form E for this merger. We expect the federal government’s review of the Anthem-Cigna merger to take at least until this summer.

There is also a special provision in Colorado law that is particular to our state when it comes to such mergers. CRS 10-3-803(6)(b) stipulates that part of the independent investigation of the proposed merger’s impact must include “an analysis of the probable effects of the merger on consumers and on suppliers of services.” Investigation into the impact on consumers is common among states, but investigating the impact on suppliers of services is not. This will be another factor that goes into the DOI’s evaluation of this merger.

The Division will hold a public hearing to review this merger and its impact on the Colorado market. At this time, we do not have a date set for the hearing, as we are waiting for the Form E to be filed. However, we have created an email notification list for people who want to receive notice of the filings related to the Anthem-Cigna merger. You can sign up for this list on our “Division of Insurance Alerts” webpage – www.colorado.gov/pacific/dora/node/91826 – enter your email address under “Merger Information Notifications” and click “subscribe.”

What’s best for Colorado consumers?
I am confident that a competitive marketplace will continue in Colorado. To that end, the Division will work to ensure that Colorado consumers will be able to continue choosing from a marketplace with sufficient competition to keep quality health care affordable and available.