Colorado Medical Society

National update: Health plan mergers

Friday, July 15, 2016 08:42 AM

As affected states continue to review the Aetna-Humana and Anthem-Cigna mergers, recent actions by regulators in Missouri and California underscore why localized market analysis is necessary to gauge the actual competitive impact of the proposed mergers.

Like Colorado, regulators in Missouri determined as a threshold matter that the proposed Aetna-Humana merger violates the statutory competitive standard in multiple health insurance lines of business. In contrast to Colorado, Missouri regulators went further, however, undertaking a thorough local market analysis that showed the proposed merger would significantly reduce health insurance market competition in that state. Missouri regulators issued an order for Aetna and Humana to cease several lines of health insurance business in the state.

Addressing the impact of the proposed Anthem-Cigna merger, the California insurance commissioner sent a lengthy, detailed letter to the United States Department of Justice outlining the anti-competitive effects of the proposed merger on that state’s health insurance market.

In Missouri, regulators issued a highly detailed report examining the affected health insurance lines in each county of the state. The primary affected health insurance lines were: Comprehensive Individual, Comprehensive Small Group, Individual Medicare Advantage, and Group Medicare Advantage plans. With just four health insurance carriers, including Aetna and Humana, issuing over 88 percent of comprehensive small group health insurance policies, Missouri regulators readily determined that the proposed merger would greatly reduce competition and result in an unhealthy concentration of bargaining power to the disadvantage of the health insurance marketplace. The Medicare Advantage numbers were even more extreme, with the four largest health insurance carriers, again including Aetna and Humana, controlling 96 percent of the market. Aetna and Humana combined control over 52 percent of the Medicare Advantage market in Missouri. Missouri regulators rejected opinion testimony offered by Aetna’s economist expert that Medicare Advantage plans are designed to compete with Medicare, finding instead that the proposed merger would create an anti-competitive effect in each of the primary lines of health insurance. Missouri regulators ordered Aetna and Humana to cease selling health insurance in each of those health insurance lines in 65 counties.

The California insurance commissioner conducted public hearings on the proposed Anthem-Cigna merger, including reports by expert economists who conducted a county-by-county review to address the likely impact of the merger on the health insurance marketplace. The commissioner determined that there will likely be a substantial anti-competitive impact if the proposed merger is approved. The commissioner also opines that the proposed Anthem-Cigna merger would pose a risk for decreased quality of patient care and that the alleged efficiencies created by the proposed merger are unsubstantiated. The commissioner requests the Department of Justice, which is conducting an ongoing investigation of the proposed mergers, to prohibit the merger under federal law.

In Colorado, the Aetna-Humana merger was approved by the insurance commissioner last fall with no public hearings or action. The Anthem-Cigna merger remains pending with a public hearing anticipated sometime this year. CMS will be prepared to encourage Colorado’s insurance regulators to look at the local competitive market impact of the proposed Anthem-Cigna merger and reach conclusions similar to the regulators in Missouri and California.