At DMHC Public Meeting, Consumer Groups Question Proposed Centene-Health Net Merger

On December 7, 2015, the Department of Managed Health Care (DMHC) held a public meeting on the proposed merger of Centene and Health Net. The public meeting was requested by consumer groups including Health Access, Consumers Union, and others, to raise questions about the structure of the deal, its potential impact on California’s patients and health care systems, and ensure proper oversight as insurance companies merge and become larger. (State of Reform wrote up the meeting as well.)

The proposed Centene-Health Net merger is one of three pending insurer mergers being reviewed by DMHC. Earlier this year, the DMHC approved a merger between Blue Shield and Care1st, following Health Access’s and other consumer groups’ request for strong conditions to address potential negative impacts. Health Access is also monitoring a merger request from Anthem Blue Cross-Cigna and Aetna-Humana and will continue to fully engage state regulators, including the DMHC, to ensure strong consumer protections and a commitment to improving the health care delivery system.

Tam Ma, Health Access California’s Policy Counsel, provided comment on behalf of California consumers, raising questions about Centene and Health Net’s track record in California and if they should be allowed to have even greater market share. Specifically, she made the case that to ensure that this merger is in the public interest, insurers should not be allowed to get bigger unless they commit to getting better, sharing skepticism about whether bigger is actually better for consumers.

Consolidation – good for consumers and government purchasers?

In her testimony, Tam Ma shared concerns about how this merger will affect government purchasers such as Covered California and Medi-Cal, and their ability to hold down prices. Nationally, Centene is the largest Medicaid managed care company, but relatively new to Medi-Cal here in California. Health Net, by contrast, has a large presence in Medi-Cal and serves over a million consumers. Health Net is also responsible for 18% of Covered California enrollment and offers products in 16 of the 19 regions. If Centene’s acquisition of Health Net is supposed to lead to better care and lower cost, then Health Access seeks clear conditions that guarantee consumers and government purchasers will benefit.

Consumer Protection

Health Access also urged DMHC to scrutinize how Centene will improve upon Health Net’s track record, both in the Medi-Cal and commercial markets.

  • Routine medical surveys: In DMHC’s most recent routine medical survey, Health Net was found to have five major deficiencies.
  • Enforcement actions: Health Net has been the subject of nearly 200 enforcement actions by DMHC in the past 15 years. Within the last year alone, HealthNet has received three six-figure fines for serious violations of patient rights and for not providing medically necessary services.
  • Quality ratings: According to the Office of the Patient Advocate’s HMO quality report card, Health Net has poor quality ratings based in part on their recent failure to help patients get the care they needed when they needed it. Among the largest HMOs in the state, Health Net does the worst job of answering calls by far, with only 25% of plan members saying their calls are answered quickly. Health Net’s Medi-Cal products also have low quality ratings from NCQA (National Committee for Quality Assurance) for customer satisfaction, prevention, and treatment.

If this merger is approved, it must result in better quality and better value for patients.

Commitment to California

Health Access also called to question Centene’s long-term commitment to serving California consumers. Currently, Centene is a Delaware-based company; because Centene is not based in California and because it lacks experience in California, it should be required to have a California-based medical director, legal counsel and regulatory compliance staff who are knowledgeable about California-specific consumer protections and other requirements we place on our health insurers. The insurance executives indicated that Centene would allow local control and that HealthNet’s operations would continue to be headquartered in California, although specifics were not detailed.

Finally, if Centene were to acquire Health Net, it would take Health Net’s place as one of the largest insurers in the state. We would want guarantees that Centene would continue to be part of both the Medi-Cal and commercial market in California. A few years ago, Centene abruptly pulled out of Kentucky’s Medicaid program mid-contract, creating chaos for the state and its 125,000 patients. Earlier this year, an appeals court found Centene to be in breach of contract and ordered them to pay damages to the state. Centene’s actions in Kentucky give Health Access great pause here in California.

Several other organizations provided public comment regarding the proposed merger. A couple in favor of the merger cited the advantages of having Health Net in both the Medi-Cal and commercial space in terms of minimizing churn and disruption to families moving from Medi-Cal to Covered California plans and back again. They also praised Health Net for providing access to communities with traditionally less access to health care.

Several consumer groups, such as Consumers Union and the Western Center on Law and Poverty, also raised similar issues and questions as Health Access, including questions about network adequacy, quality of coverage, low consumer satisfaction scores and lack of experience operating in the California market. All groups believe Centene should be required to not proceed with rate increases deemed to be unreasonable.

Health Access posed two questions to the representatives from Centene and Health Net, who had an opportunity to respond to public comment. First, why doesn’t Centene enter the California market without acquiring Health Net? Isn’t this a missed opportunity to provide Californians with a new option instead of merging with an existing one? Second, Centene and Health Net said this merger would create efficiencies that would be good for the health plans and for consumers. Health Access asked what specific commitments they can make to improve the patient experience. The representatives from Centene and Health Net did not respond to these questions in their closing statements.

Given Health Net and Centene’s track record, Health Access and other consumer advocates are urging state regulators and policymakers to further scrutinize this deal and other pending deals and consider imposing stronger conditions to protect individual policyholders and minimize any deleterious impacts on California’s health system as a whole.

If you or your organization would like to submit comments about this merger or the larger questions at stake concerning mergers in general, you have until Monday, December 14, 5:00 PM to submit your comments to publiccomments@dmhc.ca.gov.

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