State Legislation Update: AB 595 (Wood) to Increase Oversight Over Health Plan Mergers Passes Key Committee

In the midst of the ongoing federal fight, Health Access continues to advocate on behalf of consumers at the state level. Today, legislation to institute stronger state oversight over health plan mergers passed the Assembly Health Committee on a bipartisan 12-2 vote. AB 595 (Wood), sponsored by Health Access, protects Californians from changes to the health plan market that may lead to negative outcomes for consumers. Economic studies show that past health insurer mergers lead to premium increases and have no demonstrable effect on improving health care quality.

When it comes to these health care mega-mergers, bigger is often not better for consumers, and the state should have the ability to hold the health plans to their promises. AB 595 improves state oversight over these health plan mergers, to protect the millions of residents who could be negatively affected by giving one of our major health plans even more market power. Right now, our main regulator can’t disapprove a plan merger, and doesn’t even have to hold a hearing. When California saw a wave of mega mergers in the last year, consumer advocates had to ask for a hearing. This bill gives our state regulators the tools they need to further scrutinize the impact of these major market changes on our own state’s consumers.

In order to clearly evaluate the impacts of these mergers on the market, AB 595 would require health plans seeking to merge to file a new application for licensure in California. This would allow state regulators to review the application by holding a public hearing, prepare an independent health care impact statement, and require independent valuation of any nonprofit entity involved in the transition. Regulators would consider the following factors in their review:

  • short-term and long-term benefits, if any, to consumers and purchasers
  • whether the merger adversely affects competition
  • impact on cost, quality, and health disparities

California has seen a number of major and proposed health plan and insurer mergers in recent years such as Blue Shield-Care 1st, Centene-Health Net, Aetna-Humana, and Anthem-Cigna (the U.S. Department of Justice has blocked the latter two, for now). Although California has a relatively more competitive insurance market, three companies now control nearly 80% of the market and the top five insurers control over 90% of the market. With health insurance markets already highly consolidated, mergers are likely to result in fewer choices and higher prices for the 14 million California consumers enrolled in private coverage. Private insurance premiums and out-of-pocket spending are already high and projected to grow. Health insurance premiums for family coverage have seen a cumulative 216% increase since 2002, compared to a 37% increase in overall prices. Current law gives regulators some oversight over insurer mergers, but they are insufficient to fully protect consumers.

Resources:

AB 595 (Wood) Fact Sheet

Health Access: Merger Watch

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