Santa Monica, CA — Consumer Watchdog today urged the Department of Managed Health Care (DMHC) to use its authority over the proposed Aetna-Humana merger to enforce a binding agreement that the combined company will not implement any rate hikes that are deemed unreasonable by regulators.
In a letter to DMHC, Consumer Watchdog wrote that Aetna and Humana claim that the merger will increase competition, improve care and benefit consumers. Unfortunately, Aetna has made those assertions before and failed to live up to them. In a 1998 merger between Aetna and Prudential, executives made similar promises but there was an immediate 7 percent hike in premiums after the consolidation and the quality of care did not increase, it added.
“After Aetna has imposed millions of dollars in unjustified rate increases on California consumers, CEO Mark T. Bertolini can’t expect the public to trust promises that a merger will mean savings for Californians,” said Carmen Balber, executive director of Consumer Watchdog. “To even consider approving this deal, California health regulators must prohibit future unreasonable rate increases, protect Californians from bearing any costs of the merger, and prevent California premiums from being sent out of state.”
The letter continued: “according to the Department, two-thirds of its unreasonable premium rate findings have been for Aetna rate increases. In an eight-month period between 2014 and 2015, Aetna subjected more than 40 percent of its small group members to unreasonable rate increases, costing policyholders a projected $39 million in excessive rates.”
Read the letter here: http://www.consumerwatchdog.org/resources/aetna_humana_merger_letter.pdf
Consumer Watchdog called for airtight metrics in any Aetna-Humana approval to ensure commitments can be measured and enforced. Blue Shield reneged on an agreement with the DMHC to make $140 million in charitable contributions in order to gain approval of its acquisition of Care1st. DMHC has declined to enforce the agreement.
The letter added: "... millions of Californians are newly insured. Yet many low- and middle-income families continue to struggle to pay the costs of a policy, let alone use their new health coverage, as deductibles soar and doctor and hospital networks shrink. A Kaiser Family Foundation/New York Times survey released last week showed that one-in-five working-age Americans ran into serious financial difficulties trying to pay medical bills despite being insured. Mergers exacerbate these issues."
The letter said that conditions on the Aetna-Humana merger should include:
• Enhanced Rate Review: To assure the public that savings from the merger are passed on but costs are not, DMHC must require the merged company to agree to five years of enhanced rate review. It must also enforce a binding agreement that the company will not implement rate hikes deemed unreasonable by California regulators.
• Strengthen Health Care Delivery System: DMHC should mandate that Aetna participate and invest in statewide efforts to centralize a provider directory database that allows easy and timely access for consumers.
• No Plan Cancellations: As part of its conditions, Aetna should be required to maintain the combined products on the same basis as prior to the merger for the next five years.
• Bar “Upstreaming” of California Premiums to either Aetna or Humana: DMHC should prohibit them from removing reserves from California to pay for severance and retention packages for executives in connection with the merger and require it to explain any “upstream” amounts sent out of state post merger.
• Aetna must be required to improve its healthcare ratings related to timely care and customer satisfaction.
Consumer Watchdog urges DMHC to protect consumers and strictly enforce any undertakings. The result of increasing consolidation and lack of competition will lead to a healthcare crisis in California if regulators don’t protect consumers with meaningful and stringent safeguards.