HMO MERGERS: Bill To Increase Scrutiny Revived
State Sen. Herschel Rosenthal (D-Los Angeles) has "resurrected" his HMO merger oversight bill that has "sat dormant for nearly a year." The legislation, SB 330, would "increase scrutiny of proposed" HMO mergers by requiring the state attorney general to determine the deal would not create a monopoly, the Wall Street Journal/California edition reports. Rosenthal sought the support of the two gubernatorial candidates -- Lt. Gov. Gray Davis (D) and state Attorney General Dan Lungren (R) -- and the two leading candidates for attorney general -- Sen. Bill Lockyer (D-Hayward) and Dave Stirling (R) -- for the bill. So far, he has received the support of all but Davis, who is "leaning toward supporting it," according to his spokesperson, Chris Campana.
The Journal reports that Rosenthal hopes "to leverage these four allies to lure a fifth and crucial player to his team" -- Gov. Pete Wilson -- who last year said he would veto the bill if it got to his desk. "I think it's a high-powered approach, and so I'm really hoping to persuade the governor to withdraw his current opposition. It places him in almost an untenable position," said Rosenthal, whose strategy is to convince the governor that he can either sign the legislation now while he's in office and "[earn] the accolades of consumer activists," or see the next governor, with the support of the new state attorney general, sign the bill. But Rosenthal's plan may not work as well as he expects. "Many legislators over the years have tried to intimidate, cajole and otherwise exert pressure on the governor to sign a bill that he doesn't agree with on policy grounds. This will have the same success that all the others have had in the past -- none," said Wilson spokesperson Sean Walsh. He said the governor's office has "a number of issues we still have concerns with," but that "we're withholding judgement" on the measure.
Close The Loophole
Currently, HMOs are regulated by the state Department of Corporations. However, the department only scrutinizes the plans' mergers for quality of care issues, not competition concerns. Most other states' Department of Insurance regulate HMO mergers for both quality of care and anticompetitive issues. Rosenthal "says his legislation would close that loophole by directing the attorney general's office to consider merger proposals for their impact on competition in the health care marketplace." The managed care industry opposed the legislation, contending that it would "needlessly hinder" HMOs wanting to merge. "It creates a dual approval process for any acquisition, and that's unprecedented," said Maureen O'Haren of the California Association of Health Plans. Some HMOs -- such as PacifiCare and Kaiser Permanente -- are "neutral" on the measure, the Journal reports. "We just felt that it wasn't that big of a deal to us. We're already pretty big," said Kaiser Vice President Dennis Flatt (Benson, 8/12).