Hearing Looks at Acquisition of Insurer

At a public hearing on Monday in Sacramento, insurers made their case in front of officials from the Department of Managed Health Care for Centene health insurance company’s proposal to buy Woodland Hills-based Health Net for $6.8 billion.

Health Net serves more than 1.8 million Medi-Cal enrollees in California and has about 18% of the insurance enrollment through Covered California. Centene, based in St. Louis, has been involved in care here through the California Health and Wellness Foundation. Centene officials said they would keep Health Net’s headquarters in California.

Consumer groups were not necessarily against the acquisition but expressed a number of concerns, particularly over a possible lack of competition in the state’s health insurance market. 

“Why does Centene need this merger to enter this market?” asked Anthony Wright, executive director of Health Access California. “They could be a new option in the market. So why does it have to be an existing option?”

Wright said Health Net has had “issues with meeting certain consumer standards.”Advocates want to hear specific commitments from the new insurer — and from state regulatory agencies — that those standards will be improved.

“When companies get bigger, the problems get bigger, too,” Wright said. “We wouldn’t want the problems to grow with the size of the company.”

The California Medical Association weighed in, as well, citing the increasing number of mergers and acquisitions among health insurers and the possible negative effect of less competition within the market.

“We have long been concerned about reduced competition,” said Francisco Silva, general counsel for the CMA. He added that limited choice could lead to narrow networks of providers within health plans.

“When a health plan has significant market power to utilize a restricted medical network it becomes an issue,” Silva said, “compounded by the growth of Medi-Cal managed care, where choices are already limited.”

Steve Sell, president and CEO of Health Net of California, said there can’t be a reduction in competition because the two companies don’t currently compete.

“The Centene and Health Net combination will bring together complementary products without limiting any competitive market,” Sell said, “because no overlap exists between Health Net and Centene’s respective businesses.”

The proposed acquisition also will need to be reviewed by the state’s Department of Insurance. DMHC officials are expected to issue approval or denial by early next year.

Public comments on the proposed sale are due by Dec. 14.

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