California Regulators Are Urged To Scrutinize Health Insurance Mega-Mergers

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California is becoming a battleground state in the fight over health insurance mega-mergers.

Consumer advocates are putting pressure on regulators in California and a dozen other key states to scrutinize the deals amid concerns that consumers will be left with fewer choices and higher costs.

There's a lot at stake for families and employers if the deals go through and leave three health insurers in control of nearly half of the U.S. commercial insurance market.

Anthem Inc. is trying to buy Cigna Corp. for $54.2 billion, and Aetna Inc. wants to take over rival Humana for $37 billion. Anthem and Aetna would join UnitedHealth Group Inc. atop the industry. Another deal, Centene's $6.8-billion acquisition of Woodland Hills insurer Health Net Inc., will also affect Californians.

California's two insurance regulators have begun holding public hearings to examine these mergers and more hearings are expected in the coming weeks, particularly on Anthem, which sells Blue Cross policies in California and other states. If the Cigna deal goes through, Anthem will become California's largest health insurer, topping HMO giant Kaiser Permanente.

The other acquisitions will enable Aetna and Health Net to become bigger players in the state, behind Kaiser and Blue Shield of California.

Much of the debate centers on whether insurers should be required to limit rate increases for a time, expand their provider networks and make other pledges to improve patient care in order to win regulatory approval at the state level.

Antitrust officials at the U.S. Justice Department are reviewing the deals, but states typically take the lead on regulating health insurers and enforcing consumer protections. Most industry analysts expect these acquisitions to ultimately win approval but not before a fight over what concessions must be made.

"States are the most critical regulator of health insurance markets," said David Balto, a former policy director at the Federal Trade Commission and an attorney for the Coalition to Protect Patient Choice, which is lobbying states to fully investigate the mergers and take steps to maintain competition. "They can protect consumers from narrowing networks and premium increases and impose a wide variety of other conditions."

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