DMHC’s Approval of Aetna-Humana Merger Will Cost Policyholders, Says Consumer Watchdog

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Santa Monica, CA – The California Department of Managed Healthcare (DMHC) approved the merger of Aetna and Humana today, sanctioning unjustified rate increases and without requiring the insurer pass on any projected savings to consumers. Consumer Watchdog urged the U.S. Department of Justice, which has final merger approval authority, to reject the deal.

In an eight-month period between 2014 and 2015, Aetna subjected more than 40 percent of its DMHC-regulated small group members to unreasonable rate increases, costing policyholders a projected $39 million in excessive rates. A continuation of this pattern of unreasonable premium rate hikes will make an Aetna – Humana merger even more costly for consumers, said Consumer Watchdog. Despite this, DMHC’s merger undertakings sanction 2 unjustified quarterly rate increases for small businesses per year.

“Instead of barring excessive rate increases, the DMHC’s agreement with Aetna will allow the company to impose two unjustified rate increases on small businesses per year. There is no universe where allowing half of a company’s yearly rate proposals to be unreasonable can be considered a win for consumers,” said Carmen Balber, executive director of Consumer Watchdog.

Company executives promised $1.25 billion in “synergies” from the merger deal, yet did not commit that any of those savings would go to consumers.

“California’s health insurance market is now so consolidated that any merger will reduce competition. Small concessions are no longer good enough to justify a merger deal. Aetna and Humana’s inability to show consumer savings, and refusal to make significant commitments to not cancel plans or end unjustified rate increases, should have nixed the deal,” said Balber.

Consumer groups had also called on DMHC to prevent the merged companies from upstreaming California policyholder revenues to the parent company out of state. The undertakings also fail to bar upstreaming, unless to do so would make the California subsidiary insolvent.

Read Consumer Watchdog’s January letter calling on the Department of Managed Healthcare to impose strict concessions or reject the merger deal.

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Carmen Balber
Carmen Balber
Consumer Watchdog executive director Carmen Balber has been with the organization for nearly two decades. She spent four years directing the group’s Washington, D.C. office where she advocated for key health insurance market reforms that were ultimately enacted into law as part of the Affordable Care Act.

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