Gov. Jerry Brown has signed into law a bill that will give California officials more of a say in the merger of health insurance plans.
Under Assembly Bill 595, insurance companies seeking to merge plan offerings in the state must get permission from California's Department of Managed Health Care. It also gives the department the ability to veto mergers that negatively impact competition.
Plans seeking to merge must outline any potential impact to access, network adequacy, handling of consumer complaints and claims processing. It also requires insurers to host public hearings.
"All this proposed mega-mergers activity has raised real concerns and the need to protect consumers, as well as choice and competition, in this changing environment," said Anthony Wright, executive director of Health Access California, which sponsored the bill.
The last major merger in the state took place in 2015 when Centene Corp. paid over $6 billion to acquire California-based Health Net Inc. That same year, Blue Shield of California's bought Care1st Health Plan for $1.2 billion.
In California, three insurers control nearly 90% of the market. That's why the patient advocacy group Health Access California supports the law. According to state data, insurers in California collect over $300 billion dollars a year in premiums and have about $5.5 trillion dollars in assets under management.
Private insurance premiums and out-of-pocket spending are high and projected to grow. Health insurance premiums for family coverage have seen a cumulative 216% increase since 2002, according to the advocacy organization.
"These days, California can't rely on just the federal government to protect California's consumers and health care system," Wright said. "Recent mergers have revealed the need to beef up the authority of our state regulator to either deny or impose conditions on deals that are not in the interest of the patient or the public."
The California Association of Health Plans expressed disappointment in the legislation.
"AB 595 is unnecessary and could increase health care costs," said Mary Ellen Grant, a spokeswoman for the trade group. "It will add unnecessary complexity and duplication to the health plan mergers and acquisition process."