Conditions of the deal will require Centene to spend $340 million on improving the healthcare safety net in California.
This article originally appeared in California Healthfax.
The state Department of Managed Health Care and the Department of Insurance approved a proposed merger between Centene Corp. and Health Net with conditions that will require Centene to invest in the state’s safety-net infrastructure.
The $6.3 billion merger was approved with conditions that will require Centene to spend $340 million on improving the healthcare safety net in California and building a new customer service and call center for Health Net in California. “The Department’s conditions will improve both plan performance and care for California members,” said DMHC director Shelley Rouillard. “In addition to the plans agreeing to invest in our healthcare delivery system to better serve consumers, I am pleased to announce Health Net’s headquarters and key operations will remain in California.”
California insurance commissioner Dave Jones said the merger should strengthen Health Net’s presence in the state’s commercial markets.
“After a thorough review including extensive public input, I concluded that this transaction provides an opportunity to bring new capital and resources from a major national insurer outside of California (Centene) to enable a California health insurer (Health Net) to continue to compete and offer consumers additional choices in California’s individual, small group, and large group commercial health insurance market,” said Jones.
Under the agreement, Centene will invest $75 million to improve the state’s healthcare infrastructure for underserved patients, invest $200 million to build a service center in an economically distressed community in the state that employs at least 300 people, and invest $65 million to support safety-net programs in low-income and middle-income regions. Health Net, which is currently based in Los Angeles, will also retain its corporate headquarters in California.
The merger will give Centene a major foothold in the Medicaid business in California, where Health Net currently has 1.8 million members. Health Net also has an 18% market share of health plans sold on Covered California. Centene has more than 5.1 million members in 23 states.
Consumer advocacy group Health Access California said it was glad to see state regulators approve the merger contingent on conditions.
“We appreciate that California regulators appropriately conditioned this merger on several commitments to improve quality and customer service and invest in the state’s safety net,” said Anthony Wright, executive director of Health Access. “These are not onerous commitments and many of the conditions were to get Centene to fix deficiencies and follow existing consumer protection laws and regulations.”
Health Access had also requested that DMHC require Centene to not implement rate hikes that are deemed “unreasonable” by state regulators.
The Centene-Health Net deal is the latest in a flurry of insurance industry mergers in California. In October 2015, the DMHC approved a deal that allowed Blue Shield of California to acquire Care1st Health Plan. The $1.2 billion deal was approved on the condition that Blue Shield invest $200 million in improvements, including a $50 million investment to improve the state’s Medi-Cal program.
State insurance regulators are also due to rule on two more proposed mergers that will impact California. Anthem Blue Cross and Cigna are proposing a merger deal worth $52 billion and Aetna and Humana are proposing a $38 billion merger.