Since the summer of 2015, a great deal of attention has focused on whether the proposed Anthem/Cigna and Aetna/Humana mergers will be approved by federal and state antitrust regulators. These transactions have been the subject of Congressional hearings and state insurance department hearings, and to date, while some states have approved the transactions, the DOJ Antitrust Division's examination of the Anthem/Cigna and Aetna/Humana mergers remains ongoing, without any indication regarding how or when it will ultimately be completed.
In the meantime, the proposed merger of Centene and Health Net, which was announced at approximately the same time as the Anthem and Aetna deals, has received far less attention and scrutiny. This, notwithstanding the fact that the Centene/Health Net deal would also be considered a "blockbuster" insurance-industry deal based upon its size (valued at over $7 billion), if not for the even larger Anthem/Cigna and Aetna/Humana deals. Not surprisingly, given the size and significance of the Centene/Health Net deal, the deal requires many of the same regulatory approvals required of Anthem and Aetna. However, unlike Anthem and Aetna, Centene and Health Net have succeeded in gaining regulatory approvals at a much quicker pace. Centene and Health Net received antitrust approval from federal regulators by August of 2015, and by January of this year Centene and Health Net had received all of the necessary state approvals other than approval from the California Department of Insurance.
Seeking their final, required approval, Health Net and Centene appeared at a public hearing before California Insurance Commissioner Dave Jones on January 22 to state their case for approval. (Notably, the California Department of Insurance's oversight over this deal is based upon the fact that Health Net is domiciled in California. While the California Insurance Department does not have oversight over the Anthem and Aetna deals --because neither insurer is domiciled in California -- those transactions require approval from the California Department of Managed Health Care).
During a six-hour public hearing on the matter, Commissioner Jones heard from the parties, their economic experts, and various consumer groups regarding the proposed transaction. Commissioner Jones expressed some potential concerns about the transaction, and noted that he had the authority to disapprove the transaction in its entirely if he believed it was not in the public interest - a result that could potentially have rendered moot all of the parties' prior regulatory successes. Notwithstanding Commissioner Jones's authority to disapprove the transaction in its entirety, the expected result was that Commissioner Jones would, at most, impose some conditions on the deal. Indeed, doing so would have been consistent with the approach taken by then-California Insurance Commissioner John Garamendi in 2004, when he reviewd, and ultimately approved, the proposed Anthem/WellPoint deal. In that matter, Commissioner Garamendi's approval was received only after Anthem offered approximately $100 million in state-specific concessions.
At the close of the hearing, Commissioner Jones promised that his review of the deal would be swift, and he made good on that pledge. On March 22, Commisioner Jones announced that he was approving the parties' transaction, permitting Centene to obtain control of Health Net. In announcing his decision, Commissioner Jones stated that the transaction "provides an opportunity to bring new capital and resources from a major national health insurer largely 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 markets." Nevertheless, Commissioner Jones added that his approval was coupled with "strong conditions to protect California's consumers."
Specifically, the conditions on approval imposed by Commissioner Jones include an obligation that the costs of the merger not be imposed on California policyholders, that Centene continue to maintain grown Health Net's business in California (including continuing to offer products through Covered California), and the commitment to continue to improve the quality of healthcare in the state. In addition, Centene is also required to make a $200 million infrastructure investment in California by establishing a California call center, an additional $30 million investment in California's low and moderate income neighborhoods through investments in health facilities in those areas, and may not seek to "re-domesticate" Health Net out of state.
Having obtained this last, necessary approval, the Centene/Health Net deal closed on March 25. For Anthem and Aetna, however, whether, when, and under what conditions they may be permitted to consummate their deals remains uncertain.
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