Kevin McCarty, the Florida insurance commissioner, has signed a consent order that gives Aetna Inc. (NYSE:AET) permission to forge ahead with efforts to acquire Humana Inc. (NYSE:HUM) plans located in his state.
Aetna announced a $37 billion deal for Humana in July, three months before the Centers for Medicare & Medicaid Services (CMS) officially warned insurers that at least one of the major Patient Protection and Affordable Care Act (PPACA) programs for using cash from thriving insurers to help struggling insurers, the PPACA risk corridors program, was likely to work poorly.
Aetna provides or administers medical coverage for about 1.5 million people in Florida, and Humana also provides coverage for about 1.5 million Florida residents.
Aetna's Florida enrollees include about 1.3 million commercial plan enrollees and just 99,000 Medicare Advantage enrollees. Humana has about 548,000 commercial plan enrollees and 589,000 Medicare Advantage plan enrollees in the state.
Combined, they would rank third in the commercial market in terms of enrollment market share, behind Blue Cross and Blue Shield of Florida and UnitedHealth Group Inc. (NYSE:UNH).
See also: Aetna's good news: Is it good for you?
The combined company would have about 15 percent of all Medicare plan enrollees in the state. It would rank far ahead of Florida Blue, which covers just 8.4 percent of Florida's Medicare enrollees, but far behind the traditional Medicare program, which covers 64 percent of the enrollees, according to figures Aetna and Humana presented to the Florida Office of Insurance Regulation (FOIR).
McCarty approved the Aetna-Humana deal application for his state without requiring the companies to divest any existing operations. He says in the order that the disruption caused by mandatory divestitures could outweigh any benefits divestitures might have on health insurance market competition.
In explanations of consent order provisions, McCarty shares some observations about how he thinks health insurance markets are evolving. For a look at some of those observations, read on.
1. McCarty would like to see HealthCare.gov offer better individual health menus in some parts of Florida — but he's not certain what HealthCare.gov will look like two years from now.
Florida is one of the states that has refused to help set up a PPACA public exchange for its state, but residents of Florida have flocked to HealthCare.gov, the exchange enrollment system that the U.S. Department of Health and Human Services (HHS) runs for states that are unwilling or unable to run state-based exchange programs.
About 1.7 million of the 9.6 million people who signed up for 2016 major medical coverage through Health Care.gov were Florida residents, and Florida is HealthCare.gov's top state. The state with the second biggest HealthCare.gov enrollee count, Texas, has just 1.3 million HealthCare.gov plan enrollees. About 8.5 percent of Florida's 20 million residents have HealthCare.gov coverage.
In the consent order, McCarty acknowledges the importance of HealthCare.gov in his state by requiring Aetna to expand its Florida PPACA exchange portfolio.
By Jan. 1, 2018, Aetna is supposed to "enter into five new counties not in its 2016 Florida individual health insurance exchange portfolio."
By Jan. 1, 2020, Aetna is supposed to give regulators a plan for providing individual exchange coverage in other markets in which it could "secure a competitive position based upon adequate premium rates" and meet provider network adequacy standards.
But McCarty and Aetna were careful to include a provision letting Aetna and Florida regulators renegotiate the exchange program expansion commitments "if both parties agree that there are material changes in the federal health insurance exchange program, including any material exchanges in subsidies."
