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.

See also: 5 ways PPACA cushion programs could drive deal making

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. 

HealthCare.gov

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.”

See also: Witness: New insurers shun U.S. commercial health market

Taking notes

2. McCarty sees managers of the traditional Medicare program borrowing ideas from Medicare Advantage plans.

McCarty cites a congressional directive for traditional Medicare to offer merit-based pay to providers, and a Medicare manager effort to use the Medicare supplement insurance program to manage some traditional Medicare benefits, as examples of how the traditional Medicare program is becoming more like the Medicare Advantage program.

“These changes narrow the differences that exist between Medicare Advantage and traditional Medicare, which will increase the likelihood that a Medicare Advantage enrollee will transition to traditional Medicare and increase the competition between Medicare Advantage and traditional Medicare,” McCarty says. 

See also: AMA quantifies Cigna and Humana deal effects on market competition

A woman comparing two brands in a grocery store

3. McCarty says consumers’ actions in the Medicare market show that many are pretty good shoppers.

In discussions of market fluidity and the Medicare plan valuation proposition, McCarty says the traditional Medicare program’s share of the Florida Medicare enrollee market has changed dramatically as traditional Medicare and Medicare Advantage rules and enrollee cost levels have changed.

The market share shifts show that consumers are comparing traditional Medicare coverage with Medicare Advantage plans, McCarty says, citing outside studies.

The shifts “indicate that consumers recognize and understand the value differential between Medicare Advantage and traditional Medicare, and the changes therein,” McCarty says.

If Aetna or its affiliates tried to raise Medicare Advantage plan prices or cut benefits in an unreasonable fashion, consumers would react by signing up for traditional Medicare coverage, McCarty says. 

Image: TS/Tyler Olson

See also: 

Medicare plan market tilts toward HMOs

Health care’s $605 billion buying binge may slow in 2016

  

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