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Ensuring Health Plan Mergers Benefit the Community

California regulators and infrastructure investment programs

August 1, 2018

Karen Shore, Golden State Health Policy

As markets consolidate, there is an expectation that regulators, when reviewing the proposed merger transactions, will protect the interests of consumers. Regulators do this in several ways, from seeking to limit the monopoly power of the merged entity to assuring its fiscal solvency. Since 2004 California’s health plan and insurance regulators have additionally sought to protect consumer interests by placing conditions, known as undertakings, on their approvals of health plan mergers.

These conditions have resulted in agreements by the plans to make over half a billion dollars in infrastructure investments in California’s health care delivery system. These investments are intended to offer a low-cost financing option for providers working in underserved communities in the state. They are also expected to generate a positive return on investment for the health plan or insurer.

Ensuring Health Plan Mergers Benefit the Community: California Regulators and Infrastructure Investment Programs outlines the basic structure of infrastructure investment requirements, provides insight into how the funds have been invested, and suggests ways in which the process might be improved. Some of the ideas for how to extract the maximum public good out of the required investment funds include:

Expanding on what is considered positive return on investment for the plans — rather than relying solely on financial returns, plans and regulators could consider other indicators, such as improved member retention rates, better quality of care or patient satisfaction scores, and easier access to services via telehealth.
Investing the funds in pooled financing mechanisms, such as social impact bonds or community wellness funds.
Expanding the types of facilities eligible to borrow the funds to include assisted living facilities, respite centers, and recuperative care beds.
Leveraging the impact of the funds by combining investment dollars with plan grant or donation funds.

The full issue brief is available for download under Related Materials.

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