Four big managed care companies took two giant steps last week toward consolidating the U.S. health finance system.
Anthem Inc., Indianapolis, agreed to acquire a slightly larger company, WellPoint Health Networks Inc., Thousand Oaks, Calif., through a merger with a value of about $16 billion in cash and stock.
The combined company would be called WellPoint Inc. and have its headquarters in Indianapolis. Anthem directors would control the WellPoint Inc. board. The companies structured the deal as an acquisition by Anthem in part because “the state of Indiana has a much friendlier regulatory process,” WellPoint spokesman Ken Ferber says.
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The merger would help two big, multi-regional carriers come closer to offering coverage on a truly national basis.
At the end of 2002, Anthem provided or administered medical coverage for 11 million people and WellPoint covered 13 million. In the last nine months, acquisitions and internal growth have pushed combined membership to 26 million.
One of Anthems big Midwestern competitors, UnitedHealth Group Inc., Minnetonka, Minn., wants to acquire Mid Atlantic Medical Services Inc., Rockville, Md., for $2.7 billion in cash and stock. MAMSI covered 2 million people at the end of 2002. UnitedHealth covered 16 million and had 1.5 million members in MAMSIs mid-Atlantic market. By the time UnitedHealth closes the deal, smaller deals and internal growth could push total membership to 19 million.
Together, UnitedHealth and the new WellPoint Inc. could end up insuring the health of more than one-quarter of all privately insured Americans and an even higher percentage in some markets.
At the new WellPoint, “well emerge as the leading health benefits company in the nation, with the largest membership base in 12 of the 13 key states where we hold a Blues license,” says Anthem Chairman Larry Glasscock.
WellPoint Chairman Leonard Schaeffer says the Anthem deal could help the entire U.S. health care system.
“We can help take a very fragmented mom-and-pop industry and get economic improvements in terms of standardization and simplification of transactions,” he says.
Schaeffer has been calling for consolidation of Blues plans for years. He predicted in 1995 that the country might end up with 20 regional Blues plans.