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Garamendi Unveils AnthemWellPoint Proposal

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California insurance regulators want to put limits on a proposed acquisition of WellPoint Health Networks Inc., Thousand Oaks, Calif.[@@]

California Insurance Commissioner John Garamendi hopes to exercise that control by putting restrictions on plans by Anthem Inc., Indianapolis, to acquire a key WellPoint subsidiary, BC Life & Health Insurance Company, an affiliate of Blue Cross of California that sells preferred provider organization coverage.

BC Life is WellPoint’s main California life insurance subsidiary. WellPoint’s other California operating units include ordinary corporations and a health maintenance organization that is regulated by the California Department of Managed Health Care.

Garamendi has announced an effort to persuade Anthem and BC Life to agree to a list of 15 “undertakings.”

Some of the undertakings would require Anthem to keep up BC Life’s capital levels and use its own cash to make any retention payments or severance payments due to WellPoint executives as a result of the acquisition.

Other undertakings would require Anthem to ensure that Blue Cross of California complies with California’s HMO consumer protection standards and to ensure that BC Life and Blue Cross continue to serve roughly the same markets that they have served in the past.

Garamendi also wants to protect private employers that have BC Life PPO coverage from mass plan terminations.

Proposed Undertaking 6 states that “BC Life will renew and not terminate any health benefit plan in full compliance with the California Insurance Code and will not terminate any health benefit plan before the end of its contract term, except as expressly permitted by the California Insurance Code,” according to Garamendi’s undertakings proposal.

“If BC Life withdraws a health benefit plan from the market it will provide advance notice to the [Department of Insurance] and the policyholders covered by that health benefit plan and will permit each such policyholder to select continued coverage from among BC Life’s other health benefit plans without regard to any health status related factor, ” according to the Garamendi proposal.

If BC Life withdraws any plans from the market within 3 years after the completion of the Anthem deal, it must let plan members with pre-existing conditions enroll in new BC Life or Blue Cross plans and waive any pre-existing condition exclusions for members who comply with statutory eligibility requirements, according to the Garamendi proposal.