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Anthem, Inc. filed suit last week in California Superior Court seeking to overturn Insurance Commissioner John Garamendis denial of the companys effort to acquire a carrier that would complete its merger with WellPoint Health Networks.

David Frick, Anthem chief legal officer, said the suit was a last resort for the company in its effort to effectuate the merger announced last year that would create the nations largest health insurer.

“The Insurance Commissioner has gone beyond the scope of authority granted to him under California law in denying our merger, and in doing so has hurt the very people he states he is trying to help,” he said.

Late last month Garamendi refused to approve the acquisition by Anthem of BC Life and Health Insurance from WellPoint. That company represents about 10% of the WellPoint holdings in the state. Transfer of the other 90% already had been approved by the Department of Managed Care.

Anthem still retains the option of spinning off the BC Life operation, representing about 4% of the total combined company. But for now, all efforts center on completing the deal.

Garamendi asserted he took the action because the merger has been tainted with an estimated $3.4 billion in debt, which will in the long run be funded with increases in premiums to the policyholders.

“I have also found that this transaction would be prejudicial, unfair and unreasonable to the California policyholders who would pay, in part, for the $200 million to $600 million in compensation that would be given to executives,” Garamendi said in a statement.


Reproduced from National Underwriter Edition, August 5, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.