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California OKs Anthem-WellPoint Deal

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Anthem Inc. has received permission from a key regulator to proceed with its $16 billion acquisition of a major unit of WellPoint Health Networks Inc.

California Insurance Commissioner John Garamendi has given Anthem, Indianapolis, permission to take control of WellPoints Blue Cross Life & Health subsidiary.

The ruling should clear the way for Anthem to acquire all of WellPoint through a merger.

Garamendi was responsible for approving a small but important part of the deal. WellPoint shareholders, Anthem shareholders, regulators in other states and another key California agency, the California Department of Managed Health Care, which regulates health maintenance organizations, already have approved the deal.

Anthem Chairman Larry Glasscock and WellPoint Chairman Leonard Schaeffer are welcoming Garamendis ruling.

“We now look forward to the successful completion of the merger,” Schaeffer says.

Blue Cross Life, one of WellPoints biggest subsidiaries, writes the health insurance that WellPoint sells in California.

WellPoint owns another, separately regulated company that writes California health maintenance organization coverage.

In theory, WellPoint could have sold Blue Cross Life before consummating the Anthem deal, but the companies have seen Garamendis objections to the Blue Cross Life acquisition as a major stumbling block.

Garamendi argued in July that the Anthem-WellPoint deal would hurt the quality of health coverage in California and lead to big rate increases.

Anthem now has agreed to many new conditions designed to protect California consumers, Garamendi says.

Anthem has agreed to spend at least $150 million on additional investments in health infrastructure and contributions to nurse training programs and health care clinics for the poor, according to Garamendi.

Anthem also has agreed to spend at least $25 million on a care quality improvement program, and it has reaffirmed earlier commitments to invest $100 million in California health initiatives and contribute $15 million to childrens health programs.

“I continue to have misgivings about the consolidation of health insurance companies,” Garamendi says. “But those concerns are beyond the normal scope of my review. I only can judge this transaction in comparison to the status quo.”

Reproduced from National Underwriter Edition, November 11, 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.