WellPoint Inc. has proved the rumors true and agreed to acquire WellChoice Inc. through a merger with a value of about $6.5 billion.[@@]
WellPoint, Indianapolis, is the parent of Blue Cross and Blue Shield plans in many states, including California, Ohio and Indiana, and its UniCare unit sells health coverage throughout the United States. The company provides or administers health coverage for 28 million U.S. residents.
WellChoice, New York, is the parent of Empire Blue Cross Blue Shield, a major player in the New York health insurance market. It has about 5 million medical plan members.
WellPoint says it expects to pay a little more than half of the price of the deal in common stock and half in cash.
Because of the process that WellChoice used to convert to for-profit status in 2002, the New York Public Asset Fund now holds about 52 million shares of WellChoice common stock, or 62% of outstanding WellChoice shares. The fund has agreed to vote for the WellPoint acquisition, and it will receive about $2 billion in cash and 27 million shares of WellPoint common stock in connection with the acquisition, WellPoint says.
Dr. Michael Stocker, president of WellChoice, would become president of a new WellPoint Northeastern region that would include Connecticut, Maine and New Hampshire as well as New York, WellPoint says.
WellPoint and WellChoice hope to complete the deal, which is subject to approval by federal antitrust regulators and WellChoice shareholders as well as by state regulators, by March 31, 2006.
Completing the WellChoice deal would bring WellPoint into fierce head-to-head competition with UnitedHealth Group Inc., Minnetonka, Minn., which bought a big increase in its share of the New York market in 2004 by acquiring Oxford Health Plans Inc., Trumbull, Conn.
Anthem Inc., Indianapolis, went through a blistering battle with California regulators before it completed the 2004 acquisition of WellPoint Health Networks Inc., Thousand Oaks, Calif., that created the new WellPoint Inc.
California regulators asked whether the deal would be good for the California health insurance market and California charities.
Stocker says in a statement that the WellChoice deal will give his company the resources it needs to improve service, and WellPoint President Larry Glasscock says in a statement of his own that the deal should have little effect on rates.
“While premiums must keep pace with rising health care costs, we can assure our members in all of our states that this merger will not add in any way to premium increases,” Glasscock says.
Glasscock adds that both WellPoint and WellChoice have long histories of making big charitable contributions and getting involved in community affairs.
“Combined, our role in the community will be even more effective,” Glasscock says.