A health insurance giant is pulling out of the commercial health insurance markets in Illinois and Texas.

WellPoint Inc., Indianapolis, (NYSE:WLP) a manager of dominant Blue Cross and Blue Shield plans in many markets, says it will be disposing of blocks of individual and group commercial business in the Prairie State and the Lone Star State.

Some lawmakers and others with an interest in health reform have argued that WellPoint’s dominance in the many states’ health insurance markets has contributed to a decline in competition and rising coverage costs in much of the country.

In Illinois and Texas, WellPoint is a player with a relatively small share of the market. It sells coverage there under the UniCare brand name, without the benefit of Blue Cross and Blue Shield licenses.

Health Care Service Corp., Chicago, runs Blue Cross and Blue Shield of Illinois and Blue Cross and Blue Shield of Texas, and WellPoint has arranged for the Health Care Service units to offer the Illinois and Texas UniCare customers replacement coverage, WellPoint says.

“For those members who elect not to accept HCSC’s offer of replacement coverage, UniCare will continue to provide coverage until their current policies terminate according to their terms,” WellPoint says. “Other UniCare and HealthLink members, including those enrolled in standalone specialty products, senior or state-sponsored products, are not impacted by this member transition agreement.”

WellPoint is keeping the UniCare entity and most UniCare assets other than the blocks of business being transferred, WellPoint President Angela Braly said today during the company’s third-quarter earnings call.

WellPoint is selling the blocks because it wants to focus on markets where its size gives it a clear advantage, Braly said.

WellPoint is not giving a price for the block transfer, or saying whether it is paying Health Care Service or Health Care Service is paying WellPoint.

But the UniCare blocks have not contributed much to UniCare earnings, and the deal should free a few hundred million dollars in capital, executives said.

The old WellPoint Health Networks Inc., Woodland Hills, Calif., one of the companies that merged to form WellPoint Inc., created the UniCare business in 1995 to hold health insurance operations outside of California. Much of the business in the unit was acquired from Massachusetts Life Insurance Company, Springfield, Mass., in 1996 and from John Hancock Mutual Life Insurance Company, Boston, in 1997.

Also today, WellPoint:

- Announced $730 million in net income for the third quarter on $15 billion in revenue, compared with $821 million in net income on $15 billion in revenue for the third quarter of 2008.

- Reported that influenza-related costs have been low for most of the year, but that H1N1-related pharmacy claims began to spike in the last 2 weeks of the third quarter.

- Noted that it is doing well in the commercial group plan market relative to its competitors, but that the business is shrinking as a result of layoffs. The current wave of layoffs started in the fourth quarter of 2008, and WellPoint is hoping year-over-year comparisons will start to look better in the next couple of quarters. But “we don’t expect the employment situation to improve until late in 2010,” Braly said.