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Read Making a Killing

home / healthcare / in the media

The Daily News of Los Angeles
Nov 30, 2004

by Evan Pondel, Staff Writer

After a year, 'We're done';

Anthem joins with WellPoint
Anthem Inc. and WellPoint Health Networks Inc. said Tuesday that they had completed their $16.5-billion merger after Georgia's insurance commissioner approved the deal earlier in the day.

The transaction -- creating the nation's largest health plan -- required both companies to clear more than a year's worth of regulatory hurdles. The combined companies will be renamed WellPoint Inc., and serve approximately 28 million medical members through Blue Cross, Blue Shield and non-Blue plans in more than 13 states.

"This merger enables us to increase our value to be better able to hold down our costs through stepped up technology investments," Larry Glasscock, president and chief executive officer of the newly formed WellPoint Inc., said during a press conference Tuesday afternoon.

Under the terms of the deal, shareholders of Thousand Oaks-based WellPoint will receive $23.80 in cash and one share of Anthem common stock for each WellPoint share. The stock will begin trading today on the New York Stock Exchange under the symbol WLP.

As for the deal's effect on consumers, it will help "slow the rate of increase of premiums," Glasscock said. "And we plan to do much more."

Such is the case in Georgia, where Insurance Commissioner John Oxendine refused to approve the merger unless the companies increased their investment in the state. The Georgia official signed off on the deal Tuesday, only after the companies agreed to investments that will provide more than $100 million over two decades for rural health care.

Oxendine followed the lead of California Insurance Commissioner John Garamendi, who also rejected the deal until the companies agreed to invest more than $200 million in the state's health care system.

Other states, including Nevada, Texas and Wisconsin, did not ask for further concessions, much to the relief of the investment community.

"We're done," said Adam Miller, analyst with Williams Capital Group in New York. "It's a fair deal, and now the issue will be how the management team comes together."

Leonard Schaeffer, the chief executive officer and chairman of the former WellPoint, will now serve as chairman of the new company. Known as being more "magnanimous" than Glasscock, Miller said both executives "know the business very well, and I feel very comfortable with their respective positions."

In a prepared statement, Schaeffer characterized the deal as "a great strategic fit and geographic fit."

The new company will be based in Indianapolis and will employ approximately 38,000 people. There are no plans to close WellPoint's current headquarters in Thousand Oaks.

When asked whether layoffs were pending, Glasscock said, "I believe that the incredible majority of people will continue employment at our company." But analysts expect future departures as the merger sets in.

Among other questions, consumer groups continue to denounce the hundreds of millions of dollars WellPoint executives stand to receive in compensation packages from the deal.

"This merger means executives get rich, but it doesn't improve access to health care for consumers," said Jerry Flanagan of the Santa Monica-based Foundation for Taxpayer and Consumer Rights. "And when HMO executives are allowed to raid the health care system for their own enrichment, patients and small business owners lose."

The foundation has also filed a lawsuit against WellPoint Health Networks, saying the company is liable for hundreds of millions of dollars in unpaid gross premium taxes.

WellPoint shares advanced $2.08, to close at $125.10, while Anthem shares rose $1.73, to $101.33, Tuesday on the New York Stock Exchange.


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