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Read Making a Killing

home / healthcare / in the media

Sacramento Bee
Dec 01, 2004

by Lisa Rapaport, Bee Staff Writer

Health giants wrap up merger;

Anthem, WellPoint clear Georgia hurdle.
Anthem Inc. and WellPoint Health Networks Inc. completed their $16.5 billion merger on Tuesday, after making concessions to Georgia's insurance commissioner that removed the final regulatory resistance to creating the nation's largest health plan.

The new insurer, to be called Wellpoint, will have 28 million members nationwide, including more than 7 million in California.

To move the deal forward, the companies agreed to spend $126.5 million on rural health programs in Georgia, the last state to approve the merger.

Last month, the health plans secured the approval of California Insurance Commissioner John Garamendi after pledging to spend $265 million on medical programs for poor Californians.

Anthem's chairman and chief executive, Larry Glasscock, who will be president and chief executive at the new company, said during a Tuesday conference call that the merger created "a tremendous opportunity to transform our industry" through efforts to extend coverage to the uninsured and underinsured.

"This merger ... provides us with the opportunity to offer more value to our members, employers, physicians and hospitals." Glasscock said in a prepared statement.

The new company will have its headquarters in Indianapolis. Wellpoint subsidiary Blue Cross of California will retain its headquarters in Thousand Oaks.

Leonard Schaeffer, chairman of WellPoint Health Networks prior to the merger, will be chairman of the board of directors at the new company.

"This merger is a great strategic and geographic fit," Schaeffer said in a prepared statement.

Consumer groups, however, continued to criticize the merger.

"All those investments in health care for the poor are investments that will yield a return for the company. That return goes into shareholders' pockets, not into consumers' wallets," said Jamie Court, executive director of the Foundation for Consumer and Taxpayer Rights, a California advocacy group.

His group filed a lawsuit last week accusing Blue Cross of California of failure to pay hundreds of millions in taxes on its premium revenues. With the exception of Blue Cross, every investor-owned health plan in the state pays premium taxes on revenues from certain managed care plans regulated by the Department of Insurance. The suit asked the state to collect those taxes from Blue Cross.

A spokesman for WellPoint, parent company of Blue Cross of California, would not comment on the litigation but said Blue Cross had paid all taxes required by law.

Blue Cross managed care plans are regulated by another state entity, the Department of Managed Health Care, and plans regulated by the DMHC are not required to pay gross premium taxes.

It's unclear whether the merger deal would shield WellPoint or the former Anthem from paying any back taxes the courts might determine that Blue Cross owed in California. WellPoint referred questions about any settlement provisions in the merger to Anthem. Several spokesmen at Anthem did not return a series of calls seeking comment.

The merger was announced after stock markets closed for the day. In trading before the announcement, shares of both companies rose on the New York Stock Exchange. WellPoint rose $2.08 to close at $125.10 a share, while Anthem climbed $1.73 to close at $101.33. Starting today, shares of the new company, WellPoint, will trade under the WLP symbol on the same exchange.

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