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Read Making a Killing

home / healthcare / press releases

NEWS RELEASE
Nov 10, 2004


CONTACT: Jerry Flanagan (310) 392-0522 ext. 319

Schwarzenegger Called On to Protect 9 out of 10 Blue Cross Patients Who Will Pay $4 Billion Cost of WellPoint/Anthem Merger

Gov Received $140K From HMOs and Executives
In a letter sent today, Governor Schwarzenegger was called to personally guarantee that 4.4 million California Blue Cross patients will not have to pay higher premiums as a result of the buyout of Blue Cross' parent company, WellPoint Health Networks, by Anthem Inc. Governor Schwarzenegger has received $140,000 in campaign contributions from Blue Cross, WellPoint and company executives -- including a $50,000 contribution made in October while merger negotiations were taking place.

California Insurance Commissioner John Garamendi's approval yesterday of the buyout leaves 90% of California Blue Cross patients to pay for up to $4 billion in transaction costs and up to $600 million in executive payouts because Garamendi's deal only covers the 10% of Blue Cross members under his jurisdiction. Governor Schwarzenegger's administration failed to require similar protections for the managed care patients it oversees which represent the bulk of Blue Cross' California patients, according to the Foundation for Taxpayer and Consumer Rights (FTCR).

In a letter sent today, FTCR called on Schwarzenegger to renegotiate with WellPoint and Anthem and require those companies to guarantee similar protections for all California Blue Cross patients:

"Garamendi's tough negotiations resulted in remarkable provisions to guarantee that premiums do not increase faster than the rate of inflation for several years following the merger -- thus guaranteeing that merger costs will not be added to already inflated health care rates. Unfortunately, Garamendi's deal only provides protection for the 10% of Blue Cross patients that his Department of Insurance has jurisdiction over."

FTCR cited a statement released by the Schwarzenegger-appointed Department of Managed Health Care (DMHC) -- which has oversight authority over the 9 out of 10 Blue Cross patients not protected by Garamendi's decision -- expressing concern that Blue Cross not shift the cost of the merger onto unprotected patients. FTCR called on Schwarzenegger to issue a personal guarantee to those patients noting that his administration refused to require any such protections before approving the merger in June.

"The 4.4 million Blue Cross of California enrollees regulated by your Department of Managed Health Care -- who will undoubtedly face increased premiums to pay the price of the merger -- need you to personally guarantee that they will not bear this burden. You will have to stand-up to the very WellPoint and Blue Cross executives who have contributed more than $140,000 to your various campaign committees and require them to renegotiate. To live up to your promise to not accept contributions from businesses you are negotiating with, you must first return those campaign contributions."

FTCR's letter:

Governor Arnold Schwarzenegger
State Capitol
Sacramento, CA 95814

RE: Protect 9 out of 10 California Blue Cross Patients

Governor Schwarzenegger:

It is your responsibility to protect the 9 out of 10 California Blue Cross patients who will pay the price of profiteering and corporate greed if WellPoint Health Networks and Anthem Inc. are allowed to merge without additional patient protections. The cost of the deal is estimated to be $4 billion in transaction costs and up to $600 million in golden parachutes for top executives.

90% of Blue Cross' California patients are enrolled in HMO and PPO plans regulated by your Department of Managed Health Care, which approved the merger without limiting how much patients could be forced to pay.

Yesterday, California Insurance Commissioner John Garamendi announced his approval of the buyout of Blue Cross' parent company, WellPoint Health Networks, by Anthem Inc. after months of saying no. Garamendi's tough negotiations resulted in remarkable provisions to guarantee that premiums do not increase faster than the rate of inflation for several years following the merger -- thus guaranteeing that merger costs will not be added to already inflated health care rates. Unfortunately, Garamendi's deal only provides protection for the 10% of Blue Cross patients that his Department of Insurance has jurisdiction over.

In news reports today, Department of Managed Health Care Director Cindy Ehnes said she wants to make sure that the Blue Cross customers she oversees will not be forced to be pay higher premiums as a result of the merger:

"Blue Cross did not consult with us prior to their agreement with (Garamendi). We will now review its provisions to ensure that each and every California ratepayer receives the same protections."

However, your administration had an opportunity to require this very protection before signing off on the merger in June but ignored pleas from Blue Cross of California patients. Your administration's failure to act is set in stark contrast to Garamendi's solution which provides a clear path to protect patients. It is your responsibility to apply similar protections to the 90% of California Blue Cross patients who will otherwise pay for your failure.

Now the 4.4 million Blue Cross of California enrollees regulated by your Department of Managed Health Care -- who will undoubtedly face increased premiums to pay the price of the merger -- need you to personally guarantee that they will not bear this burden. You will have to stand-up to the very WellPoint and Blue Cross executives who have contributed more than $140,000 to your various campaign committees and require them to renegotiate. To live up to your promise to not accept contributions from businesses you are negotiating with, you must first return those campaign contributions.

At a time when 6.5 million uninsured and millions of underinsured Californians cannot afford adequate health coverage, patients need you to turn away the special interests and be a governor for the people.

Sincerely

Jerry Flanagan
(310) 392-0522 ext. 319

FTCR is a non-profit and non-partisan consumer advocacy organization. For more information, please visit us on the web at http://www.consumerwatchdog.org

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