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The Los Angeles Times

Ruling on Anthem to Follow Review

by Marc Lifsher, Times Staff Writer
July 10, 2004

SACRAMENTO -- State regulators, after a hearing Friday that was demanded by consumer advocates, said they hoped to rule in the next few weeks on the proposed sale of WellPoint Health Networks Inc. and its Blue Cross of California subsidiary.

Officials at the Department of Managed Health Care said they would evaluate widespread complaints about the $17-billion deal before issuing a final decision on Indianapolis-based Anthem Inc.'s bid to buy the Thousand Oaks healthcare provider.

The department scheduled the meeting after consumer groups said regulators appeared to be in the process of approving the WellPoint purchase without seeking public input. Regulators said they had no legal obligation to hold a hearing, but decided to schedule one.

The comments at Friday's hearing by the company and its critics offered little new information on the acquisition and its most controversial element: a plan to pay executives up to $356 million in severance and special compensation.

Anthem Chief Executive Larry C. Glasscock vowed that the merger would generate $250 million a year in savings that could be plowed back into new products and technologies. "Premiums will not be raised as a result of this merger," he said.

Opponents countered that they feared the cost of the severance package, plus as much as $250 million in unvested stock options for departing executives, would come out of WellPoint reserves or premiums paid by its approximately 7 million Blue Cross enrollees.

Catherine Hanson, a vice president of the California Medical Assn., which represents many of the state's doctors, said she feared that an acquisition of WellPoint would boost corporate profits and administrative expenses while cutting funding for patient care.

Other critics, led by Santa Monica-based Foundation for Taxpayer and Consumer Rights, repeated charges that WellPoint had exploited a loophole to save millions of dollars in state taxes after Blue Cross switched from a nonprofit to a for-profit corporation in the mid-1990s. The charge prompted state Sen. Deborah Ortiz (D-Sacramento) to ask Atty. Gen. Bill Lockyer to investigate whether WellPoint should pay the same premium tax paid by other health insurance companies.

WellPoint General Counsel Thomas Geiser dismissed the allegation as "a blatant lie" and maintained that his company had paid "all our taxes."

Opponents of the merger said they would consider legal action on the tax and compensation issues if Managed Health Care Director Cindy Ehnes approved the WellPoint acquisition. Ehnes did not attend Friday's hearing.