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Modern Healthcare

No resolution in California; Questions remain after Anthem-WellPoint hearing

by Michael Romano
July 12, 2004

A four-hour public hearing in California's state capital did little to answer the insurance industry's $17.4 billion question: Will regulators give the go-ahead to the controversial merger between Anthem and WellPoint Health Networks?

Officials with the two giant insurers pushed their case for the merger during a hearing conducted by the state's Department of Managed Health Care, which must approve the deal. The hearing included a handful of residents and consumer advocates who criticized the merger.

''Nothing was accomplished-it was a sham of a hearing,'' said Jerry Flanagan, a consumer advocate with the Foundation for Taxpayer and Consumer Rights. He said the department gave no indication of a timetable for a decision on the merger.

The mega-merger has come under attack by California officials and consumer groups who say the deal will trigger payments of $200 million to $600 million to top executives that could lead to higher premiums. California is the last holdout for the merger, which has been cleared by the U.S. Justice Department and regulators in 10 of the 11 states that must approve the deal.

California Insurance Commissioner John Garamendi has said he would not approve the merger unless the two companies provide up to $600 million to underwrite health programs for low-income patients in the state.

As the department held its hearing on the merger, officials with WellPoint indicated their willingness to provide some funding for medical care for low-income residents of California. Ken Ferber, a spokesman for the company, was quoted by Reuters as saying that the giant insurer is ''working with (Garamendi's) staff to develop an investment program that meets his needs.''

The merger of Indianapolis-based Anthem and WellPoint, which is based in Thousand Oaks, Calif., would create the nation's largest health insurer with approximately 28 million members.