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The Atlanta Journal-Constitution

State rejects offer by insurer;


Anthem seeks OK for merger

by ANDY MILLER
November 12, 2004

To help win approval of a $16.4 billion merger that would create the nation's largest health insurance company, Indiana-based Anthem has approached Georgia's insurance commissioner with a financial proposal to make health care improvements in the state.

Commissioner John Oxendine said Thursday he rejected Anthem's initial proposal.

"I felt like Georgia citizens deserved better," he said. Oxendine declined to give details of the offer, which was discussed Tuesday when he met with Anthem Chief Executive Officer Larry Glasscock in Atlanta.

Oxendine said there must be some additional benefit to Georgia for him to approve Anthem's acquisition of WellPoint Health Networks, the California-based parent company of Blue Cross and Blue Shield of Georgia.

"We are deciding what the appropriate action should be," Oxendine said, adding that his staff is working on developing proposals. "There will be sweetening in Georgia."

An Anthem spokesman, Ed West, said the company would not comment on merger conversations with Oxendine or other state regulators.

Oxendine originally approved the Anthem-WellPoint merger in June. The agreement contained no financial commitments to the state.

But later, when California regulators scrutinized the merger deal, Anthem and WellPoint offered $100 million in health improvements to that state. California's insurance commissioner, John Garamendi, still rejected the agreement, citing, in part, executive bonuses and compensation from the deal.

This week, Garamendi dropped his opposition when the companies raised their pledge to a total of $265 million to boost health care in that state.

Oxendine vowed to revisit the deal after disclosure of the companies' initial financial pledge in California.

Anthem said Thursday it has discussed the California pledge with regulators in nine other states, including Georgia --- all of which approved the merger originally. The transaction would create a company with 28 million members.

WellPoint membership in Georgia, 3.1 million, is second nationally behind California's.

Anthem's pledge in California includes $200 million in investments for health care in underserved areas over 20 years. An additional $50 million would be donated to expand health clinics and train nurses, and $15 million is pledged for health insurance outreach programs.

If the deal closes, executives of both companies are expected to get compensation estimated at $200 million to $600 million. In Georgia, Blue Cross reported that 32 of its executives could receive bonuses averaging $425,000.

Nearly a year ago, Oxendine married a Blue Cross of Georgia employee, who is not among the 32 that would receive a bonus, according to the company. Ivy Oxendine, a regional sales executive, also is a WellPoint stockholder.

Commissioner Oxendine said Thursday he would not step aside from making the decision on financial compensation to the state from Anthem, despite his wife's position.

Oxendine has previously said that by law, he can't recuse himself in agency decisions. "The appellate courts have stated that marital relations do not represent a conflict of interest," he said in June.

Still, political scientists and a watchdog group have said it raises conflict of interest issues and may hurt him politically. Oxendine has announced he is a candidate for lieutenant governor in 2006.

Ivy Oxendine "is not involved in policy discussions either in terms of regulatory or legislative matters," said Charlie Harman, a Blue Cross of Georgia vice president.

The Foundation for Taxpayer and Consumer Rights, a California-based consumer group that opposes the deal and raised the issue of executive compensation, said California's action opens the door for other state regulators to strike similar deals.

"Regulators should get some serious commitments, or the policyholders will be left paying the bill" for the merger, said Jamie Court, president of the consumer group.