Lawmakers Plan to Examine Bid to Sell WellPoint

Democratic Assembly leaders Thursday ordered a public hearing to scrutinize the sale of Blue Cross of California to an Indiana company after learning that state regulators were set to approve the merger behind closed doors.

In the past, state regulators have held public hearings on health company mergers to see if consumers were being protected and the law was being followed.

The state Department of Managed Health Care, however, is nearing a decision on Anthem Inc.’s proposed $15.5-billion acquisition of WellPoint Health Networks Inc., which owns Blue Cross of California, without a public hearing. WellPoint is based in Thousand Oaks.

In response to complaints from a few lawmakers and consumer groups, Assembly Speaker Fabian Nunez (D-Los Angeles) formed a special committee Thursday to investigate the merger. No hearing date has been set.

State regulators said the merger would create a heath insurance giant with 26 million customers in 13 states, including 7 million in California.

The transaction still needs shareholder approval, as well as the consent of regulators in the states in which the combined company would operate. Already, nine states and the federal government have approved the deal, but California’s Department of Managed Health Care has yet to give a final authorization.

The Managed Health Care Department was formed in 1999 by then-Gov. Gray Davis and the Legislature to regulate health maintenance organizations that do business in the state. In evaluating mergers, the department reviews how they would affect such issues as quality of care, the number of available doctors, and payments to hospitals and physicians.

The state’s insurance commissioner, John Garamendi, also must approve a portion of the deal, but said Thursday he may wait until after the Assembly hearing. The Democrat said he wanted answers on how Anthem would manage Blue Cross and its assets and whether patients would receive the same level of service as they do now.

“I’m delighted they are going to have a hearing,” Garamendi said. “This must be brought out in the public.”

WellPoint spokesman Ken Ferber said the combination would not fundamentally change Blue Cross of California. Its assets would stay in California and not be transferred to Indiana.

Officials at the Department of Managed Health Care also said the merger was different from other healthcare industry transactions because it doesn’t involve the combination of two California-based companies. In those cases, consumer impact can be greater because services are often merged or cut.

The Anthem-WellPoint merger would leave Blue Cross largely untouched except at the top management level, state regulators said.

The Department of Managed Health Care has not scheduled its own hearing but officials there said they would share with the Assembly committee “the results of our months-long review of how the plan will operate in California,” said G. Lewis Chartrand, chief deputy director of the department.

Consumer groups have been concerned that the public won’t get a chance to see the terms of the deal before it is approved by the Department of Managed Health Care, which is controlled by appointees of Gov. Arnold Schwarzenegger.

Laurie Sobel, a senior attorney with Consumers Union, said she wanted assurances from WellPoint that it would continue to provide service for MediCal recipients in California. And she wants to know whether Anthem understands California’s complicated laws governing HMOs.

“The more transparent the process,” Sobel said, “the better it will be.”

Shares of Indianapolis-based Anthem fell $1.56 to $85.47 and WellPoint shares fell $1.73 to $108.72. Both trade on the New York Stock Exchange.

The companies expect the transaction to close in the third quarter.