$17-Billion Anthem-Wellpoint Deal OKd

Times Staff Writer

California Insurance Commissioner John Garamendi today dropped his opposition to Anthem's $17-billion acquisition of WellPoint Health Networks after the two health insurers pledged not to raise premiums to pay for the merger and boosted their financial support of public health care initiatives.

Anthem also said it was dropping its lawsuit challenging Garamendi's July 23 decision to reject its application for control of a WellPoint subsidiary, Blue Cross Life & Health Insurance Co. Although it affects only a small part of the deal, Garamendi's move threw the entire transaction into limbo.

Despite "continued misgivings" about the combination, Garamendi said he approved the deal after Anthem and WellPoint made additional concessions totaling more than $100 million.

"Last week, Anthem and WellPoint returned to my office and presented me with a revised offer of settlement," Garamendi said in a statement. "I demanded more, and after long negotiations, Anthem has made additional concessions and contributions that will assure that California health care consumers will realize benefits from this transaction."

As part of its agreement not to pass along merger costs to Blue Cross customers, Anthem will file rate and proposed policy changes to California regulators for review.

Anthem also agreed to boost its previous financial pledges to public health care programs. The company will contribute an additional $35 million to health care clinics in underserved communities, $15 million for nurse training and an additional $100 million to support other statewide health care initiatives.

"We have worked diligently with Commissioner Garamendi to understand and address his concerns in order to demonstrate that this merger will truly benefit Californians," Anthem Chairman Larry C. Glasscock said in a statement. "Thanks to the work previously done by associates from both Anthem and WellPoint, we are well prepared to quickly and successfully integrate our two organizations."

On Wall Street, investors bid up shares of both companies now that the last major obstacle to the deal had been overcome. WellPoint shares were up more than 8%, and Anthem stock rose more than 5% in late-afternoon trading on the New York Stock Exchange.

Thousand Oaks-based WellPoint insures 7 million Californians -- most of them through its Blue Cross of California operation.

Garamendi's opposition to the combination was based in part on broad concerns about the effect of the deal on healthcare in the state. He also took issue with the huge financial payments and bonuses that would be paid to WellPoint and Anthem executives under the deal.

Company executives have said previously that they had guaranteed to state regulators that the new company would not use any of its California funds to pay for the executive bonuses. In addition, he said, no extra funds from California, beyond what has been passed along historically to corporate coffers, would help finance the debt.

Times Staff Writer Marc Lifsher contributed to this story.

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