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WellPoint Buys Unit of John Hancock

TIMES STAFF WRITER

WellPoint Health Networks, one of California’s largest managed- care companies, will announce today that it has acquired the health insurance business of Boston-based John Hancock Mutual Insurance Co. for $86.7 million.

The Hancock unit oversees medical insurance plans covering about 1.4 million people, boosting WellPoint’s total membership to more than 5.5 million enrollees.

The acquisition, which had been rumored for several months, is part of the Woodland Hills-based company’s strategy to diversify outside California and become a leading national player in the fast-growing managed-care business. WellPoint has 4.3 million members in several states, including 3.3 million in California.

WellPoint is the main subsidiary of Blue Cross of California, which operates the CaliforniaCare HMO and various Blue Cross health plans.

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WellPoint executives said the Hancock acquisition will strengthen its market position in states such as California, Texas and Georgia, where both companies have substantial business. The deal also gives WellPoint a toehold in the New York-New Jersey metropolitan area.

The acquisition follows WellPoint’s $380-million purchase earlier this year of the health insurance operations of Massachusetts Mutual Life Insurance Co.

The deal, which is subject to regulatory approval, is expected to close by Jan. 31, the company said.

Cynthia Coulter, a WellPoint spokeswoman, said Hancock made an attractive acquisition in part because of its numerous large corporate accounts, such as Ford Motor Co., Federal Express and Whirlpool Corp. WellPoint’s traditional focus has been on small to medium-size employers, “so this gives us a whole new market segment, which is jumbo accounts with multi-state membership,” she said.

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The bulk of Hancock’s business is in traditional indemnity insurance plans, which are no longer offered by many California employers but are still relatively common in the Eastern United States, where the number of people enrolled in HMOs is much smaller.

WellPoint hopes to benefit from the rapid growth of managed care on the East Coast and other parts of the country, as employers switch workers from traditional medical insurance into lower-cost managed-care plans.

“This allows us to take what we’ve learned in the managed-care business [in California] and take that to a much bigger level,” Coulter said.

As part of the deal, WellPoint will acquire Cost Care Inc., a Newport Beach-based company that helps managed-care companies control costs by reviewing the necessity of hospital stays, medical tests and other treatments. Cost Care employs about 300 people, most of them in Orange County.

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