Garamendi Tries to End Anthem Suit

California’s insurance commissioner filed a motion Wednesday to dismiss an Anthem Inc. lawsuit that challenges his authority to block the company’s $16.5-billion acquisition of WellPoint Health Networks Inc.

Anthem sued Commissioner John Garamendi this month to overturn his finding that the WellPoint purchase would increase state healthcare costs. Garamendi says in a court filing in Los Angeles that he has the authority to block the merger.

The acquisition would create the biggest U.S. healthcare provider, with 28 million members nationwide. Garamendi is the lone holdout against the deal, which has won the approval of the U.S. government, 10 states and the shareholders of both companies.

“The commissioner’s function is not to rubber-stamp transactions that meet minimal financial reserve or surplus requirements,” Garamendi said in the state court filing. “Instead, he serves to broadly protect insurance policyholders from deals that are not fair and reasonable and that may prejudice them, in whatever form that prejudice or unfairness exists.”

Jim Kappel, a spokesman for Indianapolis-based Anthem, said the company looked forward to “resolving this quickly through the court system.”

Garamendi’s motion is set for an Oct. 5 hearing before Judge Dzintra Janavs.

In its lawsuit, Anthem said Garamendi based his decision on his personal beliefs about healthcare policy and executive compensation, rather than on the grounds supported by California law.

Garamendi said he objected to payouts for departing executives that might be worth as much as $600 million, or about 3.7% of the transaction’s value. He said he rejected the deal because California policyholders would probably bear the burden of repaying about $3.4 billion of the transaction’s costs through higher policy rates, co-payments and reduced benefits.

WellPoint shares fell 30 cents to $97.45 and Anthem shares fell 49 cents to $80.90. Both trade on the New York Stock Exchange.