Court says Anthem can't take over Kansas Blues

After long delays, the state's high court upheld a commissioner's decision denying the company the right to buy another plan.

By Robert Kazel, AMNews staff. Sept. 1, 2003.

Like Dorothy in "The Wizard of Oz," BlueCross BlueShield in Kansas dreamed of reaching beyond the Sunflower State and becoming part of a larger and more exciting world -- in the insurer's case, by persuading the state to allow Indianapolis-based Anthem Inc. to buy the Kansas plan for $190 million.

But after more than two years of following a yellow brick road that included confrontations with state regulators and legal skirmishes, the Blues plan didn't get what it wanted in its meeting with the great and powerful Oz known as the Kansas Supreme Court. It upheld a decision by the state insurance department that blocked the sale.

Officials had warned that an acquisition could hurt the public health, partly because it would raise health premiums for many businesses and make coverage unaffordable for some.

The ruling was a setback for Anthem, which had viewed winning the Kansas plan as its next step toward fulfilling its goal of eventually becoming the nation's top insurer. Officials at the Kansas plan expressed disappointment but also relief that the fight was behind them.

The Kansas plan said it had no interest in pursuing a merger with another insurance company. Anthem, for its part, said it would continue to look for merger partners elsewhere.

Anthem and the Kansas company announced in May 2001 that they had reached agreement to merge, and the policyholders of the Kansas plan approved the sale by a 2-1 margin. But in February 2002, Kansas Insurance Commissioner Kathleen Sebelius, now the governor, denied permission for the merger. Regulators pointed to studies that predicted Anthem could raise premiums by 20% to 25% for some Blue Cross products and that small groups could see price hikes of 30% to 40%. The Supreme Court's decision struck down a lower court's decision that had overturned the Sebelius action as beyond her authority.