Link between merger, premium hike probed

BlueCross of California says increases are not connected to the Anthem-WellPoint deal.

By Robert Kazel, AMNews staff. May 9, 2005.

The insurance commissioner of California is investigating whether the 2004 merger between Anthem Inc. and WellPoint Health Plans spurred an unusually high increase in the premiums of certain BlueCross of California subscribers, an accusation the plans say is untrue.

Insurance Commissioner John Garamendi in April said that he was looking into allegations by a consumer watchdog group that many individual health insurance policyholders whose policies had been renewed this spring saw price hikes of 20% to 50%. BlueCross, a member company of WellPoint, said the reports of the increases were highly exaggerated.

"We are investigating to test the validity of [BlueCross's rate filings]," Garamendi said in a statement, adding, "It was very clear that no part of any premium can be used to pay for merger costs."

Garamendi reluctantly agreed to approve the $16.5 billion merger, which created Indianapolis-based WellPoint Inc., in the fall of 2004. As a prerequisite for his permission, the merger partners assured him that California policyholders wouldn't have to pay additional premiums that could be attributed to merger-related expenses.

The Foundation for Taxpayer and Consumer Rights, a California-based advocacy group that strongly opposed the merger, wrote a letter to Garamendi and California Gov. Arnold Schwarzenegger saying that numerous individual policyholders of the California Blues plan had reported rate increases significantly higher than the increases seen last year.