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Nov
9

Anthem-Wellpoint merger

It looks like the Anthem-Wellpoint merger is going to go through after all. John Garamendi, the Insurance Commissioner of California, was holding up the merger, claiming it would cost California’s members in both dollars and health care quality.
Garamendi successfully negotiated with the merger parties, getting them to provide over $100 million in payments to fund rural health, child health, nurse training, and other initiatives. In addition, Anthem-Wellpoint promised to not raise CA premiums to pay for the merger; the actual language mentioned that the entity will not pass along merger costs to Blue Cross (Anthem) customers in CA.
This is exactly what we had predicted would occur; the only surprise is it took longer to get the deal done than I thought.
What does that mean? Maybe something, perhaps not much. There are any number of reasons for premium increases, and lots of ways to change premiums that could be used to “hide” merger-associated costs. These could include:
–plan design changes
–different provider panels
–amortization of capital expenses
–different risk pooling
–increased distribution expenses
— and on and on.
The net is this – Garamendi got some additional concessions, the “rate increase” deal is probably unenforceable, and he, and Anthem-Wellpoint, can move on to other priorities. For Garamendi, it may likely be contingent commissions, sham-bidding, and other broker-consultant games. Your author’s opinion is this elected official can’t stand to be upstaged by another regulator, and Mr. Spitzer’s press is likely driving Mr. Garamendi nuts.
While Anthem and Wellpoint are free to move on, brokers, agents, et al are likely to feel the “wrath of a regulator scorned.”


Joe Paduda is the principal of Health Strategy Associates

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