Feds See No Harm in Anthem-WellPoint Merger

By | March 11, 2004

The U.S. Justice Department has ruled that the proposed merger of health insurers WellPoint Health Networks Inc. and Anthem Inc. will not harm competition or consumers, leaving it up to state regulators whether the mega-deal will be allowed to go through.

The department’s antitrust division issued the following statement and closed its investigation into Anthem, Inc.’s proposed acquisition of WellPoint Health Networks, Inc.:

“The facts did not support a conclusion that this merger will give a combined Anthem/WellPoint market or monopsony power in any market in which they compete. WellPoint’s share in the markets in which they overlap is very small, and these companies are not particularly close competitors. Although this particular transaction should not threaten to harm competition or consumers, we will continue to be vigilant in our enforcement of the antitrust laws in this area.”

Monopsony is defined as a situation in which there is only one customer for a company’s product. It’s also called buyer’s monopoly.

This acquisition will make Anthem the nation’s largest health insurer, covering 26 million people in 19 states.

Some consumer groups worry that the merger of the two biggest Blue Cross Blue Shield licensees could erode consumer choice within some of the 13 states where the companies have about 26 million members.

Doctors also have joined consumers in questioning the deal.
“The proposed merger will create a giant company on a scale not seen in an industry where competition has already been dramatically reduced,” said AMA President Donald J. Palmisano, MD. “The model of a traditional not-for-profit health plan, which operated for the benefit of the community, seems to be disappearing.”

He added that such “mergers should be highly scrutinized to ensure they are in the best interest of our patients.”

Anthem owns Blue plans in nine states: Colorado, Connecticut, Indiana, Kentucky, Maine, New Hampshire, Nevada, Ohio, and Virginia. WellPoint operates Blue plans in California, Georgia and Missouri, and recently won approval to acquire Wisconsin’s plan. Regulators in each of these states must now rule on the merger.
Insurance commissioners in each of those states are expected to hold hearings on the merger in the coming months. Shareholders of both companies must also vote on the deal.

Thousand Oaks, Calif.-based WellPoint and Indianapolis-based Anthem, which announced the deal in October, have argued that consumers will benefit from the merger through economies of scale and cash raised through stock sales. The cash and stock deal was valued at $14.3 billion when it was announced. The insurers expect to close the merger at midyear.

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