Anthem/WellPoint Reportedly Will Sue Calif. Insurance Commissioner Over Blocked Merger

Anthem Inc. announced plans earlier this week to file a lawsuit against California Insurance Commissioner John Garamendi for reportedly blocking part of its planned buyout of WellPoint Health Networks.

The Foundation for Taxpayer and Consumer Rights (FTCR) called Garamendi’s decision to block the merger on the grounds that it would cost patients $4 billion or more, “the right prescription for California patients.”

Blue Cross of California, WellPoint’s most profitable subsidiary, recently reportedly contributed $250,000 to the Proposition 64 initiative campaign – a November ballot measure aimed at removing an individual consumer’s right to sue under the state’s Unfair Business Competition statute.

Blue Cross has reportedly been sued at least four times under the consumer protection law that Proposition 64 would gut, for unfair practices including deceptive increases of patient premiums and charges of underpaying hospitals and doctors.

“It is the height of hypocrisy for a company filing a lawsuit against a regulator operating well within his legal authority to spend a quarter of a million of our premium dollars to take away a patients right to sue,” Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights (FTCR) remarked.

“Anthem’s and WellPoint’s decision to sue is a desperate attempt to buy time while company executives weigh their diminishing options,” Flanagan said. “Garamendi acted on firm legal ground to deny this merger because $600 million in golden parachutes for company executives and $3.4 billion in debt payments will cost patients too much.”

The Foundation for Taxpayer and Consumer Rights has also questioned why Blue Cross of California has reportedly not paid an estimated $500 million in gross premium taxes as required by Article XIII, Section 28 of the California Constitution.

Blue Cross of California does reportedly pay a much lower tax on its overall net income but the company has reportedly avoided paying the gross premium tax even though every other similarly situated for-profit company that sells PPO products in the state pays the higher tax.

The differential between the net income tax Blue Cross of California has been paying and the gross premium tax the company should have reportedly been paying was reported to be at least $50-60 million in 2003.