Big Blues Merger

California Insurance Commissioner John Garamendi approved the merger of Blue Cross and Blue Shield companies Anthem and WellPoint in November, allowing the creation of the nation's largest health insurer.

Historically not-for-profit entities, in recent years the Blue Cross companies have turned into profit seekers, and have been required to hand their charitable assets over to their home states when they make the switch. Garamendi had called the merger a "lousy deal" and held it up for months, but signed off after Anthem agreed to provide $265 million for state health projects. California had already won $3 billion for charitable health foundations after WellPoint went public several years ago. The company had initially offered $100 million ["Stinging the Blues," July 2001].

Regulators in Maryland and Kansas have rejected other deals ["Regulators Say No to the Blues," June 2003]. Critics of the deals say that the companies are getting off cheap, giving compensation packages to their executives that rival their payments to the states. WellPoint also had been criticized for spending below the industry average on patient care, but Garamendi got the company to agree to increase its expenditures.

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