WellPoint, WellChoice complete merger

With its entry into New York, the nation's largest private health plan begins to push harder for national corporate accounts.

By Jonathan G. Bethely — Posted Jan. 23, 2006

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The nation's largest health insurer became even bigger when Indianapolis-based WellPoint completed its $6.5 billion acquisition of WellChoice, a move that expands WellPoint into the coveted New York market.

WellChoice is the parent company of Empire Blue Cross Blue Shield of New York. The deal gives WellPoint a greater foothold in the northeast, where it also owns Blues plans in Connecticut, New Hampshire and Maine. But more than that, WellPoint's entry to New York gives it an opportunity to further push its national health plans to corporations, rather than only sell market-by-market.

In fact, soon before the merger closed, WellPoint announced all national accounts business will now be offered under the Anthem Blue brand, as Anthem National Accounts, in its 13 Blues states, a move analysts predicted was predicated by WellPoint's move into the New York market.

"The fact that New York is the largest market in the country for large national employers ties in with our national accounts strategy," said WellPoint spokesman Jim Kappel, adding both companies saw "tremendous" membership growth in national accounts last year. "That was one of the business drivers for bringing our two companies together."

The AMA is skeptical about the WellPoint merger, voicing the same concerns it raised last month as UnitedHealth and PacifiCare consolidated amid outcries from both the AMA and the Colorado Medical Society that the deal posed critical concentration issues in several markets.

"It's not a free market. You can't go out to advertise to bring more patients in. They are limited with employer contracts," said AMA Trustee Edward L. Langston, MD. "The problem we see for patients and physicians is that it becomes very anticompetitive very quickly."

The Dept. of Justice stepped in and required United to sell certain operations in Arizona and Colorado, as well as cut a shared-physician network deal with WellPoint's Blue Cross of California, as conditions of approval. State regulators in California and Colorado also required contributions to a fund to pay for health care for the uninsured. However, regulators put no such requirements on the WellPoint-WellChoice deal.

The merger adds 5 million new members to WellPoint, bringing its total membership to about 34 million.

The AMA is also concerned that rapid consolidation has a negative impact on physicians' ability to negotiate contracts with insurers. Dr. Langston said insurers are not entering markets and earning the trust of their customers; instead they are buying their way into these markets without establishing a relationship with physicians and consumers.

"The only thing we can do is continue to raise these concerns when they come up," Dr. Langston said. "We have to raise these points so that regulators have complete understanding of consolidation."

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