WellPoint Merger: Healthy for Companies?

As the number of health providers continues to decline, corporate customers are understandably concerned about even higher premiums, which are already growing at multiples of the overall inflation rate.

WellPoint Inc. has agreed to acquire and WellChoice Inc. in a deal valued at $6.5 billion in cash and stock, as the health-insurance business continues to consolidate.

WellPoint, the nation’s largest health insurance provider, was created last year when Anthem Inc. bought WellPoint Health Networks Inc. for nearly $21 billion. WellChoice, the parent company of Empire Blue Cross Blue Shield, is the largest provider in New York State; it became a for-profit company in 2002.

The combined company will serve more than 33 million individuals as a Blue Cross or Blue Cross Blue Shield licensee in 14 states and through its HealthLink and UniCare subsidiaries.

Of course, as the number of health providers continues to decline, corporate customers are understandably concerned about even higher premiums, which are already growing at multiples of the overall inflation rate. Larry C. Glasscock, president and chief executive officer of WellPoint, tried to reassure his customers, noting, “While premiums must keep pace with rising health care costs, we can assure our members in all of our states that this merger will not add in any way to premium increases.”

Glasscock also said that WellChoice customers will continue to be served by the same local health plan they know today, with decisions made by local management based in New York City.

Dr. Michael Stocker, president and chief executive officer of WellChoice, will become president and chief executive officer of a newly combined Northeast Region of WellPoint. Stocker, too, assured his customers that they will experience no disruption, and there will be “no changes in our networks or benefits as a result of the merger.”

In their joint announcement, the companies also asserted that a post-merger WellPoint will be better able to serve large employers with multistate operations. Les Funtleyder, a health-care strategist at Miller Tabak & Co., told Bloomberg that the merger could result in smaller medical-cost increases since WellPoint will be able to negotiate bigger discounts from hospitals and doctors. “Getting larger really does matter,” Funtleyder added. “Scale helps because it helps drive greater discounts. The more enrollees you have, the better off you are in terms of costs.”

The two companies must still receive approval from regulators; one potential roadblock could be the office of New York Attorney General Eliot Spitzer. “We expect the merger could take some time…particularly given that WellChoice is the largest health insurer in the state,” wrote Scott Fidel, an analyst at J.P. Morgan Securities, according to Bloomberg.

Discuss

Your email address will not be published. Required fields are marked *