Despite months of negotiations, California regulators say they aren't satisfied with Blue Cross of California's plans to set up foundations worth $3 billion in connection with the for-profit conversion of its subsidiary, WellPoint Health Networks, and WellPoint's merger with Health Systems International.
The proposed $1.8 billion merger of the Woodland Hills-based firms would create the nation's largest for-profit HMO.
In an eight-page letter to Blue Cross, Gary Mendoza, commissioner of the state's department of corporations, asked Blue Cross to show, among other things, that Malik M. Hasan, M.D., the new company's board chairman, and Leonard D. Schaeffer, its president and chief executive officer, would not exercise improper control of the foundation's operations.
In response, WellPoint said it was exercising its right under the state's HMO laws to require California regulators to issue a formal ruling by Aug. 22 on the proposed merger.
WellPoint said in a written statement that it had already resolved many issues raised in the state's letter.
Mendoza said in a statement that Blue Cross should be able to handle the state's request for information quickly.