One Califorinia agency today approved the proposed $16.4 billion merger between healthcare giants Anthem and WellPoint Health Systems, but the companies said they expected the state insurance commissioner to withhold approval of the deal and stall its completion.
Insurance Commissioner John Garamendi, who could not immediately be reached for comment, scheduled an afternoon news conference in San Francisco to announce his decision.
Anthem chief executive Larry Glasscock said Garamendi's disapproval could create an uncertain timetable for the merger, expected to produce the nation's largest health care insurer covering 28 million people.
Glasscock said Garamendi notified him of his decision by phone Friday. WellPoint chief financial officer David Colby claimed Garamendi was putting his own interests first.
"We find it unbelievable that an elected official who claims to protect consumer interests would put his own political ambition over the welfare of the people he is sworn to serve," Colby said.
Prices of both stocks fell Friday before trading was suspended at the request of the two companies. Shares of Indianapolis-based Anthem fell 1.3% today, while shares of Thousand Oaks, Calif.-based WellPoint dropped 1.7%. Garamendi's announcement was to come after the close of the New York Stock Exchange.
Garamendi has been one of the merger's leading critics, demanding the companies contribute $600 million to California's uninsured population as a condition of his approval.
The state Department of Managed Health Care's announcement removed one of the final significant roadblocks to merging Anthem and WellPoint, parent of Blue Cross of California.
The U.S. Department of Justice and nine other affected states and Puerto Rico have approved the merger.
"We have negotiated a pact that is a good deal for consumers and sends a strong message that California is a state with a competitive and healthy marketplace where business is welcome," said Cindy Ehnes, director of the California's managed health care agency.
Ehnes said WellPoint and Anthem agreed to numerous concessions for the change in ownership.
Among them, Blue Cross will invest $17 million in mental health and child obesity programs, up to $100 million over 20 years for health care in rural and underserved communities and $5 million over three years to increase enrollment in the state's Healthy Families Program.
Leading Democratic officials, including Garamendi and state Treasurer Phil Angelides, have called a multimillion-dollar executive compensation package obscene.
Though both companies maintained the package follows industry standards, Garamendi has demanded an equivalent amount be invested in the state. Angelides led efforts by institutional investors, including California's large pension funds, to withhold support from the deal. But 97 percent of company shareholders voted June 28 to approve the merger.
Other states that approved the deal are Texas, Illinois, Wisconsin, Virginia, Delaware, Missouri, West Virginia, Georgia and Oklahoma.