Garamendi’s Decision on Anthem-WellPoint Merger Could Affect 2006 Lt. Gov. Campaign

Insurance Commissioner John Garamendi's (D) "high-profile" decision to reject part of a proposed merger between Indianapolis-based Anthem and Thousand Oaks-based WellPoint Health Networks "is good fodder for a campaign" as he prepares to run for lieutenant governor in 2006, according to some analysts, the Sacramento Bee reports. Garamendi "reaffirmed his reputation as a maverick who courts controversy" by denying Anthem's request (Rapaport, Sacramento Bee, 8/1).

Anthem seeks to acquire the license of Blue Cross of California, which represents the largest part of WellPoint operations in California. Garamendi does not have the authority to block the merger, but he has regulatory authority over Blue Cross Life & Health, a subsidiary of Blue Cross of California that offers life insurance and preferred provider organization plans and accounts for about 10% of WellPoint operations in California. The 10 other states with direct regulatory authority and the federal government, as well as WellPoint and Anthem shareholders, have approved the proposed merger.

Garamendi's central concern was that Anthem would use as much as $400 million annually in health insurance premiums paid by California residents to finance the proposed merger in the first three years and an unlimited amount after that time. In addition, Garamendi criticized the amount of compensation packages for WellPoint executives under the proposed merger (California Healthline, 7/28).

Republican political consultant Dan Schnur said, "The politics are all good for him." He added, "You are never going to lose points in a Democratic primary by bashing some big corporations."

Karen Hanretty, a spokesperson for the California Republican Party, said Garamendi's opposition to the executive compensation packages was only "joining the chorus of statewide democrats who have their eye on the 2006 governor's race."

Mark Petracca, a professor of political science at University of California-Irvine, said that Republicans might criticize Garamendi's decision as being harmful to the state's business climate but added that it "would be easy for Garamendi to let any anti-business criticism roll off his back if he cast himself as this lone white knight who has the consumers' interest at heart."

Garamendi said that politics did not play a role in his decision. He added, "If there is a political gain in it, I don't see it. If there is a political loss in it, I don't much care" (Sacramento Bee, 8/1).

Democrats in other states "need to follow the lead" of Garamendi and "exercise[e] their regulatory and executive powers" at the state level, "tackle drug companies' profiteering" and "set reasonable standards overall for pay and profits in the health care system," Jamie Court, head of the Foundation for Taxpayer and Consumer Rights, writes in a Los Angeles Times opinion piece. Court writes that Garamendi "used the broad discretion given regulators and executive branches" to block the Anthem's acquisition of Blue Cross Life & Health, "taking the stand that obscene profiteering in health care is a threat to policyholders."

Court notes that six of the nine other states with regulatory authority over the merger are controlled by Democratic governors and insurance commissioners, "yet only Garamendi stepped up to stop the deal." Court concludes, "If Democrats truly care about protecting the health care of Americans, they will take their cue from Garamendi and fight for the consumer. All they have to do is follow the money" (Court, Los Angeles Times, 8/2).