Ortiz Calls for Investigation Related to Proposed Anthem-WellPoint Health Networks Merger
Sen. Deborah Ortiz (D-Sacramento) on Thursday called on Attorney General Bill Lockyer (D) to investigate allegations that WellPoint Health Networks, parent company of Blue Cross of California, saved millions of dollars in state taxes over the last 10 years through an exemption not available to most other health insurers, the Los Angeles Times reports. Ortiz made the request one day before a scheduled Department of Managed Health Care public hearing on a proposed merger between WellPoint and Indiana-based Anthem (Lifsher, Los Angeles Times, 7/9). The proposed merger, announced last October, would combine the companies under the name WellPoint and establish a headquarters in Indianapolis. The combined company would have $27.1 billion in assets, 40,000 employees and 26 million members in 13 states.
The DMHC and the Department of Insurance must approve the proposed merger. Insurance Commissioner John Garamendi (D) does not have the authority to block the merger, but he can deny a request by Anthem to acquire the license of Blue Cross of California, which represents the largest part of WellPoint operations in the state. The 10 other states with direct regulatory authority and the federal government, as well as Anthem and WellPoint shareholders, have approved the proposed merger (California Healthline, 7/8).
Ortiz, in response to allegations made on Wednesday by the Foundation for Taxpayer and Consumer Rights, asked Lockyer to investigate whether WellPoint and Blue Cross of California, which converted from a not-for-profit to a for-profit company in 1994, benefited from a tax exemption not available to similar health insurers in the state. Blue Cross of California does not pay a 2.35% state tax on gross health insurance premiums, although the company does pay a corporate net income tax. Ortiz also asked Lockyer to investigate whether WellPoint accumulated excessive reserves that the company should have returned to members through lower premiums or improved medical services. Lockyer spokesperson Tom Dresslar said that the Office of the Attorney General would review the request and "take appropriate action."
Ortiz said, "If the state of California is owed" taxes, "we ought to get that before we talk about an acquisition by Anthem." WellPoint officials said that the company remains in compliance with California laws and owes no past debt to the state. "There is no tax loophole. We are not exempt from any taxes. Any accusation to the contrary is a lie," WellPoint spokesperson Ken Ferber said, adding, "Blue Cross already pays more taxes than any other California insurer, and as our tax payments are already audited by the state, any investigation would be duplicative and a waste of taxpayer money" (Los Angeles Times, 7/9).