BUSINESS 2004: WELLPOINT AND ANTHEM MERGE STATE GETS $265 MILLION FOR ITS HEALTH CARE SYSTEM.

Byline: Brent Hopkins Staff Writer

Anthem Inc.'s quest to merge with WellPoint Health Networks to create the nation's largest health insurance plan climbed over numerous stumbling blocks this year, before finally winning approval.

Indianapolis-based Anthem's bid $16.4 billion for the Thousand Oaks- based WellPoint on Oct. 27, 2003. The two cleared the first major hurdle in February, when the Federal Trade Commission said there were no anti-trust concerns. Ten states and Puerto Rican regulators also consented in following months, leaving California as the lone holdout by late June.

Trouble surfaced, however, when the California Public Employees' Retirement System criticized the deal as unfair to the state's consumers, joined by Treasurer Phil Angelides and consumer advocates.

``This is egregious by any account and it will come out of the pockets of health care consumers and shareholders,'' Angelides charged at the time.

Though shareholders approved the plan and the state's Department of Managed Care gave its approval July 23, Insurance Commissioner John Garamendi quashed it the same day. Though he has oversight over only 10 percent of Blue Cross' business in California, he managed to hold up the deal for more than four months.

Anthem quickly responded with a lawsuit charging Garamendi lacked the power to block the deal, which threatened to delay the merger for years as it unfolded in court. Several states put their approval on hold to see how the California fight would unfold.

But after months in limbo, the two sides reached an agreement Nov. 9. Anthem agreed to invest $265 million in the state's health care system. Garamendi withdrew his opposition, Anthem dropped its suit and the merger appeared to be on track for consummation.

After seeing what Garamendi had wrangled, however, his Georgia counterpart John Oxendine blocked the deal. The Georgia commissioner held out for several weeks, relenting Nov. 31 after Anthem pledged $100 million to fund rural health care in Georgia.

With the final hurdle cleared, the merger finally closed the same day. The two companies became one more than a year after they first sought to combine, taking the name WellPoint Inc. and encompassing 28 million members in 13 states. The added time in limbo added several billion to the fair market value, costing Anthem around $21 billion as a result of a rise in WellPoint's stock since the deal was first proposed.

``It took 13 months and approval from 11 different regulators,'' said Ed West, a WellPoint spokesman. ``All in all, we're certainly delighted to have completed the process. It took a little longer than we expected, but we're glad to have it done.''

Brent Hopkins, [phone]

brent.hopkins(at)dailynews.com

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Anthem's bid to merge with WellPoint was met with resistance from Insurance Commissioner John Garamendi, who quashed the deal the same day shareholders approved it.

John McCoy/Staff Photographer