Garamendi’s Power Grab
Today’s editorial in the Los Angeles Dog Trainer lavishes praise on California Insurance Commissioner John Garamendi for his recent decision to block an acquisition by Anthem, Inc. of BC Life & Health Insurance Company (which the Trainer erroneously identifies by its former name, “Wellpoint Life Insurance Company”). Quoth the Trainer:
Their feud escalated last week when Garamendi turned down the company’s deal to acquire Thousand Oaks-based WellPoint, which insures more than 7 million Californians through its Blue Cross of California subsidiary. Any day now, Anthem is expected to take Garamendi to court for his admirable stance as the only regulator to stand in the way of the acquisition.
I haven’t been following this struggle, so for all I know, there may be legitimate reasons for Garamendi to oppose the merger. I can say, however, that if such reasons exist, Blue Cross is not among them. Contrary to the Trainer, no one “insures” anyone through a subsidiary; the subsidiary itself does that. This may sound like petty semantic quibbling, but it’s not, as the California Department of Insurance has authority to regulate one company but not the other. Go to the Department of Insurance web site and look the companies up. You’ll find a profile for BC Life, a life and disability insurer regulated by the DOI. You won’t find a profile for Blue Cross of California, however, as that company is not an insurer regulated by the DOI, but an HMO regulated by the Department of Managed Health Care, a separate agency which, as best we can determine, did not object to the proposed acquisition (which the Trainer erroneously described as a “merger”).
Garamendi’s decision to approve or deny Anthem’s acquisition should be based entirely on what he believes BC Life - not its subsidiary - would do. It should have nothing to do with any considerations of what Blue Cross of California would or wouldn’t do. That’s the DMHC’s business, not the DOI’s.
UPDATE: Here’s a link the the DMHC’s order of approval (PDF) of the merger Garamendi wants to block.
July 31st, 2004 at 10:46 am
I wasn’t even aware we had a Department of Managed Health Care. Gosh, is there anything the government can’t do for us?
Sigh.
July 31st, 2004 at 11:07 am
Every state regulates HMOs. Most do so through a division of the Department of Insurance, but California has always regulated them separately under the Knox-Keene Act. For many years, HMOs were regulated by a division of the Department of Corporations. That division broke off in 2000 and became a separate agency.