Archive for Wednesday, February 20, 2002

Blue Cross to appeal ruling

Officials disagree with decision to block Anthem takeover

February 20, 2002

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— The directors of Blue Cross and Blue Shield of Kansas unanimously voted Tuesday to fight a ruling by Kansas Insurance Commissioner Kathleen Sebelius that blocked the company from merging with a larger insurer.

Blue Cross of Kansas officials also released their first detailed response to the Feb. 11 decision by Sebelius, who rejected a proposed takeover of the Kansas company by Indianapolis-based Anthem Blue Cross and Blue Shield.

Under the deal, Blue Cross of Kansas would have paid its policyholders up to $320 million to become a stock-held company that would be purchased by Anthem for $190 million.

But Sebelius said the merger would have brought increased premiums for Blue Cross of Kansas policyholders because Anthem would have been driven by stockholders to make more profit.

John W. Knack, president and chief executive of Blue Cross of Kansas, disagreed.

"If we had believed premiums would increase ... we never would have pursued this affiliation in the first place," Knack said.

Anthem also announced its support of the appeal.

Sebelius spokeswoman Nicole Basso-Corcoran said, "The commissioner weighed the evidence before her and she stands by her decision."

The appeal will be made to a district court in Shawnee County.

The appeal can be made only on whether Sebelius properly considered the evidence in the case and correctly followed administrative procedures, not on the facts of the deal, Basso-Corcoran said.

Blue Cross of Kansas responded to several reasons Sebelius cited in her rejection of the merger.

Sebelius said the deal would have drained the reserves of Blue Cross of Kansas. But officials with the company said Anthem's reserves were larger and the company had guaranteed it would abide by Kansas law on reserve requirements.

Sebelius also said the merger would have linked the Kansas company with one of Anthem's worst-performing regions. Blue Cross of Kansas officials said that while the Colorado-Nevada plan in Anthem's western region was in trouble when it joined Anthem in 1999, the plan has made improvement since then.

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