WellPoint won't appeal rejection of CareFirst deal

Deadline passes on asking court to overturn ruling

April 05, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

WellPoint Health Networks Inc., the California insurer that was trying to buy CareFirst BlueCross BlueShield, said yesterday that it would not appeal the Maryland insurer commissioner's decision blocking the $1.37 billion deal.

Yesterday was the deadline for CareFirst or WellPoint to launch a court appeal of the decision issued March 5 by Commissioner Steven B. Larsen.

CareFirst said March 19 that it would not appeal, announcing the decision at a General Assembly hearing on a bill that would spell out CareFirst's nonprofit mission in law and replace some of its board members.

That legislation is still under consideration. The WellPoint deal called for CareFirst to convert to for-profit operation before being sold.

Analysts hadn't expected an appeal from WellPoint. Larsen's report - 200 pages with another 150 pages of exhibits and appendices - cited numerous legal grounds for blocking the deal.

The report said CareFirst had failed to negotiate a fair price, that its board hadn't fulfilled its obligation to consider its nonprofit charter, that consultants to health insurer had conflicts of interest, and that a bonus plan for its executives violated state law.

The ruling "made it very clear the current environment in Maryland is just not conducive to a conversion of CareFirst," Ken Ferber, a WellPoint spokesman, said the day of Larsen's decision.

Ferber and David M. Funk, regulatory lawyer for CareFirst and WellPoint, said yesterday that they could not discuss the reasons why no appeal was being filed.

While the deal appears dead, it still isn't officially so.

After Larsen's decision, WellPoint had asked regulators in Delaware and the District of Columbia, where CareFirst also operates, to suspend their review of the CareFirst-WellPoint deal.

While those regulators were told yesterday there will be no appeal in Maryland, no decision has been reached on whether to withdraw the applications in the other jurisdictions, Funk said.

Either WellPoint or CareFirst can now terminate the sale agreement, Funk said, but no decision had been reached to do that, either.

The announcement came yesterday after the close of stock markets. WellPoint shares closed at $77.02, down 37 cents for the day but up $9.17, or 13.5 percent, since their close the day of Larsen's ruling.

WellPoint, which operates Blue Cross of California, has also acquired Blue Cross plans in Missouri and Georgia.

CareFirst, a nonprofit since its founding in 1937, is based in Owings Mills. The largest health insurer in the state, it covers 3.2 million people in Maryland, District of Columbia, Delaware and Northern Virginia.

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