Merger of HMOs approved;

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State unveils plans to use new funds

The Atlanta Journal-Constitution

State Insurance Commissioner John Oxendine unveiled a $126.5 million initiative Tuesday to improve rural health care in Georgia.

The funding paved the way, just hours later, for the completion of the long-delayed $16.4 billion merger between Anthem and WellPoint Health Networks, creating the nation’s biggest health insurance company.

Oxendine approved the acquisition of WellPoint, the California-based parent company of Blue Cross and Blue Shield of Georgia, on Monday night after Anthem agreed to fund improvements in rural health care for the next 20 years.

Georgia and California, which secured a pledge of $265 million, are the only two of 10 states approving the merger that gained financial concessions from Indiana-based Anthem.

Oxendine originally approved the Anthem-WellPoint merger in June. The agreement contained no financial commitments to the state, but Oxendine later re-evaluated the deal when California began gaining concessions.

He said Tuesday that his initiative’s goal is to elevate the quality of health care in rural Georgia to the level of urban areas.

Oxendine said there are two Georgias in terms of wealth, education, “and unfortunately, in the quality of health care. … It is vitally important to our state to ensure that our rural citizens have equal access to the best possible health care.”

Most of the Georgia money — $100 million over 20 years — will provide debt financing for rural hospital expansions, renovations and equipment upgrades. Blue Cross would invest the money, equal to 2 percent of its investment portfolio.

“We would buy hospital bonds if they want to build a new wing or invest in information technology,” said Charlie Harman, a Blue Cross of Georgia vice president. “These are attractive debt instruments because they are at a lower interest rate.”

The investment fund would also give rural hospitals greater access to capital, and at longer-term rates than typical bank loans, Harman added.

He said it’s similar to the $200 million in investments that Anthem has pledged in California to win approval of regulators there.

Oxendine said the other $26.5 million would fund telemedicine across the state, linking patients in remote locations through telecommunications with specialists.

“This is the largest rollout of a telemedicine network in the U.S.,” said Oxendine, who has announced his bid for lieutenant governor in 2006.

Telemedicine will help a patient be examined remotely by physician specialists, Oxendine said.

“People will be diagnosed in their own town,” he said. “They won’t have to travel. They’ll get better-quality health care, and get it more quickly.”

Blue Cross will spend $11.5 million to buy and maintain telemedicine equipment, and to fund staff at the medical facilities, over a three-year period. The state’s four medical schools will link up with 36 rural hospitals or clinics across the state.

An additional $15 million over three years comes from a Blue Cross pledge to pay for telemedicine services and procedures.

“Starting now, we are one of the first commercial insurers to reimburse for it,” Harman said.

Georgia’s initiative “is a great first step,” said the American Telemedicine Association, an industry trade group.

Telemedicine now is used more frequently, for such services as radiology, dermatology and mental health, said Jonathan Linkous, executive director of the group.

The rural initiative “will have a profound impact” on the health care of Georgians, said Dr. James Gavin, president of the Morehouse School of Medicine.

Pete Mills, CEO of 25-bed Jenkins County Hospital in Millen,, said the bond financing could be attractive. His organization has been considering a small bond offering for upgrading his 30-year-old facility.

While Mills and other rural hospital officials awaited more details of the initiative, critics of the merger were not impressed.

A California-based consumer group, the Foundation for Taxpayer and Consumer Rights, noted the merger would bring up to $600 million in cash and stock options to top executives of the companies.

And Blue Cross of Georgia can still make a profit from the $100 million investment in Georgia, said Jerry Flanagan, health care policy director of the consumer group. “One hundred million sounds like a lot, but it’s actually a much smaller payout.”

“Georgians are getting shortchanged,” he said. “Unfortunately, it’s the patients who will pay the bill. When mergers occur among mega-HMOs, history shows that competition goes away and premiums increase.”

Harman of Blue Cross said that Anthem has guaranteed that no premium increases will result from the merger.

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