Los Angeles, CA — A pork roast was held in downtown Los Angeles this morning prior to a hearing being conducted by California Insurance Commissioner John Garamendi concerning the merger of health care giants Anthem and Wellpoint. Price-gouged Blue Cross of California patients joined nurses, consumer advocates and a small business owner to present a 25 lb. roasted pig to Wellpoint CEO Leonard Schaeffer who is slated to receive $235.2 million in cash and stock in the pending merger. Schaeffer and other executives will receive up to $607 million in cash stock. If approved, the merger would result in the nation’s largest HMO. Consumer and patient advocates will testify at the hearing this afternoon.
The pending merger and excessive payouts to corporate executives coincides with the Bush Administration’s support this week of a Supreme Court ruling overriding state laws allowing patients to sue their HMOs when they are harmed by the denial of care. California and ten other states have passed such laws since 1997.
“HMO executives should not be allowed to feed at the trough at the expense of California patients and business owners,” said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights (FTCR). “It is outrageous that while executives are allowed to cash out with $600 million, patients are not allowed to recover a penny of damages when they are harmed by an HMO. The companies must be required to significantly reduce these obscene executive payouts and guarantee that Blue Cross of California’s $1 billion in reserves are kept in the state.”
Previously confidential documents acquired by FTCR through a Public Records Act request disclosed that under the terms of the proposed merger of Blue Cross of California parent company, WellPoint Health Networks, and Anthem Inc. executives would receive up to $607 million in cash and stock. The compensation documents are now publicly available at: http://www.consumerwatchdog.org/healthcare/rp/rp004344.pdf
According to page 71 of the joint proxy statement and the confidential compensation documents, Leonard Schaeffer will receive $82.3 million in cash and $152.9 in stock options once the merger is complete.
Blue Cross patient Dave Parker, criticized the size of the executive payouts citing his family’s skyrocketing premiums and out-of-pocket health insurance costs. Parker has been waiting for a phone call from Governor Schwarzenegger since December when an aide to the Governor promised that someone would get back to Dave and his wife when they hand-delivered a letter asking for state action to address excessive health insurance premiums. The letter was delivered at the Governor’s $10,000 per sky-box seat fundraiser at a L.A. Laker game.
The Schwarzenegger Administration announced plans on Wednesday to hold a public hearing on July 9 in Sacramento on the pending merger after refusing to do so for seven months. However, the Schwarzenegger Administration has repeatedly refused to release documents providing details of the proposed merger, including communications between top Administration officials and executives of the merging companies.
“What is the Governor hiding? A hearing without full disclosure of the details of the merger is a violation of the Governor’s promise of an open government,” said Flanagan.
Governor Schwarzenegger has received $92,400 in campaign contributions to his various fundraising committees from WellPoint and its executives.
In addition to the excessive payouts to company executives, the new merged company would be allowed to remove up to $1 billion of Blue Cross of California’s premium funded reserves.
Consumer advocates and health care providers have denounced the pending merger because when company executives are handed hundreds of millions of dollars, patients get short changed because there is less money available for hands on care. The terms of the merger also allow the merged company great latitude to drop individuals and employers from coverage and even refuse to treat low-income and disabled patients.
Company executives have refused to guarantee that Blue Cross of California patients will continue to have access to their physician of choice, neighborhood hospitals, or prescription medications and that premiums will not increase as a result of the merger.
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The Foundation for Taxpayer and Consumer Rights is a non-profit and non-partisan consumer advocacy watchdog organization. For more information, please visit http://www.consumerwatchdog.org