$6.5 billion deal for Empire Blue parent would mean big presence in New York
Just 14 months after UnitedHealth Group Inc. acquired a major New York-area health insurer, WellPoint Inc. is poised to net an even bigger fish.
WellPoint, Indianapolis, has agreed to acquire WellChoice Inc., New York, the parent of Empire Blue Cross and Blue Shield, for $6.5 billion in cash and stock.
Health plan acquisitions are notoriously difficult to carry off. WellPoint needs approval from WellChoice shareholders and federal antitrust regulators as well as state regulators before it can complete the WellChoice deal. But a New York state fund that owns 62% of WellChoice's stock would get about $4 billion if the deal goes through. The fund is backing the deal.
If WellPoint completes the deal, the company would emerge providing or administering health plans with a total of about 34 million people, up from 29 million people today.
The deal would widen the gap between enrollment at WellPoint and enrollment at UnitedHealth, the second biggest private U.S. health insurer, which now insures or administers health plans with 23 million members.
UnitedHealth ended up with 1.4 million of its members and a highly regarded brand name in the New York market in July 2004, when it closed on a deal to acquire Oxford Health Plans Inc., Trumbull, Conn.
UnitedHealth, a carrier with a major presence in many states, talked about using expanded New York operations to go after the business of the many national employers based in New York.
WellPoint, a company that has Blue Cross and Blue Shield licenses in many states along with UniCare, a national health insurance unit, might be in an even better position to compete for national accounts. WellPoint's Blues plans can fill in any gaps in its network by offering employers access to the BlueCard program, a system that can link Blues plans in many states together to serve the needs of national and multisite employers.
Ratings analysts reacted to the WellChoice deal announcement by noting that Anthem Inc., Indianapolis, completed the merger with WellPoint Health Networks Inc., Thousand Oaks, Calif., that formed the new WellPoint Inc. less than a year ago, in November 2004.
Analysts in the Chicago office of Fitch Ratings put WellPoint on "Rating Watch Negative."
Anthem and WellPoint both have had a good track record of integrating Blues plans, but, at some point, the challenge of integrating the old Anthem and the old WellPoint and WellChoice could get to be too much, according to the Fitch analysts.
