State regulators are investigating whether a $950-million dividend Blue Cross of California sent to its Indianapolis-based parent violates an agreement the companies made to limit such payments to keep premiums down and maintain the quality of healthcare benefits, officials said Friday.
Officials said the parent, healthcare giant WellPoint Inc., should have taken no more than $141 million out of California. They called the higher amount excessive, particularly as Blue Cross, which serves more than 7 million state residents, has continued to raise premiums.
The state Department of Managed Health Care also is considering expanding its probe to determine whether there are any other potential violations of the three-year agreement, part of a deal to win the agency's approval for a corporate marriage that created the nation's largest health benefits provider.
Cindy Ehnes, director of the Department of Managed Health Care, said she was shocked to learn of the $950-million payday for WellPoint, whose total profit last year was $3.1 billion on $57 billion in revenue.
"We are concerned that it reflects a viewpoint of California being its own ATM machine, while, at the same time, Californians are struggling to get health insurance for their families," Ehnes said in an interview.
The state agency could order WellPoint to return to California policyholders any payments it determines were taken improperly, as well as levy other fines and penalties.
A WellPoint spokeswoman said the dividends Blue Cross paid its corporate parent complied with the agreement as well as all regulatory requirements.
"The current surplus is primarily a result of Blue Cross' continued growth in membership, increased efficiencies that were realized through the 2004 merger ... and the company's success in reducing administrative expenses," WellPoint spokeswoman Shannon Troughton said in a written response. "Like our counterparts in the industry ... WellPoint regularly receives dividends from its state plans."
She said WellPoint requested the dividend at the end of March, and Blue Cross paid it this month.
The merger came about when an Indianapolis-based company then known as Anthem Inc. purchased Thousand Oaks-based WellPoint, which used the Blue Cross license in California, and adopted its name. Consumer advocates, physician groups and others criticized the $15.5-billion merger because it included an estimated $3.4 billion in debt as well as severance, options and bonuses for executives of as much as $600 million.
