Department of Justice Investigating Health Insurer Anthem

The U.S. Department of Justice is investigating Indiana-based insurance company Anthem's use of contracts with lower-cost guarantees that require hospitals and physicians' practices to grant them the same lowest rates given to any carrier that generates a comparable volume of business, the Indianapolis Star reports. Federal officials over the past several months have asked Indianapolis hospitals to submit copies of Anthem contracts with the guarantee, also known as the "most-favored nation clause," which critics say lowers rates to customers but limits competition over time. DOJ officials also have questioned other insurance companies as to whether the clause gives Anthem an unfair competitive advantage, and DOJ and the Federal Trade Commission last year held public hearings on health care competition, including the use of most-favored nation clauses. Anthem spokesperson Deborah New said that Anthem has supplied documents to DOJ and FTC, adding that federal agencies "are looking into these clauses by health plans across the country." However, Anthem appears to be the only target in the Indianapolis investigation, according to Bill Oakes, director of business development at Johnson Memorial Hospital, which was asked to provide copies of Anthem contracts. In its most recent session, the Indiana Legislature did not enact a law -- opposed by Anthem, but supported by hospital and physician groups -- that would have banned most-favored nation clauses. Anthem, which sells Blue Cross and Blue Shield Association-brand policies in nine states, controls about one-third of health insurance business in Indiana (Swiatek, Indianapolis Star, 5/15).

Merger With WellPoint
In related news, officials from the administration of California Gov. Arnold Schwarzenegger (R) may approve a proposed merger between Anthem and California-based health plan WellPoint Health Networks without a public hearing -- a possibility that has raised concerns from consumer advocacy groups, the Los Angeles Times reports (Salladay/Nicholas, Los Angeles Times, 5/19). Under the proposed merger, announced last October, the combined company, which would use the name WellPoint and have a headquarters in Indianapolis, would have $27.1 billion in assets, 40,000 employees and 26 million members in 13 states (Kaiser Daily Health Policy Report, 3/10). In California, WellPoint provides health insurance for seven million state residents through subsidiary Blue Cross of California. State law does not require a public hearing on the proposed merger, but state Insurance Commissioner John Garamendi (D) said that he supports a joint hearing conducted by the state Department of Insurance and the state Department of Managed Health Care. The state has held public hearings on similar mergers in the past, but state DMHC officials said the proposed merger between Anthem and WellPoint is different because "there would be no curtailing of consumer choice or competition" because Blue Cross of California would continue to operate. State DMHC officials said that the department will make a decision about the impact of the proposed merger on state residents in the near future. California Medical Association CEO Dr. Jack Lewin said, "Not having the public hearing is not a good sign. Anthem should ... get in and listen to people and be ready to start a new approach." Jamie Court of the Foundation for Taxpayer and Consumer Rights said, "Anthem and WellPoint executives have to assure the public that the promises made to Blue Cross customers will be kept."

Campaign Contributions
Court also said that a public hearing is important because of the "financial relationship" Schwarzenegger has with WellPoint. According to the Times, financial disclosure forms indicate that Schwarzenegger has invested more than $1 million in Dimensional Fund Advisors, a fund management company that lists WellPoint as a client. In addition, secretary of state records indicate that Blue Cross of California contributed a total of $71,000 to the Schwarzenegger campaign fund and a March ballot measure campaign supported by the governor; WellPoint contributed $21,200 to the governor's campaign last year, the Times reports. A WellPoint spokesperson said that the company would not oppose a public hearing on the proposed merger with Anthem (Los Angeles Times, 5/19).