Aug 7, 2003 By John Hanna Associated Press Writer 3 min read

TOPEKA, Kan. (AP) – The Kansas Supreme Court on Wednesday blocked the $190 million sale of the state’s largest health insurance company to an Indiana firm, Anthem Insurance Companies. The court’s unanimous ruling will prevent Indianapolis-based Anthem from buying Blue Cross-Blue Shield of Kansas under the terms of a 2001 deal between the two companies. After the decision, Blue Cross ruled out seeking another proposal from Anthem or any deal involving another partner.

“There are no plans at all to pursue a different affiliation,” said Blue Cross spokesman Graham Bailey said. “There are no plans in any way to continue with Anthem.”

Bailey said the company is disappointed but, “We’re prepared to progress as an independent, single-state plan.”

In a separate statement, Anthem said it was also disappointed by the decision, but said it should not affect its earnings projections for this year or its growth strategy that includes “affiliations with other health plans that choose to partner with us.”

Anthem shares fell sharply after the ruling was announced, but later regained some lost ground.

The justices affirmed an order issued by Kathleen Sebelius as insurance commissioner who said the purchase would have raised Kansans’ premiums too much.

When the companies appealed her order in Shawnee County District Court, a judge had concluded Sebelius did not have the authority to block the sale under Kansas law.

“We give deference to the commissioner’s interpretation and find that it is reasonable,” the court wrote in an unsigned opinion.

“The legislative history also reinforces the commissioner’s interpretation that the public concern is overriding.”

Sebelius, now the Kansas governor, called the decision an important victory for Blue Cross policyholders and insurance consumers generally.

“It would have cost Kansas businesses, small employers and families millions of dollars in additional health insurance premiums,” Sebelius said of the proposed sale.

Shawnee County District Judge Terry Bullock ruled that Sebelius had based her decision on “mere speculation.” The judge ordered Sebelius to reconsider; she appealed his ruling instead.

Anthem had planned to pay $190 million for the Kansas company, and Blue Cross would have distributed at least $142 million of Anthem’s funds and $131 million of its existing reserves to policyholders.

Blue Cross holds 45 percent of the Kansas health insurance market, with 172,000 group and individual policies covering 400,000 people; an additional 315,000 people work for employers who self-insure but have their plans administered by the Blues.

Anthem has acquired nonprofit health insurers in other states and is now the nation’s fifth-largest publicly traded health benefits firm, with about 11 million policyholders. It contends it can reduce costs in Kansas through efficiencies.

The company has repeatedly noted it has grown through merging with other Blue Cross plans and has been successful because it provides a good product that is reasonably priced.

But doctors in its home state have accused Anthem of unfair billing practices, and the company has had protracted negotiations with hospitals over health coverage contracts. In 2002, Indiana’s insurance commissioner ordered an investigation of Anthem’s claims practices.

In afternoon trading on the New York Stock Exchange, Anthem shares were down $2.73, or 3.8 percent, to $69.53.

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On the Net:

Blue Cross-Blue Shield of Kansas: http://www.bcbsks.com/

Anthem: http://www.anthem.com

Governor’s office: http://www.ksgovernor.org

Supreme Court: http://www.kscourts.org

AP-ES-08-06-03 1312EDT