Consumer Group Will Fight $337 Million Merger Deal For Wellpoint CEO
Wellpoint CEO Leonard Schaeffer will reportedly receive 3.3 million shares of the combined company, WellPoint Inc. His total gain, not including salary, is estimated to be $37.5 million, plus the 3.3 million sares of stock, for a total of up to $337.5 million.
"Wellpoint is notorious for siphoning off premium dollars to pay for lavish salaries and bonuses for company executives. Wellpoint needs to be forthcoming about how much money they plan to loot from the company as a result of the proposed merger or face a revolt by stockholders and patients," said Jerry Flanagan of FTCR. "State regulators and the FTC should scrutinize this deal to ensure that Wellpoint CEO Leonard Schaeffer and other executives don't steal from the company and undermine patient care. Our insurance premiums should not be used to finance golden parachutes for company executives."
Last week, Governor-elect Schwarzenegger named Patricia Clarey, vice president for governmental affairs of the HMO Health Net Inc, as his chief of staff. FTCR said that the Schwarzenegger's administration oversight of the proposed merger would be a key test of Governor-elect's pledge to stand-up to special interests once in office. The merger, to be completed in 2004 upon approval by state and federal regulators, would result in a single company covering nearly 26 million people in 13 states.
Wellpoint and Anthem have a long history of inappropriate diversions of premium dollars away from patient care, according to FTCR:
- In 2002, WellPoint paid CEO Leonard Schaeffer $6.9 million -- a 120% increase over the year before according to the Los Angeles Times. In 2001, Schaeffer was awarded more than $64 million in unexercised stock options according to Families USA.
- In 2002, Anthem, Inc. paid CEO Larry Glasscock annual cash compensation amounting to $3.5 million. He received the maximum bonus of 240% of annual salary, amounting to $2.3 million, according to the company's SEC filing.
- The profits of WellPoint, the parent company of Blue Cross, jumped 64% in the fourth quarter of 2002 over the previous year.
- In a deal announced in March to sell the Maryland-based CareFirst to Wellpoint, CareFirst's board approved merger-related incentives and bonuses valued at nearly $120 million. Following public outcry, CareFirst and WellPoint agreed to decrease merger-related compensation by about $70 million.
- In a proposed July 1998 merger between Blue Cross and Blue Shield of Georgia Inc. and Wellpoint 240 key Blue Cross employees would share a cash bonus of $28 million.
- According to the California Department of Managed Health Care (DMHC), in 2002 Blue Cross had more 400% of state required reserves on-hand, a measurement called Tangible Net Equity (TNE).
FTCR called on state regulators and the Federal Trade Commission to investigate the proposed merger on grounds that it will lead to pillaging of corporate accounts by top executives and lead to less competition and greater inefficiency in the nation's health care system.
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The Foundation for Taxpayer and Consumer Rights is a non-profit and non-partisan consumer advocacy group. For more information visit us on the web at www.consumerwatchdog.org
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