TRENTON, N.J., January 5 – The state Insurance Department has approved the New Jersey part of a $6.5 billion merger deal involving two health insurance giants despite some objections at the hearing.

The objections were raised by Assemblyman Neil Cohen, (D-Union County), who said he feared that the next step could be the acquisition of Horizon Blue Cross-Blue Shield and deprive the state of a competitive health insurance market.

The merger involves the acquisition of WellChoice, the parent company of Empire Blue Cross Blue Shield, the largest health insurer in New York State, by WellPoint of Indiana, now the nations largest health insurer.

The Insurance Department approved WellPoints acquisition of WellChoice Insurance Co. of New Jersey and now the entire merger proposal is in the hands of the regulatory agencies of Indiana and New York.

Effect on Horizon Raises Concern

According to the record released by hearing officer Jonathan Cuttler, Cohen stated that he believes the presence in New Jersey of the largest health care conglomerate in the nation will only encourage Horizon Blue Cross/Blue Shield of New Jersey to inch towards conversion from its current non-profit status.

Cuttler wrote in the hearing synopsis that WellChoice testified it did not plan any other acquisitions in the area at this time and to question future moves of WellChoice would be speculative.

According to the hearing report, Cohen said Horizon had entered negotiations with Anthem Health Care, which subsequently acquired Wellpoint several years ago. Cohen also stated that the proposed transaction would not help lower rates for those New Jerseyans who are unable to afford decent health care insurance.

The Democrats, who control the Legislature, are feuding with Horizon Blue Cross/Blue Shield and part of that fight saw the Legislature and Democrat Governor impose a special $40 million health care premium tax on Horizon, a tax Horizon has challenged in a lawsuit before the New Jersey Supreme Court.

Similar concerns that Horizon could be the next acquisition target of WellPoint were expressed by Renee Stenhagen executive director of New Jersey Appleseed. She said the acquisition provided little benefit to New Jersey consumers. She also expressed concerns about the application of the New York conversion law to the conversion of Empire Blue Cross/BlueShield.

According to the hearing review record, she said that the addition of WellPoint to the New Jersey health insurance market may increase the likelihood of Horizons conversion.

Horizon Concerns Purely Speculative

Cuttler said, There is no indication in the record that the acquisition of WellChoice by WellPoint and Wellpoint Holding will negatively impact the provision of health care to New Jersey citizens.

He wrote, Indeed the entry of the nations largest health care insurance entity into this state may promote additional competition and provide additional choice to New Jersey health care consumers. Cuttler added, It is purely speculative whether the proposed acquisition might inch Horizon closer to conversion.

Besides, Cuttler noted the conversion of a health service corporation into a stock health user is subject to many procedures of law, including filings and reviews to ensure that the interests of the public are protected in any conversion.

The hearings are part of the customary closing conditions for the merger, including approval by WellChoice stockholders and various regulatory agencies in Indiana, New York and New Jersey.

According to the filing, the merger involves $6.5 billion consisting of $500 million in cash, 2.7 billion dollars in long term debt and $3.3 billion dollars worth of stock.

When completed, the combined companies will serve more than 33 million medical members as a Blue Cross or Blue Cross Blue Shield licensee in 14 states, and through its HealthLInk and UniCare subsidies.