woke up this morning in the recovery room.

The California-based health insurer is nursing a blow delivered late Wednesday by Maryland Insurance Commissioner Steven Larsen. After more than a year of heated public debates, Larsen ruled against WellPoint's proposed acquisition of CareFirst, a nonprofit BlueCross Blue Shield health insurance plan covering millions of people in Maryland and nearby areas.

WellPoint had eyed CareFirst as a strong vehicle for growth outside its home state. A former nonprofit BlueCross Blue Shield program itself, WellPoint has exploded as a public company that now ranks as the third-largest managed care insurer in the country.

The merger would have allowed WellPoint to suddenly expand its enrollment by 25% to more than 16 million people -- and the price tag was inviting. WellPoint inked a deal to buy CareFirst for $1.37 billion in a proposal two years ago. Since then, investment bankers have valued the company at between $1.45 billion and $1.65 billion. An outside opinion, filed Tuesday by an independent economist, calculated CareFirst's worth at an even greater $2.27 billion.

"The purchase price does not reflect the fair value of CareFirst," Larsen said in his formal order. Moreover, "conflicts of interest existed that either were not disclosed or were not appreciated or considered by CareFirst."

In a stinging denial, Larsen criticized CareFirst for "selling the company on the cheap" in a deal that he viewed as sweet for CareFirst executives but potentially bitter for CareFirst customers. Had the acquisition gone through, CareFirst executives were poised to collect handsome bonuses and generous paychecks, a factor that some believe tainted the negotiation process.

CareFirst described such insinuations as "unfair, unwarranted and inconsistent" when responding to Larsen's ruling Wednesday. And the company warned that it faces competitive challenges without a big partner such as WellPoint.

For its part, WellPoint expressed disappointment -- but no strong surprise -- at Larsen's decision. The company said Thursday that it plans to fully study Larsen's order before deciding what further actions, if any, it plans to take.

All along, Wall Street analysts have given the acquisition coin-toss odds of succeeding. And they excluded CareFirst from any WellPoint earnings projections, despite tentative plans for a 2003 closing date.

Investors, reassured by analysts that other deals could still materialize, shrugged off WellPoint's setback. The stock was up 75 cents, to $68.49.