BlueCross sued for collusion

Powerhouse law firm takes on NC insurance company and other ‘Blue’ plans nationwide

The State, Saturday, Feb. 09, 2013 

CHARLOTTE — A major lawsuit filed against BlueCross BlueShield of North Carolina has generated a flurry of class-action cases that, if successful, could result in lower health insurance premiums for tens of millions of Americans. 

The suit alleges that BlueCross plans nationwide have driven up health care costs by colluding to carve up the nation’s insurance market.

As the plaintiffs tell it, the arrangement works like this: 38 Blue Cross and Blue Shield plans nationally have illegally agreed not to compete on one another’s turf. Consequently, BlueCross plans in South Carolina and Virginia don’t compete with BlueCross BlueShield of North Carolina. 

BlueCross strongly disputes the allegations, saying that it is simply trying to get its customers the best prices available. The company says its territorial restrictions and contracts have withstood legal challenges and government scrutiny for years.

The plaintiffs – three Mooresville, N.C., residents and two small businesses – are represented by lawyers with a powerhouse firm in Washington, and some antitrust experts predict they will win in court.

The various BlueCross plans are independent insurance companies. But the lawsuit alleges that they have colluded through their national trade group – the Blue Cross and Blue Shield Association.

More competition would mean lower prices, the lawsuit contends. Instead, the arrangement has allowed the insurers to dominate their markets and to charge inflated premiums.

For years, BlueCross BlueShield of North Carolina required hospitals and other key health care providers to agree to contract provisions, commonly known as “most favored nation” clauses, which ensured that BlueCross received the best prices for health care services.

The lawsuit argues that those clauses stifle competition by preventing other insurers from negotiating for lower costs. That, in turn, leads to higher premiums at the other insurance companies.

BlueCross BlueShield of North Carolina, a not-for-profit company that is fully taxed, is the largest private health insurer in North Carolina, controlling more than 70 percent of the market. It has reserves of more than $1.8 billion.

In court filings, BlueCross said the N.C. Department of Insurance thoroughly regulates and approves its contracts with providers, including provisions like the MFN clauses.

BlueCross also said plaintiffs have yet to point to facts showing that the MFN clauses have driven up prices.

The U.S. Justice Department has been investigating whether BlueCross MFN clauses in North Carolina and other states violate antitrust laws. A BlueCross BlueShield of North Carolina spokesman said that the company is cooperating fully with the ongoing investigation.

The company said it is no longer including MFN clauses in new contracts and has recently removed them from old ones.

The North Carolina case, filed in early 2012, was the first of more than 20 class actions making similar allegations against BlueCross plans nationwide. Those cases recently have been consolidated before a federal judge in Alabama, which means that the litigation’s outcome likely would affect companies and policyholders nationwide.

Among those representing the North Carolina plaintiffs are lawyers from Boies, Schiller and Flexner, a high-profile Washington firm known for taking on complex cases. The U.S. government hired the firm’s chairman, David Boies, to litigate its antitrust case against Microsoft.

The Blue Cross and Blue Shield Association called the lawsuits “meritless.”

‘Benefits of competition’ 

But some antitrust experts find the plaintiff’s arguments credible. 

Duke University law professor Barak Richman, an expert on health care policy and antitrust law, said he thinks antitrust law is in the plaintiff’s favor.

“We’ve always known that Blue Cross of America uses its trademark to prevent competition,” he said. “And we’ve always questioned whether it’s legal.”

Nationally, “Blue” plans cover about 100 million Americans. 

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