BlueCross sued for collusion

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

By AMES ALEXANDER and JOSEPH NEFF
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. 

Read more here: http://www.thestate.com/2013/02/09/2624801/bluecross-sued-for-collusion.html#storylink=misearch

Blue Cross giving rebates for failing to meet requirement

The State
July 24, 2012

Insurer violated new health care law in spending on claims

BY STEPHEN LARGEN The (Charleston) Post and Courier

South Carolina’s largest health insurer has begun sending out rebate checks to some policyholders because it failed to meet a requirement of the federal health care overhaul.

Blue Cross Blue Shield of South Carolina said Monday that checks – most for less than $200 – will be sent to individual and small group policy holders during the next two weeks. A company spokeswoman declined to say how much it will be paying out in rebates.

The provider, like some others, didn’t spend enough on customers’ medical claims in 2011, according to the terms of the Affordable Care Act.

Blue Cross Blue Shield said it is complying with the law, even though the insurer views the requirement as bad policy. 

The spending stipulation doesn’t address the root causes of rising health care expenses, such as waste and fraud and lifestyle choices, a company spokeswoman said.

And Jim Deyling, Blue Cross Blue Shield’s president of private business, said in a statement that “our concern remains that a rebate such as this not only creates a false impression of overpricing, but also reveals the fundamental flaw of the legislation, which is that it does nothing to reduce health care expense for members.”

The director of Gov. Nikki Haley’s Department of Health and Human Services agreed.

“In a health care system where it has been estimated up to 30 percent of health care spending is excess cost, these small rebates may be momentary relief for those who receive them, but they clearly don’t target the underlying reasons for out of control health care costs,” Tony Keck said in a statement.

Haley, like most Republicans, opposes the Affordable Care Act.

Conversely, the president of South Carolina’s Small Business Chamber of Commerce hailed the requirement that forced Blue Cross Blue Shield to issue rebates.

“This demonstrates that the Affordable Care Act, ‘Obamacare,’ health care reform or whatever you call it is doing what it said it would do: help make health insurance more affordable,” said Frank Knapp, a longtime supporter of the law.

Blue Cross Blue Shield held at least 60 percent of the market share in eight of the state’s largest metro areas in 2008, according to a study by the American Medical Association. 

MONEY BACK

BlueCross BlueShield of South Carolina will issue checks to some policyholders because it didn’t meet a requirement of the Affordable Care Act. Questions and answers:

Who will get rebates? Individual customers will receive checks directly from the company, while owners of businesses with between two and 50 full- and part-time employees, including seasonal help, will get one check for the company’s policy.

What can the rebates be spent on? No restrictions for individual customers. Small business owners can return money to employees, reinvest it to offset future health care costs or use it in another way that benefits employees.

Why are the rebates coming? The company did not meet the medical loss ratio for spending on customers’ medical claims in 2011. It was required to spend 80 percent of premiums for customers’ medical claims. It spent 74.8 percent in the individual market, and 79.9 percent in the small group market. The company won’t issue checks for large group plans as it exceeded the 85 percent target.

http://www.postandcourier.com/article/20120724/PC16/120729651/1177/south-carolina-s-largest-health-insurer-issuing-rebates

Anticompetitive health insurance practices

One of the most popular parts of the new federal health care law is the establishment of the state insurance exchanges—large pools of customers for which insurance companies would compete to sign up for health insurance. Leveraging large numbers of customers to drive down insurance premiums is a concept loved by all—Democrats, Republicans, Libertarians, Tea Partiers, big business and small business.

But the idea relies on the premise that there is real competition in the health insurance market that actually works to drive down costs. Apparently that isn’t the case.

Many of us have been aware that the dominant health insurance company in a market demands that it be treated as a “most favored nation” by providers. In other words, these dominant insurance companies would negotiate fee rates with hospitals and other providers and require those providers to charge higher fees to the patients of other insurance companies. They leverage their volume of insureds to get a better deal.

In this way the dominant insurance company can always have more competitive premiums. If the providers don’t agree to play, the dominant insurance company can kick the providers out of their network thus reducing the provider’s revenue due to fewer patients.

This tactic makes it more difficult for other insurance companies to compete and insures (pardon the pun) that the dominant insurance company stays dominant.

As bad as this “most favored nation” tactic is for consumers because it reduces competition, it apparently is even worse than that.

Blue Cross Blue Shield of Michigan is being taken to court by the U.S. Justice Department and is accused of anticompetitive behavior that encourages higher provider rates and thus higher premiums.

Specifically, Michigan’s Blue Cross is being charged with “paying hospitals higher prices for medical care in exchange for a promise they would charge competing insurers as much as 40% more than they charge Blue Cross.”

The reality is that without real competition in the health insurance market because the “most favored nation” tactic is allowed, there is no incentive for insurance companies to try to get the lowest price for health care services. In fact, the companies make more money when the service costs rise because their built-in profit margins are a percentage of their health service cost payouts.

Is Michigan the only state where this is going on and forcing the individual and small group markets to pay inflated premiums due to a health insurance company greed?  I doubt it.