Blue Cross Blue Shield of Michigan must stop using "most-favored nation" clauses in their contracts with providers, the state insurance commissioner said in an order issued last week.
The preferential hospital pricing policies, in which Blue Cross allegedly required hospitals to charge higher prices to competing insurers, also are banned for all insurers operating in Michigan unless Insurance Commissioner Kevin Clinton specifically approves them, the Detroit Free Press reported.
"As of Feb. 1, 2013, any attempt by an insurer to enforce a most-favored nation clause in any provider contract, without the commissioner's prior approval, is prohibited and will result in appropriate administrative action," Clinton said in the order.
Both the U.S. Department of Justice and rival insurer Aetna have filed suit against Blue Cross, claiming the most-favored nation policies artificially raise market rates as hospitals are forced to increase fees for other insurers to offset the deep discounts they give to Blue Cross.
Although Clinton said the most-favored nation clauses may violate the state insurance code, he clarified the order wasn't condemning any specific policy or attempting to preempt anti-trust enforcement, the Detroit News reported.
Despite the order, Blue Cross hasn't yet decided whether it will stop using the most-favored nation policies because their benefits outweigh other issues, Chief Counsel Jeffrey Rumley told the Detroit News.
The Michigan Association of Health Plans, meanwhile, supported the order. "These orders will help create a more competitive market for health insurance in Michigan and are a start toward leveling a playing field that has been tipped toward Blue Cross for many years," Executive Director Rick Murdock told Crain's Detroit Business.