The Justice Department, in conjunction with the Michigan attorney general office, is suing Blue Cross Blue Shield of Michigan, alleging it stifled competition to protect its market share, leading to higher costs and preventing new insurers from entering markets.
At stake are a set of agreements Blue Cross signed with about 70 hospitals in the state that allegedly stipulate they must charge its competitors equal or higher prices for healthcare procedures. In some cases, such "most-favored-nation" (MFN) clauses require that hospitals charge Blue Cross' competitors up to 40 percent more, the Wall Street Journal reports.
This case has broad implications because many local insurance markets, like those in Michigan, are highly concentrated, according to the New York Times. Indeed, Assistant Attorney General Christine Varney said the Justice Department is on the lookout for similar practices across the country. "If we uncover other health insurers with market power that use anticompetitive MFNs to thwart competition, we will challenge them," she said.
The civil suit, which was filed in U.S. District Court for the Eastern District of Michigan, seeks an injunction to stop Blue Cross from continuing the practice, a move that could lower premium rates and open competition. Blue Cross Blue Shield of Michigan has a 60 percent market share--nine times larger than its closest competitor, the Detroit News reports.
Blue Cross defended itself against these claims, saying the lawsuit lacks merit. "These kinds of low cost guarantees are widely used in a variety of contracts in a number of industries," Andrew Hetzel, vice president of corporate communications for Blue Cross, told USA Today. He warned the Justice Department’'s suit could boost health costs by restricting the company's ability to negotiate "deeply discounted" prices for its members.
To learn more:
- read the New York Times article
- see the Wall Street Journal article
- check out the Detroit News article
- see the USA Today story
- read the DOJ briefing statement
- see the Michigan attorney general press release