Oscar Health is taking on an established Blue Cross Blue Shield plan, alleging the insurer devised a targeted scheme to monopolize insurance brokers in Florida and limit the startup's ability to sell exchange plans.
In a lawsuit filed in the U.S. District Court for the Middle District of Florida, Oscar claims Blue Cross Blue Shield of Florida—or Florida Blue—tried to prevent Oscar from selling Affordable Care Act marketplace plans in the state with a “blatant scheme” that forced consumers into higher-cost plans. It further claimed that Florida Blue strong-armed insurance brokers into selling only Blues plans and then “aggressively enforced this exclusivity policy” after learning that Oscar plans were cheaper.
Oscar said more than 190 brokers have backed out of agreements to sell Oscar plans in the state once they were faced with termination from Florida Blues.
That type of “monopoly power” is “devastating to a new entrant like Oscar,” according to the complaint.
“Beyond the harm to competition derived from seeking to exclude a new, innovative competitor with lower-priced products from the marketplace, Florida Blue’s scheme undermines a key function of the ACA health insurance marketplace,” it reads. “One of the principal purposes of the ACA is to provide consumers with more choices. Independent brokers serve a valuable public purpose in explaining options and helping consumers navigate health insurance exchanges.”
In a statement, a Florida Blue spokesperson Paul Kluding said the lawsuit has no merit, noting that brokers are independent contractors "who may terminate their agreements with Florida Blue at any time if they wish to sell another carrier’s products."
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Oscar's Chief Policy and Strategy Officer Joel Klein called the exclusive broker policy "exceedingly rare," adding that it "undermines the ability of independent insurance brokers to provide fair, impartial advice to their clients" and forces consumers to pay more for an inferior plan.
The insurance startup says Florida Blue’s actions have also stymied plans to expand its Florida footprint. Oscar plans to begin selling plans in Jacksonville and Tampa in 2019, but Florida Blue’s presence in those cities have made it difficult to negotiate with providers and attract local brokers. Oscar says the scheme “will have the effect of keeping Oscar out of the Orlando metro area and other major metro areas, and preserving the high prices and monopoly profits that Florida Blue now reaps.”
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“Florida Blue’s actions are those of a monopolist that believes it can get away with this type of anticompetitive conduct because it is too powerful to be told no,” the complaint states. “As a result of Florida Blue’s anticompetitive conduct, Oscar’s sales are substantially lower than they would have been but for Florida Blue’s misconduct.”
Kluding added that there are many agencies that do not contract with Florida Blue and nothing in the state "precludes any competitor – let alone a New York-based company with financial backing from Google and operations in nine states - from building an effective distribution channel."
"When you see that the Florida Office of Insurance Regulation website shows that the New York company has 1,600 appointed agents in Florida, you can’t help but wonder why that is not enough and they have chosen to resort to a Plan C, for Courts, now that Open Enrollment is underway," he said.
Oscar entered the Florida ACA market this year offering plans in four counties. The insurer is asking the court for injunctive relief and “treble damages.”