Blue Cross Blue Shield Association, a conglomerate of 36 health insurance companies providing policies to more than 100 million Americans, is currently facing two major class action lawsuits alleging antitrust law violations. The plaintiffs include policyholders and medical practitioners from a number of states who are alleging that Blue Cross Blue Shield is stifling competition to drive up premiums and diminish remuneration to medical professionals. Due to the size of Blue Cross Blue Shield and its immense market share, the outcome of these lawsuits could be immensely costly and impact the insurance industry throughout the country.
The Blue Cross Blue Shield Association licenses independent insurers in virtually every state in the nation. Most licensees are nonprofit and operate in markets without competition from other BCBSA licensees; some larger markets like California do have more than one Blue Cross Blue Shield Association licensee. BCBSA also serves as administrators of Medicare in many regions, in addition to insuring many state and federal employees through the Federal Employees Health Benefit Plan. The largest licensee in the Blue Cross Blue Shield Association is Anthem, Inc which operates within 14 states. BCBSA insured almost 31 percent of the U.S. population and 40 percent of commercial organizations in 2013, with an annual revenue of almost $21.3 billion.
The two antitrust lawsuits against BCBSA allege that the organization instituted agreements with licensees which eliminated competition between them due to geographical distribution. This has not only eliminated price competition but has limited the compensation for care providers, who might have benefited from more potential employers. Plaintiffs are seeking an injunction to lift those anti-competition agreements and three times the amount of damages. The class action lawsuits have already cleared one major hurdle when U.S. District Judge R. David Proctor refused to dismiss the suits, declaring that if the anti-competition agreements were used would constitute antitrust violations. Proctor also ruled that BCBSA did not qualify for certain antitrust exemptions.
BCBSA has responded that it has produced these agreements in the open for years with the full knowledge of federal regulators. The company also argues that any member alliances are to compete with non-Blue national insurers and support the BCBSA trademark, a key intellectual property. Furthermore, all the premium rates are closely monitored by state insurance agencies.
Outside legal experts point out that there are strengths and weaknesses to these arguments. The mere fact that many BCBSA members limit themselves to certain geographical markets is emblematic of antitrust practices. Agreements which inhibit competition may be construed as antitrust violations which contributed to higher consumer premiums and lower salaries for providers.
On the other hand, there are some glaring weaknesses. In many states, Blue companies are the only major insurer yet still offers plans with premiums lower than the national average. For example BCBSA insured almost 91 percent of individual businesses and 97 percent of small groups in Alabama, yet still has some of the lowest family and employer premiums in the country. Another key factor is that in many markets Blue companies do not generate significantly higher revenue.
It will probably take years for these cases to work their way through the courts unless there is a settlement. While no one is willing to say who is likely to triumph, there is considerable speculation that the two key issues these cases will hinge on are licensing and protection of intellectual property versus collusion to inhibit competition.
Article written by:
Robert Moghim, M.D.
CEO, Health Carousel Locum Tenens