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DOJ files antitrust lawsuit against Blue Cross Blue Shield of Michigan

by Heather Mayer, DOTmed News Reporter | October 18, 2010
The Department of Justice filed a civil antitrust lawsuit Monday against Blue Cross Blue Shield of Michigan, claiming that provisions of its agreements with hospitals raise hospital prices, prevent other insurers from entering the marketplace and discourage discounts. DOJ said the agreements likely forced Michigan consumers to pay higher prices for their health care services and insurance.

"American consumers deserve affordable health care at competitive prices, and the antitrust division will vigorously pursue anti-competitive actions that stand in the way of achieving that goal," said Christine Varney, assistant attorney general in charge of the Department of Justice's antitrust division, in prepared remarks.

The state also joined the suit, which was filed in the U.S. District Court in the Eastern District of Michigan.

The department, in its lawsuit, argues that the insurance agency's most-favored-nation (MFN) clauses, which are the challenged provisions, in its contracts with hospitals have caused them to increase their prices to BCBSM's competitors, shielding the health insurance company from competition. The department said the MFNs guarantee that no other insurance plans could obtain a better rate for hospital services than BCBSM.

According to the suit, BCBSM has used MFNs or similar clauses in contracts with at least 70 of Michigan's 131 general acute care hospitals, including many major hospitals in the state.

"Negotiated hospital discounts are a tool that Blue Cross uses to protect the affordability of health insurance for millions of Michiganders," said Andrew Hetzel, BCBSM vice president for corporate communications, in prepared remarks e-mailed to DOTmed News. "Through this lawsuit, the federal government seeks to deny millions of Michigan residents the lowest cost possible when they visit the hospital."

The insurance agency is a nonprofit health care corporation, based in Southfield, Mich. It is the state's largest provider of commercial health insurance, bringing in more than $10 billion in revenue, according to DOJ. BCBSM covers 60 percent of the state's 3 million commercially insured residents.

"Because BCBSM is the only nonprofit health care corporation that is regulated by Michigan Public Act 350, it is the only Michigan insurer that is required to meet the cost, quality and access goals required by statute," according to a BCBSM statement. "BCBSM's efforts to secure the lowest rates in hospital agreements are designed to benefit the people of Michigan consistent with BCBSM's statutory obligations."

The court will determine a pretrial schedule for the case once BCBSM files its response to the government's lawsuit, according to DOJ.