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26-03-2013 | Article

Dominant health insurer agrees to play fair

Abstract

Department of Justice

medwireNews: An antitrust lawsuit against Blue Cross Blue Shield of Michigan (BCBSM) was dismissed after the state of Michigan passed a law that disallows health insurers to provide exceptionally favorable terms with healthcare providers - also known as "most favored nation clauses" (MFN).

The original lawsuit against BCBSM claimed that the insurance company had reached agreements with hospitals that led to price increases for other insurers, making it difficult for the provision of competitive discounts.

"The Department of Justice's antitrust lawsuit alleged that Blue Cross Blue Shield of Michigan's MFN clauses likely raised health care costs, harmed consumers and prevented other health plans from entering local markets," Bill Baer, Assistant Attorney General of the department, said in a press release. "The law just enacted by Michigan addresses the department's concerns by eliminating MFNs and ensuring that Michigan consumers will benefit from enhanced health insurance competition."

Both the Department of Justice as well as the state of Michigan accused Blue Cross Blue Shield of contracting with various hospitals in Michigan in a manner that made sure that other insurers were charged at least as much - if not more - than they were, which ultimately stifled competition.

The MFN ban is set to come into effect in 2014 to ensure that self-funded employers and their employees do not end up in an unfairly rigged market that forces them to pay higher prices to hospitals through competitor insurance plans that are forced to charge higher rates or provide less reimbursement.

These contractual clauses that BCBSM managed to formulate with various hospitals were found to purposefully restrict rival insurers and other health plans from having a fair chance at expanding in the Michigan market.

"The department remains committed to challenging any anticompetitive effects of MFN clauses," the Department of Justice declared in a press release. The department noted that insurers in North Carolina serve as an example of their growing initiative to prevent other states from allowing MFN clauses to enter into contracts with hospitals and healthcare providers in general.

So far, the Department of Justice is investigating how Blue Cross Blue Shield has used its market superiority to reach preferred-pricing agreements with other states without it leading to litigation.

By Peter Sergo, medwireNews Reporter