Michigan, Department of Justice Drop Lawsuit Against BCBS of Mich.
On Monday, the Department of Justice and the state of Michigan in a joint motion dropped their antitrust lawsuit against Blue Cross Blue Shield of Michigan over a controversial contracting practice by the insurer, Modern Healthcare reports (Carlson , Modern Healthcare, 3/25).
In October 2010, DOJ filed a lawsuit alleging that BCBS of Michigan set up agreements with hospitals that likely raised health costs and insurance premiums for state residents. The department targeted agreements made between the insurer and 70 of Michigan's 131 general acute-care hospitals.
The agreements involve a "most-favored-nation" clause, which stipulates that hospitals must charge BCBS' competitors equal or higher prices for health care procedures, allowing hospitals to raise their prices as long as they raise them more for other insurers. In some cases, the clause led to hospitals charging BCBS' competitors up to 40% more, according to DOJ (California Healthline, 10/19/10).
In June 2011, a federal judge denied a motion from BCBS of Michigan to dismiss the lawsuit. A trial was scheduled in federal court for later this year.
However, DOJ on Monday said it no longer intends to pursue the lawsuit because Michigan recently took action to ban the use of most-favored-nation clauses, the Wall Street Journal reports (Kendall, Wall Street Journal, 3/25).
On Feb. 1, Michigan's insurance commissioner signed an order prohibiting hospitals or insurers from enforcing the most-favored-nation pricing agreements in insurance contracts unless they first obtain state approval. In January 2014, a state law takes effect that will ban contracts from containing most-favored-nation clauses.
DOJ, BCBS of Michigan Comment on Motion To Dismiss Lawsuit
In a statement, DOJ said the enactment of the new state law makes the lawsuit unnecessary.
Bill Baer -- assistant attorney general in DOJ's antitrust division -- in an email added that the law would ensure that "Michigan consumers will benefit from the enhanced health insurance competition."
In a separate statement, Jeffrey Rumley -- BCBS of Michigan's vice president and general counsel -- agreed that the new law "renders moot any further need for [DOJ] and the State to pursue this case." However, he reiterated the insurer's position throughout the litigation period that state regulators always exercised "sufficient control over the use of [most-favored-nation] provisions between health insurers and hospitals" (Carlson , Modern Healthcare, 3/25).
However, as of Monday, BCBS of Michigan still is facing multiple lawsuits filed by private entities -- such as Aetna -- that echo the arguments made by DOJ, Modern Healthcare reports.
DOJ To Still Pursue Similar Lawsuits Against BCBS in Other States
According to Modern Healthcare, DOJ probed BCBS' involvement in similar most-favored-nation agreements in about six other states when the department filed its lawsuit against BCBS of Michigan. At least one of those investigations is ongoing, according to a lawyer familiar with the probes.
DOJ in its statement acknowledged that its "Antitrust Division continues to investigate the use of [most-favored-nation] clauses in health plan contracting in other areas" and reiterated its stance that such contracts potentially "reduce competition" (Carlson , Modern Healthcare, 3/25).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.