Health System Sues Blue Cross Blue Shield for Alleged Collusion

Health System Sues Blue Cross Blue Shield for Alleged Collusion

Source: pymnts

A health system based in Michigan has sued BCBS entities in a federal court for allegedly conspiring to suppress competition and drive up insurance costs. The suit, filed by Corewell Health, claims that the BCBS Association, along with many affiliated insurers, engaged in a collective scheme to suppress competition across state lines to the detriment of healthcare providers and consumers.

Corewell Health, previously Spectrum Health and Beaumont Health, argues that Blue Cross Blue Shield insurers employed restrictive contracts to carve up markets geographically, essentially barring competition among the stand-alone BCBS companies in different states. In the complaint, these contracts are said to have stifled the capacity of other insurers to compete in Michigan, artificially maintaining low reimbursement rates for providers and inflating patient premiums.

The suit, which was filed in the U.S. District Court for the Northern District of Alabama, is based on a previous antitrust case that charged BCBS companies with the same behavior. In 2020, the BCBS Association resolved that case for $2.7 billion, although it did not admit to wrongdoing. That agreement contained provisions to permit certain legal claims to be pursued individually, which Corewell is now doing with its own lawsuit.

Corewell’s formal complaint charges that the BCBS Association’s membership companies’ license agreements essentially constitute a non-compete contract, which is against federal antitrust regulations. The agreements bar each BCBS company from using the Blue Cross name in other insurers’ exclusive territories. For instance, BCBS of Michigan wouldn’t be allowed to sell Blue Cross insurance policies in surrounding states, nor would out-of-state BCBS providers be able to compete in Michigan, further reducing competition and establishing regional monopolies.

The healthcare system further contends that these deals enabled BCBS of Michigan to exert disproportionate market power, and in so doing, enabled the organization to receive uncomely terms for its contracts with hospitals and clinics. This reportedly comprised lower payment for services, subjecting healthcare systems to financial hardship and preventing investments in the infrastructure of patient care.

In its answer, the Blue Cross Blue Shield Association asserted that its organizational structure encourages, not discourages, competition and referred to the 2020 settlement as a resolution of claims. Yet, Corewell’s suit pursues damages and injunctive relief to stop like conduct from ongoing into the future.

Legal analysts say the case has wide-ranging implications for the healthcare sector, particularly if other health systems copy Corewell’s lead and pursue their own suits. The ruling may also have an impact on the way insurers and provider networks bargain over contracts and how state-based insurance monopolies are regulated.

As medical expenses keep climbing and insurers are under greater scrutiny, this suit highlights lingering tensions between insurers and providers regarding market dominance, pricing authority, and disclosure. With antitrust enforcement growing under the current federal government, industry analysts will be keenly interested in how the courts address Corewell’s allegations and whether this will lead to a wider rethinking of the Blue Cross Blue Shield system’s business model.