Justice Department Goes After Michigan Blue Cross For Antitrust Violations

Very happy to see they're pursuing this case. The Blues are infamous for cutting deals with hospitals that squeeze competition out of the market -- in fact, did you know the Blues often require that hospitals do not give sliding-scale prices to

Very happy to see they're pursuing this case. The Blues are infamous for cutting deals with hospitals that squeeze competition out of the market -- in fact, did you know the Blues often require that hospitals do not give sliding-scale prices to people without insurance? If they decide to go after more of them, this might lead to actual competition:

WASHINGTON — The Justice Department sued Blue Cross Blue Shield of Michigan on Monday, asserting that the company, the state’s dominant health insurer, had violated antitrust laws and secured a huge competitive advantage by forcing hospitals to charge higher prices to Blue Cross’s rivals.

The civil case appears to have broad implications because many local insurance markets, like those in Michigan, are highly concentrated, and Blue Cross and Blue Shield plans often have the largest shares of those markets.

In the Michigan case, the Obama administration said that Blue Cross and Blue Shield had contracts with many hospitals that stifled competition, resulting in higher health insurance premiums for consumers and employers.

The State of Michigan was also a plaintiff in the lawsuit, filed in the Federal District Court in Detroit.

Blue Cross and Blue Shield, like most insurers, contracts with hospitals, doctors, labs and other providers for services. The lawsuit took direct aim at contract clauses stipulating that no insurance companies could obtain better rates from the providers than Blue Cross. Some of these contract provisions, known as “most favored nation” clauses, require hospitals to charge other insurers a specified percentage more than they charge Blue Cross — in some cases, 30 to 40 percent more, the lawsuit said.

Christine A. Varney, the assistant attorney general in charge of the antitrust division of the Justice Department, said these requirements were “pernicious.”

“Our lawsuit alleges that the intent and effect of Blue Cross Blue Shield of Michigan’s contracts is to raise hospital costs for competing health plans and reduce competition for the sale of health insurance,” Ms. Varney said. “As a result, consumers in Michigan are paying more for their health care services and health insurance.”

The contract terms, she said, discouraged discounts and prevented other insurers from entering the market. The lawsuit also asserts that Blue Cross, in effect, bought protection from competition — by agreeing to pay higher prices to certain hospitals to induce them to agree to the “most favored nation” clauses.

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