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Blue Cross and Blue Shield faces antitrust allegations

Two separate lawsuits claim insurers work as an illegal cartel

Blue Cross and Blue Shield (BCBS) insurance companies as well as the Blue Cross Blue Shield Association (BCBSA) face antitrust lawsuits alleging that the 37 independently owned insurers act as an illegal cartel, reported the Wall Street Journal.

The claims--which have been consolidated into two lawsuits--are gaining traction in a federal court in Alabama. One lawsuit represents healthcare providers, the other individual and small-employer customers. Claims that Blues plans allegedly conspire to avoid competition first arose in Alabama courts in 2012, FierceHealthPayer previously reported.

The allegations state that BCBS--which covers nearly one-third of Americans--has been plotting to divvy up markets in order to alleviate competition, increasing consumers' prices and limiting the amounts paid to providers.

The customer plaintiffs argue that, because BCBSA is controlled by its members, the association limits the amount of insurance business insurers can do under non-Blue brands. The provider plaintiffs believe that, due to "decreased competition, healthcare providers, including the plaintiffs, are paid much less than they would be" without the Blue association's agreements.

BCBSA, which licenses the brands to the insurers that use them, said the licensing deals "do not constitute an agreement to do anything unlawful," according to the article. Additionally, BCBS insurers note that federal regulators know about the licenses and have not taken any antitrust action.

"This is a model that has withstood scrutiny over our entire history," Scott Nehs, general counsel of BCBSA, told the WSJ. "There's no smoky room involved, there's no dividing up." He added that state regulators closely watch insurers' rates.

The two cases may depend upon the laws mandating trademark rights and the antitrust statutes. However, what's up for debate is whether Blues operate more like a franchising arrangement or if BCBSA involves unacceptable agreements between potential rivals, Barak D. Richman, a professor at Duke University School of Law, told the WSJ.

The issues at hand may impact the association's reputation. "It is a very big deal," said Tim Greaney, a professor at Saint Louis University School of Law. "The dollars involved are potentially huge."

For more:
- here's the Wall Street Journal article
- read the provider (.pdf) and customer (.pdf) lawsuits

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Blues plans allegedly conspire to avoid competition