Blue Cross Affiliates Lose Key Defense in Antitrust Case

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By Victoria Graham

Blue Cross Blue Shield affiliates across the country face heightened stakes in a massive antitrust lawsuit after a district court judge ordered April 5 that the allegations of wrongdoing will be evaluated using the highest legal standard.

The case, filed in 2013, claims that nearly 30 BCBS health care providers entered into illegal agreements with one another to not compete for customers. That in turn raised premiums and lessened consumer choice, the class of insurance purchasers alleged.

Scott Nehs, senior vice president, general counsel, and corporate secretary for BCBS, told Bloomberg Law that the company plans to appeal the decision.

The judge’s decision to evaluate the alleged actions on a “per se” basis makes it more difficult for BCBS defendants to skirt antitrust liability because they can’t argue that their behavior promoted pro-competitive benefits. That is, if the plaintiffs can prove the insurers engaged in the illegal behavior, they are liable. The lower “rule of reason” standard under antitrust law requires plaintiffs to prove in addition that the conduct caused economic harms.

Judge R. David Proctor, of the U.S. District Court Northern District of Alabama, granted a class of insurance subscribers’ request that the evidence demonstrating the insurers’ agreements to divide up geographic markets will be reviewed and ruled upon using the higher “per se” standard.

“The court concludes that defendants’ aggregation of a market allocation scheme together with certain other output restrictions is due to be analyzed under the per se standard of review,” Proctor said in his memorandum opinion.

Proctor’s only other antitrust-related case involved steel companies, Gulf States Reorganization Grp., Inc. v. Nucor Corp., according to Bloomberg Law’s Litigation Analytics. In that case, Proctor granted summary judgment to the defendants, saying the plaintiffs hadn’t shown material injury for allegations that they were frozen out of competitive bidding.

Dramatic Change

A ruling that determines antitrust violations will dramatically change how the U.S. health care industry works, Michael D. Hausfeld, a member of the plantiffs’ counsel, told Bloomberg Law in an interview April 6. “If there is a jury determination that this is per se unlawful, and the challenged conduct has to end, that will bring about a major change in the delivery of health care insurance,” he said.

Hausfeld said in a statement that “the Blue Cross Blue Shield system has operated as an illegal association of competitors trying to suppress competition in order to inflate their own profits at the expense of their customers.”

“This is one step in a lengthy process; we will appeal the interim ruling and are confident that we will prevail,” Nehs told Bloomberg Law. “The Blue Cross and Blue Shield System has served Americans well for almost a century, and we are disappointed by the court’s ruling with respect to certain aspects of the BCBS System.” The case is In Re: Blue Cross Blue Shield Antitrust Litigation , N.D. Ala., No. 2:13-CV-20000-RDP, Order 4/5/18

To contact the reporter on this story: Victoria Graham in Washington at vgraham@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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