Healthcare Business News

Feds still looking at insurers' 'most-favored' contracts

By Joe Carlson
Posted: March 25, 2013 - 6:30 pm ET

The U.S. Justice Department has closed its antitrust case against Blue Cross and Blue Shield of Michigan, but the government is expected to remain active in examining how insurers use controversial “most-favored-nation” pricing contracts in other states.

The department opened investigations into preferred-pricing contracts by other Blues plans in several other states about the same time that it filed its antitrust lawsuit against the Michigan Blues plan. The Justice Department has closed several of those investigations—but not all of them—without filing lawsuits, according to an antitrust attorney involved with the investigations.

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The Justice Department and the attorney general of Michigan sued the Michigan Blues in October 2010, but after two and a half years of litigation, the government lawyers and the insurance company filed a joint motion asking a judge to close the case before its scheduled trial this October.

The complaint accused Blue Cross and Blue Shield of Michigan—the dominant health plan in the state—of illegally using its market power to enforce contracts that effectively prevented smaller insurers from entering the market or getting competitive pricing. These “most-favored nation” deals required hospitals to give the Michigan Blues the best rates for services, and in some cases forced healthcare providers to raise prices on other health plans.

The state insurance commissioner has since said that such deals cannot be enforced as of Feb. 1, and on Jan. 1, 2014, a new state law goes into effect banning future most-favored nation pricing by healthcare insurers, making the lawsuit obsolete, government officials said.

The lawyer who spoke to Modern Healthcare said the Justice Department has been probing other most-favored nation arrangements by Blues plans in about half a dozen states, and that at least one of those cases is still ongoing. The source declined to say which state.

"The Antitrust Division continues to investigate the use of MFN clauses in health plan contracting in other areas," the department said in a news release announcing the Michigan development. "The department has observed that MFN clauses used by health plans that have market power in the sale of health insurance can reduce competition by, for example, encouraging hospitals to contract with smaller health plans at higher rates or through less efficient reimbursement models."

Monday's filing also doesn't spell the end of the most-favored nation litigation for the Michigan Blues, since the company is being sued by multiple private groups that make allegations similar to what the government had claimed. For example, insurer Aetna's lawsuit and several other complaints against the Michigan Blues remained pending in Detroit District Court on Monday night, court records showed.

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