The Justice Department and the attorney general of Michigan sued the Michigan Blues in October 2010, but after 2½ years of litigation, 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, however, 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 antitrust division continues to investigate the use of MFN clauses in health plan contracting in other areas,” the Justice 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.”