Oscar sues Florida Blue over alleged anticompetitive broker scheme

Insurance startup Oscar Health is suing Florida's Blue Cross and Blue Shield affiliate for allegedly prohibiting insurance brokers who sell Florida Blue individual plans from selling competing insurers' coverage—a tactic Oscar said undermines the Affordable Care Act exchanges and harms consumer choice.

New York-based Oscar is offering exchange plans in the Orlando metro area for the first time in 2019. When Florida Blue learned of Oscar's lower-priced plans, it implemented the policy "targeted at Oscar to keep it out of the state, thereby causing Florida consumers to continue to pay more for health insurance coverage," Oscar alleged in the lawsuit filed Tuesday in U.S. District Court in Orlando.

Oscar is demanding that Florida Blue terminate its exclusive broker policy, which it says prevents meaningful competition, undermines insurance brokers' ability to give impartial advice, and harms consumers by forcing them to unknowingly pay higher prices.

More than 1.7 million people enrolled in exchange plans in Florida for 2018 coverage, making it the state with the highest exchange enrollment in the nation. Florida Blue covers just over 1 million people in ACA individual plans on and off the exchange.

In an emailed statement, Florida Blue spokeswoman Toni Woods said Oscar's claims have no merit, but she acknowledged that Florida Blue does contract with agents and brokers on an exclusive basis for the health insurance plans they sell. She added that exclusive arrangements in the insurance business are common, and agents are free to quit their agreements with Florida Blue at any time if they wish to sell another insurer's products.

"There is also nothing about the Florida market which precludes any competitor—let alone a New York-based company with financial backing from Google and operations in nine states—from building an effective distribution channel. There are many agencies available that are not contracted with Florida Blue, and there are also other distribution channels from which they can sell their products," Woods wrote.

But Oscar said brokers who have large books of business with the dominant Florida Blue can't afford not to sell its plans. According to the lawsuit, Florida Blue in October threatened to stop working with brokers who signed contracts with and were appointed as brokers by Oscar.

Oscar, which is known for emphasizing the use of technology, telemedicine and concierge teams to augment members' care, said in its complaint that Florida Blue's tactics undermine the ACA exchanges by limiting consumer choice. Instead of reviewing options with consumers, brokers will only help them renew their Florida Blue plans, Oscar argued.

Brokers are instrumental in helping consumers sign up for ACA exchange coverage. According to the CMS, agents and brokers supported 42% of enrollments for 2018 coverage.

Oscar said it is already feeling the effects of Florida Blue's policy. More than 190 brokers have backed out of agreements to sell Oscar insurance plans. And only about a quarter of brokers in Orlando have been appointed by Oscar—far fewer than in other markets Oscar has entered, it said in the lawsuit. Its sales so far "are substantially lower than they would have been but for Florida Blue's misconduct," the complaint states. ACA open enrollment is already underway and lasts until Dec. 15.

Oscar said it plans to sell ACA exchange plans in the Tampa and Jacksonville, Fla., areas next year, but will have a hard time achieving the scale needed to negotiate reasonable contracts with providers.

"Florida Blue's actions are those of a monopolist that believes it can get away with this type of anticompetitive conduct because it is too powerful to be told no," Oscar argued in the complaint.