Blues antitrust case just got tougher for the insurers

A federal appeals court on Wednesday ruled that Blue Cross and Blue Shield insurers must defend themselves against a major class action case accusing them of anticompetitive practices on much less favorable legal grounds.

The 11th U.S. Circuit Court of Appeals upheld a federal district judge's April ruling that the combination of the Blues plans' exclusive territories, in which they agreed not to compete, and the agreement to limit competition on non-Blues branded products is a per se violation of the Sherman Antitrust Act.

The 11th Circuit panel's one-sentence memorandum opinion denying the Blues' interlocutory appeal of U.S. District Judge R. David Proctor's ruling is a significant legal blow for the insurers. It makes it easier for providers and plan members to prove that the plans impede competition by offering insurance coverage in exclusive markets.

The ruling means the plaintiffs don't need to offer extensive economic evidence of the anticompetitive nature of the Blues organizations' conduct, lessening the need for a long and complicated trial. It could boost the chances of the Blues organizations moving to settle the case.

"The Blues will have to do some things to increase competition in order to address this order," said Joe Whatley, the lead attorney for the providers. "I hope they will now sit down and have a dialogue with us to come up with ways to do exactly that."

But Barak Richman, an antitrust law expert at Duke University, said he isn't convinced the appellate decision will force the Blues to the table.

"Maybe—it means they've lost one delay tactic," he said. "But the trial will be a long slog, and then they might be optimistic that the 11th Circuit will reverse the per se ruling once they finally get a review."

In April, Proctor found that healthcare providers and consumers showed that some of the practices of the Blue Cross and Blue Shield Association and its 36 member plans should be reviewed as a per se violation of federal antitrust law if the case goes to trial.

The Blues had hoped Proctor would look at their practices and all the circumstances surrounding them before determining during trial if they violated federal antitrust law.

Proctor wrote there are disputed issues of fact over whether the Blues organization is a single entity that will have to be tried. If the Blues prevailed in a trial on that issue, they can't be found to have conspired to restrain trade under the law.

The Blues got a more favorable ruling on the issue of whether their collaboration to offer national insurance plans under the BlueCard program is an antitrust violation. The judge said that will require another motion with more briefing and evidence.

The next step in the litigation, which has been pending for six years, is deciding on certifying the class of plaintiffs. The potential class of provider plaintiffs includes most hospitals and physicians in the country, plus most other healthcare professionals who bill Blue Cross and Blue Shield plans.

If the Blues organizations now proceed to trial, they would have to defend their agreement not to compete with each other in selling insurance, administering employee benefit plans and contracting with providers under a legal standard that those actions are antitrust violations.

The Blue Cross and Blue Shield Association said the 11th Circuit ruling was not unexpected, because acceptance of pre-trial appeals are rare.

"This is another step in a very long process and we look forward to continuing to defend our case in the U.S. District Court," said Scott Nehs, the association's senior vice president and general counsel, in a written statement. "We remain confident that we will ultimately prevail."

If the plaintiffs ultimately prevail, however, the Blues plans could be forced to compete with each other within their current state and substate territories.

Richman said if the case results in greater insurance competition, that would be good for consumers but wouldn't necessarily bring down premiums.