Antitrust Lawsuits Seek to End Cartel-Like Behavior Among Blues

A pair of federal lawsuits in Alabama alleges that the network of Blue Cross and Blue Shield companies operating in a majority of states are operating like a cartel, making it hard for other insurers to compete, driving up prices for consumers, and pushing down payments to doctors.

The 2 lawsuits were filed in federal court in Alabama; one was filed on behalf of healthcare providers and the other on behalf of individual and small employers. The lawsuits were reported in The Wall Street Journal.

Although the filing is in federal court, the location in Alabama is notable for 2 reasons. First, it is a state where Blue Cross and Blue Shield (BCBS) of Alabama has one of the highest market penetrations among the members at 97%. Second, that market power played out earlier this year, when the state’s largest mental health provider shut its doors after it was unable to reach a contract with BCBS of Alabama, leaving 26,000 patients to find care elsewhere.

According to the report, the suits name all BCBS companies as defendants along with the Blue Cross Blue Shield Association. The suits have survived their first hurdle and moved into the discovery phase, and experts told the Journal this is a case to watch, both for the arguments being presented and the legal talent involved.

In sum, the plaintiffs say the Blues association and its members each use the Blues brand within a given state, and have thus divided up the country into markets illegally, resulting in an unfair playing field for everyone else. While most of the 37 Blues in the suit are not-for-profit, some have trade in that status in recent years, including Anthem, Inc., which now operates in 14 states. State regulators have turned back attempts by some Blues to pursue for-profit status.

The Blues association responded to arguments about the use of its brand by saying that its licensing arrangements have been known to regulators for decades, and the focus is on competing against national insurers.

Among the lawyers for the health insurance customers is David Boies, who has battled Microsoft in antitrust action. Whatley Kallas is the firm for the providers.

An expert who spoke with the Journal said the case will boil down to whether the Blues operate like a franchising arrangement, in which a company can grant a franchisee access to the brand for a certain territory. “You’ll be looking for cartel-like behavior or the protection of intellectual property,” Barak D. Richman, a Duke University law professor, said.