Insurer moves to dismiss antitrust lawsuit filed by Mich. AG, feds

Jessica M. Karmasek Dec. 17, 2010, 12:40am


DETROIT (Legal Newsline) - Blue Cross Blue Shield of Michigan on Friday filed a motion in a Michigan federal court seeking dismissal of the antitrust lawsuit brought by the Justice Department and state Attorney General Mike Cox in October.

The lawsuit seeks to eliminate provisions in contracts between the nonprofit organization and some Michigan hospitals that guarantee the lowest prices for more than 4 million Blue Cross Blue Shield Michigan, or BCBSM, members.

These provisions are known as "most favored nation" clauses, are commonly used in a number of industries, and have never been invalidated by antitrust litigation, BCBSM says.

BCBSM, in its motion, argues that for nearly 70 years, entities such as itself that are enabled by state law and strongly and comprehensively regulated by state government have been protected against federal antitrust lawsuits by U.S. Supreme Court precedent.

It also argues that the government failed to meet the standard for filing an antitrust lawsuit -- alleging specific facts that demonstrate economic harm caused by anticompetitive behaviors in specific geographic markets or within specific products. No such facts were cited in the government's pleading, BCBSM said.

Jeffrey Rumley, BCBSM vice president and chief legal counsel, said in a statement that the government's lawsuit is "deficient" and should be dismissed as a matter of law.

"It fails to recognize that the Michigan Blue Cross plan was enabled by state law and recognized by our Legislature as a primary vehicle to achieve critical public policy goals of the state -- namely statewide access to health care at reasonable cost for all of Michigan's citizens," he said.

"U.S. Supreme Court precedent has long protected such state-related entities from federal antitrust claims, and that should continue to be the case here."

Beyond that, Rumley explains, the government's complaint fails to meet fundamental requirements for the case to survive.

"The government has failed to allege any specific facts that support their conclusion that anticompetitive effects of most favored nation clauses outweigh the benefits to payers and consumers. They rely upon conclusory allegations because they have no facts. Competition worked as it should here," he said.

BCBSM is regulated by state government under Michigan Public Act 350 of 1980 -- its enabling legislation.

"We conduct our business under a comprehensive regulatory system enabled by a 30-year-old Michigan statute that was written solely to govern Blue Cross Blue Shield of Michigan," Rumley said.

"Blue Cross Blue Shield of Michigan has unique responsibilities under state law. These responsibilities are established to fulfill specific state policy objectives of access to health care and controlling its cost."

And according to the organization, those objectives are being met in Michigan.

Michigan led all states from 1999-2009 in managing the growth of health care costs, according to a White House report issued in September 2009.

Rumley said the litigation makes no sense.

"The U.S. government is attacking the very model for a post-reform health insurance company," he said.

"Guarantee coverage to all, provide universal access to hospitals, comply with strong regulations, manage down the cost of health care and maintain very little profit margin -- these are all goals laid out for health insurance companies under health care reform. This is our business model. We employ these values every day here at Blue Cross Blue Shield of Michigan."

BCBSM is a nonprofit corporation and an independent licensee of the Blue Cross and Blue Shield Association.

From Legal Newsline: Reach Jessica Karmasek by e-mail at

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