DOJ forces sale of commercial health insurance business
HELENA, Mont. (Legal Newsline) - The Department of Justice announced Tuesday that it will force New West Health Services Inc. to sell the majority of its commercial health insurance business to a third-party buyer -- most likely Pacific Source Health Plans of Springfield, Ore.
The action was taken to regulate health-insurance competition in the state, according to the DOJ.
Blue Cross and Blue Shield of Montana Inc. will now be allowed to proceed with an agreement with five of New West's six hospital owners to purchase health insurance from Blue Cross exclusively for six years.
The DOJ maintains that without the divestiture and additional relief, competition would have been substantially reduced in commercial health-insurance markets in Montana by effectively eliminating New West as a competitor, resulting in higher prices and lower quality services.
"This settlement ensures that Montana residents will continue to benefit from competitive choices for commercial health insurance," said Sharis A. Pozen, acting assistant attorney general in charge of the DOJ's Antitrust Division.
"We are committed to preserving competition in the health-insurance industry because competition spurs insurers to lower prices, enhance services and increase quality."
New West is one of only two significant competitors to Blue Cross in the sale of commercial health insurance in the Billings, Bozeman, Helena and Missoula areas of Montana. Blue Cross and Blue Shield of Montana Inc. is the largest health insurer in the state.
Montana Blue Cross reported revenues of approximately $530 million in 2010.
New West Health Services Inc., like Blue Cross, is a Montana non-profit corporation and the third-largest health insurer in the state. It reported revenues of $120 million in 2010.
Pacific Source Health Plans, also a non-profit, reported revenues of $735 million in 2010.
The feds, along with the Montana Attorney General Steve Bullock, filed an antitrust lawsuit in U.S. District Court for the District of Montana to block the proposed agreement. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the lawsuit and the department's competitive concerns.
According to the complaint, the original transaction would have effectively eliminated competition between Blue Cross and New West and decreased the number of significant competitors in the affected markets from three to two, allowing Blue Cross to increase prices and reduce the quality of its commercial health-insurance plans.