A case of the Blues: BCBS plans' appeal rejected, must face antitrust allegations

By | December 14, 2018

Dive Brief:

  • The 11th U.S. Circuit Court of Appeals this week upheld a federal court ruling from April that the 36 Blue Cross Blue Shield plans’ agreement to limit competition while staking claim in exclusive markets is a per se violation of the Sherman Antitrust Act. 
  • The class action lawsuit has been ongoing for six years. The plaintiffs, a mix of providers and employers, allege that the BCBS companies have non-compete pacts in which each plan is designated an exclusive territory where they sell their products and limit competition.  
  • “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,” Scott Nehs, senior vice president and general counsel for BCBS Association, said in a statement. “We remain confident that we will ultimately prevail.”

Dive Insight:

This class action lawsuit — the largest antitrust suit in U.S. history — has been looming over BCBS for years now. Despite Nehs’ confidence, having this appeal rejected — with a swift, one-sentence memorandum opinion from the court, nonetheless — is a considerable setback for the Blues and a major win for the plaintiffs.

By upholding April ruling, the 11th Circuit has eliminated the need for plaintiffs to provide any kind of evidence of the economic losses they’ve incurred as a result of BCBS’ alleged foul play.

“This ruling means that the antitrust claims challenging the agreement by all of the Blue Cross and Blue Shield entities including their Association that they will not compete with each other may now proceed on a per se illegal basis,” Edith Kallas and Joe Whatley, co-lead counsel for the plaintiffs, wrote in a statement. “This ruling is an important positive step for all healthcare providers and subscribers in America. It is our sincere hope that the parties can now engage in a dialogue to increase competition in health insurance and to improve healthcare for all Americans.” 

Nehs, who left Pepsi to jump into the BCBS fire as general counsel in 2015, brushed off this week’s ruling, saying in a statement that the denied appeal “was not unexpected, as pre-trial appeals are rare.” A big part of Nehs’ job, as he said in an interview with a corporate law recruiter back in May, is overseeing the “legal functions” of each Blue that keeps the BCBS system working. 

The class action lawsuit, he said at the time, is a “full assault on the Blue System.” 

The “Blue System” has taken hits from a few different sides this year, all for anti-competitive behavior.  Last month, an Anthem shareholder sued over that company’s failed acquisition of Cigna, claiming Anthem executives knew of and ignored engaging in antitrust behaviors governed by membership in the BCBSA. Those behaviors, such as limiting the amount of revenue Anthem could collect from non-BCBS plans, are what the shareholder argued led to the deal being blocked.

Then, in mid-November, insurance startup Oscar brought a lawsuit that claims Florida Blue has an exclusive broker policy that keeps brokers from selling non-Blues plans on the individual exchange. Florida Blue, Oscar’s lawsuit claims, threatened to pull its products from the entire state if brokers sold Oscar plans in the Orlando area, a warning that caused more than 190 brokers to back out of their agreements with Oscar. 

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