Update June 2011: Eastern District of Michigan Judge Denise Page Hood has denied a motion to dismiss the U.S. Department of Justice’s lawsuit against Blue Cross Blue Shield of Michigan. The antitrust suit alleges that the most-favored-nation clauses in the health insurance company’s contracts with hospitals have effectively immunized Blue Cross Blue Shield of Michigan from competition by guaranteeing that no other health insurer can secure a better rate from a particular hospital. In addition to the DOJ’s suit, the health insurer is facing a proposed antitrust class action over the contracts, in a case that also names 21 Michigan hospitals as having conspired with the insurer to drive up prices. BCBSM and the hospitals have also filed motions to dismiss that suit. The court has not yet ruled on those motions.
Original Post: The Antitrust Division, joined by the Michigan attorney general, has sued Blue Cross of Michigan in the Eastern District of Michigan alleging that the most-favored-nations provisions in its contracts with hospitals anticompetitively increase health care costs. Blue Cross is by far the largest provider of health insurance in Michigan, requiring hospitals to reach an agreement with it. Blue Cross has insisted, upon threats of dramatically lower reimbursement rates, that the hospital must agree not to accept lower rates from any other insurance provider. The provision has required competitive providers to increase their rates by up to 40%. Blue Cross counters that the MFNs provisions work to reduce health care costs.