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U.S. government investigating antitrust practices in health insurance

By Ashley Fletcher Frampton
Published March 28, 2011

The U.S. Department of Justice claimed in a lawsuit filed in October that Blue Cross Blue Shield of Michigan was violating antitrust laws in its contracts with hospitals, and now the government is expanding its investigation of the matter.

BlueCross BlueShield of South Carolina appears to be among the targets of that investigation.

Justice Department spokeswoman Gina Talamona said the department’s antitrust division is investigating the possibility of anticompetitive practices involving “most favored nation” clauses in various parts of the country. She decline to discuss specifics and to name regions or states.

BlueCross BlueShield of South Carolina spokeswoman Elizabeth Hammond said the company received an inquiry from the Justice Department. She also declined to comment further.

“We did receive an inquiry from the U.S. Department of Justice and are working with our counsel to respond,” Hammond said.

The Justice Department’s lawsuit against BlueCross BlueShield of Michigan challenges provisions of the health insurance carrier’s agreements with hospitals. The provisions, referred to as “most favored nation” clauses, essentially guarantee that no other insurance plan can obtain a better rate, according to the Justice Department.

Some of the clauses guarantee the plan an even better rate than given to any other plan or purchaser, the department said in an October press release about the Michigan case.

The Justice Department claims that BlueCross BlueShield of Michigan’s contracts with hospitals have led hospitals to increase their prices for the carrier’s competitors and have insulated BlueCross BlueShield of Michigan from competition.

In some cases, the department said, BlueCross BlueShield of Michigan agreed to pay more for certain health care services, effectively “buying protection from competition by increasing its own costs.”

The department said that these agreements likely resulted in Michigan consumers paying higher prices for their healthcare services and health insurance.

BlueCross BlueShield of Michigan insures more than nine times as many residents as its next-largest competitor, covering more than 60% of the state’s 3 million commercially insured residents, the Justice Department said.

Brett Lieberman, spokesman for the Blue Cross and Blue Shield Association, a national federation of 39 independent Blue Cross and Blue Shield companies, said the contract clauses in question are used by many businesses and government to make sure they get the best prices.

“It’s our goal to secure the best health care at the best rates for our members, while also ensuring fair compensation for our providers,” Lieberman said.

He said he couldn’t address specifics of contract language.

Reach Ashley Fletcher Frampton at 843-849-3129.