By Zach Gorchow
Gongwer News Service
Attorney General Dana Nessel walked into the Frank J. Kelley Library in the G. Mennen Williams State Office Building, trailed by some assistant attorneys general and a few others, to announce a lawsuit against the state’s largest health insurance provider.
Her team had announced the press conference only a couple hours in advance of the 11 a.m. start, saying only that it was “action to address Michigan’s ailing health insurance market.”
“Today, we filed a lawsuit in federal court against Blue Cross Blue Shield of Michigan, alleging an illegal health insurance monopoly in Michigan in violation of federal and state antitrust law, which significantly contributed to or caused many of the rising costs and negative health outcomes facing our residents,” Nessel said.
Blue Cross later said it was “blindsided” by the legal action.
Filed on behalf of both the State of Michigan and the People of the State of Michigan in the U.S. District Court for the Eastern District of Michigan, the lawsuit targets the state’s dominant health insurance carrier, the Blue Cross Blue Shield of Michigan Mutual Insurance Company.
Nessel, speaking to reporters, said Blue Cross achieved its dominance by violating antitrust laws.
She said Blue Cross’s control of 65% of the health insurance market and 79% of the PPO market in the state resulted from “a series of illegal and anti-competitive agreements in conspiracy with the entire Blue Cross and Blue Shield network” restricting product offerings. She said the company abused its market dominance to drive rates paid to healthcare providers to nearly the lowest in the nation, forcing providers to reduce services, close facilities or exit Michigan entirely.
“Blue Cross and other Blue Cross and Blue Shield entities, known as Bluemarks, conspired to eliminate competition for health insurance to large employers like the state of Michigan, which has caused millions of consumers to pay inflated prices for health insurance and medical benefit coverage, while at the same time receiving continually diminished quality of care,” she told reporters. “This blue conspiracy strikes directly on the harms of monopoly behavior and points to the precise reason our state and nation have robust antitrust laws to protect consumers.”
David Ellenbogen, senior vice president and general counsel for Blue Cross Blue Shield of Michigan, who said the company was “blindsided” by the lawsuit, argued competition is present throughout the market.
“Blue Cross Blue Shield of Michigan has not yet been served and therefore we cannot comment on the specific merits of the case,” he said in a statement. “We fundamentally disagree with the attorney general’s characterization of an uncompetitive insurance market in Michigan. Competition exists everywhere in our state’s insurance markets, with strong local and national insurers competing with us every day. For nearly 90 years, Blue Cross has provided coverage for citizens across Michigan, in every county, without exception. This heritage, and the quality of products and services we provide, is foundational to our success in Michigan.”
The litigation targets both alleged effects on state government, where Blue Cross serves as the third party administrator on healthcare claims, and the people of the state. Nessel has authority under state antitrust law to bring claims.
It is not the first time a Michigan attorney general has targeted Blue Cross in court. In 2010, then-Attorney General Mike Cox and the U.S. Justice Department filed an antitrust suit alleging a practice known as “most favored nation” clauses where Blue Cross and a healthcare provider agreed no other insurer could obtain a better rate than Blue Cross. Then-Attorney General Bill Schuette and the Justice Department dropped the case in 2013 after the state enacted a law banning such clauses.
What Nessel’s Department of Attorney General filed Thursday, however, goes right to the heart of Blue Cross operations as opposed to one particular tactic.
“This Blue conspiracy strikes directly on the harms of monopoly behavior and points to the precise reason our state and nation have robust antitrust laws to protect consumers,” Nessel said. “Healthcare providers in Michigan have
no meaningful alternative to contracting with Bluemark companies. If your doctor, for example, declines to accept Blue Cross, they automatically become an out-of-network provider for basically two-thirds of commercially insured patients in the state. For Blue Cross’s 4.5 million Michigan customers, seeing an out-of-network doctor means higher out-of-pocket costs, balance billing and costly administrative burdens. And for insurance companies who aren’t part of this massive network, it means being locked out of large employer contracts, difficulty negotiating reimbursement rates with providers and a much, much smaller pool of customers to sell to.”
For state government, Nessel said every time it has sought bids for its contract to handle third party administration of health claims from state employees or to negotiate its contract, other “bluemarks,” as Nessel called them, have “simply refused to compete.” As a result, the state lacked leverage to negotiate better rates, broader networks or improved service levels, she said.
Nessel also slammed Blue Cross for how it handled the dispute with Michigan Medicine earlier this year, putting 300,000 Michigan residents at risk of needing to find new healthcare providers – impossible in many cases given the highly specialized medical services only available in the state at Michigan Medicine.
She blamed Blue Cross’s dominance in the market for escalating premiums and reduced coverage.
Nessel has less than three months remaining in office. A case of this nature will surely take many years. Nessel said both major party candidates, Republican Doug Lloyd and Democrat Eli Savit, have talked about the importance of consumer protection and affordability issues. If they are sincere, they will want the lawsuit to succeed and pursue it aggressively, Nessel said.
The hope for the case, Nessel said, is to recoup hundreds of millions from Blue Cross and remit it to customers.
Health insurance for state employees is handled through the Civil Service Commission, which is autonomous from the governor. Still, the administration of Gov. Gretchen Whitmer works with Blue Cross on a host of issues, and Blue Cross is one of the state’s Medicaid health plans. Whitmer also has longtime ties to the company. Her late father, Dick Whitmer, was president of the company for many years, and she is close friends with its recently retired longtime president, Dan Loepp.
Stacey LaRouche, Whitmer’s press secretary, said the governor’s office had no comment on the case.
Nessel, asked about any involvement from the governor in the lawsuit, said she had not discussed the case with Whitmer.
“She is a client and not my boss,” she said. “But she has talked quite a bit about healthcare affordability, so I’m hopeful that she’ll be supportive of this lawsuit.”
Assistant Attorney General Jonathan Comish said unlawful agreements among different Blue Cross entities go back to the 1980s. Neither Nessel nor Comish would say how long the department has been investigating, citing confidentiality.
Nessel, asked about any smoking gun of evidence, said Blue Cross’s conduct has been happening in plain sight.
“The numbers don’t lie,” she said. “We know what their percent of the market share is. It’s astounding. I think there’s only one state where an insurer has a higher percentage of the market share. … That’s bad. We know that competition is good, not just for the quality of care, but of course to bring down prices, and that’s the purpose of the antitrust laws in the first place. That it allows us to break up these big monopolies that are so harmful for customers here in Michigan and all around the country, so I think this is not shocking to anyone who hears it.”
Gongwer News Service
Attorney General Dana Nessel walked into the Frank J. Kelley Library in the G. Mennen Williams State Office Building, trailed by some assistant attorneys general and a few others, to announce a lawsuit against the state’s largest health insurance provider.
Her team had announced the press conference only a couple hours in advance of the 11 a.m. start, saying only that it was “action to address Michigan’s ailing health insurance market.”
“Today, we filed a lawsuit in federal court against Blue Cross Blue Shield of Michigan, alleging an illegal health insurance monopoly in Michigan in violation of federal and state antitrust law, which significantly contributed to or caused many of the rising costs and negative health outcomes facing our residents,” Nessel said.
Blue Cross later said it was “blindsided” by the legal action.
Filed on behalf of both the State of Michigan and the People of the State of Michigan in the U.S. District Court for the Eastern District of Michigan, the lawsuit targets the state’s dominant health insurance carrier, the Blue Cross Blue Shield of Michigan Mutual Insurance Company.
Nessel, speaking to reporters, said Blue Cross achieved its dominance by violating antitrust laws.
She said Blue Cross’s control of 65% of the health insurance market and 79% of the PPO market in the state resulted from “a series of illegal and anti-competitive agreements in conspiracy with the entire Blue Cross and Blue Shield network” restricting product offerings. She said the company abused its market dominance to drive rates paid to healthcare providers to nearly the lowest in the nation, forcing providers to reduce services, close facilities or exit Michigan entirely.
“Blue Cross and other Blue Cross and Blue Shield entities, known as Bluemarks, conspired to eliminate competition for health insurance to large employers like the state of Michigan, which has caused millions of consumers to pay inflated prices for health insurance and medical benefit coverage, while at the same time receiving continually diminished quality of care,” she told reporters. “This blue conspiracy strikes directly on the harms of monopoly behavior and points to the precise reason our state and nation have robust antitrust laws to protect consumers.”
David Ellenbogen, senior vice president and general counsel for Blue Cross Blue Shield of Michigan, who said the company was “blindsided” by the lawsuit, argued competition is present throughout the market.
“Blue Cross Blue Shield of Michigan has not yet been served and therefore we cannot comment on the specific merits of the case,” he said in a statement. “We fundamentally disagree with the attorney general’s characterization of an uncompetitive insurance market in Michigan. Competition exists everywhere in our state’s insurance markets, with strong local and national insurers competing with us every day. For nearly 90 years, Blue Cross has provided coverage for citizens across Michigan, in every county, without exception. This heritage, and the quality of products and services we provide, is foundational to our success in Michigan.”
The litigation targets both alleged effects on state government, where Blue Cross serves as the third party administrator on healthcare claims, and the people of the state. Nessel has authority under state antitrust law to bring claims.
It is not the first time a Michigan attorney general has targeted Blue Cross in court. In 2010, then-Attorney General Mike Cox and the U.S. Justice Department filed an antitrust suit alleging a practice known as “most favored nation” clauses where Blue Cross and a healthcare provider agreed no other insurer could obtain a better rate than Blue Cross. Then-Attorney General Bill Schuette and the Justice Department dropped the case in 2013 after the state enacted a law banning such clauses.
What Nessel’s Department of Attorney General filed Thursday, however, goes right to the heart of Blue Cross operations as opposed to one particular tactic.
“This Blue conspiracy strikes directly on the harms of monopoly behavior and points to the precise reason our state and nation have robust antitrust laws to protect consumers,” Nessel said. “Healthcare providers in Michigan have
no meaningful alternative to contracting with Bluemark companies. If your doctor, for example, declines to accept Blue Cross, they automatically become an out-of-network provider for basically two-thirds of commercially insured patients in the state. For Blue Cross’s 4.5 million Michigan customers, seeing an out-of-network doctor means higher out-of-pocket costs, balance billing and costly administrative burdens. And for insurance companies who aren’t part of this massive network, it means being locked out of large employer contracts, difficulty negotiating reimbursement rates with providers and a much, much smaller pool of customers to sell to.”
For state government, Nessel said every time it has sought bids for its contract to handle third party administration of health claims from state employees or to negotiate its contract, other “bluemarks,” as Nessel called them, have “simply refused to compete.” As a result, the state lacked leverage to negotiate better rates, broader networks or improved service levels, she said.
Nessel also slammed Blue Cross for how it handled the dispute with Michigan Medicine earlier this year, putting 300,000 Michigan residents at risk of needing to find new healthcare providers – impossible in many cases given the highly specialized medical services only available in the state at Michigan Medicine.
She blamed Blue Cross’s dominance in the market for escalating premiums and reduced coverage.
Nessel has less than three months remaining in office. A case of this nature will surely take many years. Nessel said both major party candidates, Republican Doug Lloyd and Democrat Eli Savit, have talked about the importance of consumer protection and affordability issues. If they are sincere, they will want the lawsuit to succeed and pursue it aggressively, Nessel said.
The hope for the case, Nessel said, is to recoup hundreds of millions from Blue Cross and remit it to customers.
Health insurance for state employees is handled through the Civil Service Commission, which is autonomous from the governor. Still, the administration of Gov. Gretchen Whitmer works with Blue Cross on a host of issues, and Blue Cross is one of the state’s Medicaid health plans. Whitmer also has longtime ties to the company. Her late father, Dick Whitmer, was president of the company for many years, and she is close friends with its recently retired longtime president, Dan Loepp.
Stacey LaRouche, Whitmer’s press secretary, said the governor’s office had no comment on the case.
Nessel, asked about any involvement from the governor in the lawsuit, said she had not discussed the case with Whitmer.
“She is a client and not my boss,” she said. “But she has talked quite a bit about healthcare affordability, so I’m hopeful that she’ll be supportive of this lawsuit.”
Assistant Attorney General Jonathan Comish said unlawful agreements among different Blue Cross entities go back to the 1980s. Neither Nessel nor Comish would say how long the department has been investigating, citing confidentiality.
Nessel, asked about any smoking gun of evidence, said Blue Cross’s conduct has been happening in plain sight.
“The numbers don’t lie,” she said. “We know what their percent of the market share is. It’s astounding. I think there’s only one state where an insurer has a higher percentage of the market share. … That’s bad. We know that competition is good, not just for the quality of care, but of course to bring down prices, and that’s the purpose of the antitrust laws in the first place. That it allows us to break up these big monopolies that are so harmful for customers here in Michigan and all around the country, so I think this is not shocking to anyone who hears it.”
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