United States: Insurance Antitrust Legal News: March 2014 • Volume 3, Number 2

FTC COMMISSIONER CRITICIZES PROPOSED LEGISLATION THAT WOULD PERMIT HEALTH PROVIDERS TO NEGOTIATE JOINTLY WITH HEALTH INSURERS

In a February 26 speech before the Connecticut Bar Association, Federal Trade Commissioner Maureen Olhausen expressed strong opposition to proposed legislation that would create an antitrust exemption for collective negotiations with health insurers by otherwise competing health care providers. Describing such proposals, which have been introduced at both the federal and state levels, as "particularly troublesome," Commissioner Olhausen noted that the FTC has "long advocated against such exemptions for the simple reason that they tend to raise prices and harm consumers."

In further explaining the basis for her concern about such proposals, Commissioner Olhausen stated that while collaborations among physicians and other health care professionals can benefit consumers, her opposition is rooted in the following three principles: (1) the antitrust laws, as currently constructed, do not stand in the way of health care providers forming collaborative arrangements that are likely to reduce costs and benefit consumers through increased efficiency and improved coordination of care. She noted that the FTC has authored guidance on this very issue, explaining how an accountable care organization can ensure that the prospect of antitrust liability does not impede the formation of beneficial ACOs; (2) that, in Commissioner Olhausen's view, the central purpose of such legislation often appears to be to permit physicians to extract higher reimbursement rates from health plans, not to integrate their practices to reduce costs or better coordinate care for their patients; and (3) that because procompetitive health care collaborations are already permissible under the antitrust laws, the proposed legislation's main effect would be to foster precisely those types of collaborative negotiations that would not generate efficiencies and thus otherwise pass muster under the antitrust laws, an unwelcome result.

Turning her attention to the oft-heard contention that such legislation is needed to "level the playing field" between providers and payors, Commissioner Olhausen responded that "reducing competition on one side of a market is not the answer to a perceived lack of competition on the other side of the market." For this reason, Commissioner Olhausen closed with a prediction that she "expects [the FTC] will continue to oppose these attempts to authorize departures from competition."

In the last twelve months, there have been several state bills that would permit providers to collectively bargain with payors (including Connecticut H.B. 6431, which was the principal focus of Commissioner Olhausen's remarks). At the federal level, Congressman John Conyers of Michigan introduced legislation of this nature on February 25 as the "Quality Health Care Coalition Act of 2014." Stay tuned.

PROPERTY & CASUALTY INSURERS HIT WITH ANTITRUST SUIT BY AUTO BODY SHOPS

On February 24, a group of Florida auto body shops filed an antitrust action against over forty property & casualty insurers in the United States District Court for the Middle District of Florida.

In the case, styled A&E Auto Body v. 21st Century Centennial Insurance Co., d/b/a Farmers Insurance Group et al., the plaintiffs allege that State Farm's vendor agreement requires shops desiring to participate in tis preferred provider program to accept the "market rate" for such services, and that State Farm calculates those rates in an improper manner that keeps them artificially low and not representative of the true "market" for such services. The plaintiffs also alleges that the remaining insurer defendants in the state have advised plaintiffs that they will pay no more than State Farm pays for labor at their shops, thus resulting in a stabilizing of rates at these allegedly low levels.

In addition to a number of common law counts, plaintiffs assert that defendants' conduct constitutes price fixing under Section 1 of the Sherman Act. In search of evidence of "agreement" amongst the defendants (a necessary element of a Section 1 claim), plaintiffs allege that the insurers agreed to control and suppress automobile damage repair costs at meetings "amongst themselves" that they "refused to allow members of the auto collision repair industry to attend." Plaintiffs also contend that defendants' allege conduct constitutes unlawful "boycott" activity. In support of that assertion, plaintiffs maintain that defendants' alleged acts of "steering customers away from plaintiffs, through allegations and intimidations of poor work quality" places defendants' conduct beyond the limited antitrust exemption that the insurance industry enjoys under the McCarran Ferguson Act.

The action is only in its very earliest stages, and the insurers have not yet responded to plaintiffs' allegations. However, given the number of insurer defendants, and the nature of the issues, the case is clearly "one to watch" going forward into 2014.

BLUE CROSS OF RHODE ISLAND IS UNSUCCESSFUL IN BOUNCING HOSPITAL SYSTEM'S ANTITRUST CLAIM

In June of 2013, Steward Health System, a Massachusetts-based provider, commenced an antitrust lawsuit against Blue Cross Blue Shield of Rhode Island in the federal district court in Rhode Island. Steward contended that, for anticompetitive reasons, BCBS-RI derailed Steward's proposed acquisition of Landmark Medical Center, a Rhode Island hospital that was in financial distress and looking to be acquired.

Specifically, Steward alleged that because it has a reputation in Massachusetts for partnering with low-cost insurers offering limited network products, BCBS-RI feared Steward's entry into Rhode Island would jeopardize BCBS-RI's alleged market dominance. In support of its claim, Steward alleged that, among other things, BCBS-RI (1) refused to negotiate an extension of "in network" status for Landmark at "reasonable" rates, knowing that this would ensure that Steward would pull back from its offer to acquire Landmark; and (2) terminating BCBS-RI's in-network contract with a different Steward hospital that is located near the Rhode Island/Massachusetts border, despite Steward's offer to continue the relationship on terms "advantageous" to BCBS-RI.

BCBS-RI filed a motion seeking to have Steward's claims dismissed, contending that, for numerous reasons, the allegations failed to state an antitrust claim. However, on February 19, District Court Judge William Smith denied BCBS-RI's motion, holding that Steward's claims passed muster under the antitrust laws.

Turning first to BCBS-RI's argument that, even as an alleged monopolist, it had no duty to deal with Steward, Judge Smith found that argument unpersuasive, at least at this stage of the proceeding. After acknowledging that, in most cases, a party is free to choose with whom it will deal, Judge Smith noted that right is not unqualified. Citing the Supreme Court's decision in Verizon Communications v. Trinko, he observed that "under certain circumstances, a refusal to cooperate with rivals can constitute anticompetitive conduct and violate Section 2 of the Sherman Act." And, while the existence of a valid business justification for a monopolist to refuse to deal may preclude Section 2 liability, Judge Smith held that "the existence of a business justification is not properly determined on a motion to dismiss." Moreover, Judge Smith noted that the complaint included "sufficient factual allegations suggesting that [BCBS-RI's] conduct was contrary to its short-term financial interests," and thus held that "it is sufficient for Steward to have pled facts suggesting that Blue Cross rejected proposed reimbursement rates significantly lower than the statewide average that Blue Cross accepted at other hospitals."

Second, Judge Smith considered BCBS-RI's contention that Steward lacked standing to assert its claims. Rejecting this argument as well, the Court held that where a plaintiff demonstrates the "intent and preparedness" to enter the relevant market, that satisfies antitrust standing. While observing that "Steward may ultimately be called upon to demonstrate that its successful acquisition of Landmark would have permitted Steward to develop its community hospital model in Rhode Island, Steward need not do so at the initial pleading stage."

Finally, addressing BCBS-RI's contention that Steward had failed adequately to allege the relevant product and geographic markets, the Court rejected this argument as well. While BCBS-RI contended that the proper product market should include both services offered to commercial and government payors (i.e., Medicare and Medicaid), Steward contended that the proper relevant market was commercial payors only, a contention with which the court agreed. And, as to the geographic market, the Court accepted Steward's contention that the geographic market need not be alleged with precision, and that the fact that a small number of Rhode Island residents cross over into Massachusetts for health care services did not make Steward's allegation that the geographic market was Rhode Island unreasonable.

Having denied BCBS-RI's motion, the case now proceeds into discovery. And, given the somewhat unique set of facts presented in Steward v. Blue Cross Blue Shield of Rhode Island, the case is likely to garner significant interest going forward.

PENNSYLVANIA BLUES ANNOUNCE PROPOSED MERGER

On February 19, two Pennsylvania Blues – Blue Cross of Northeastern Pennsylvania and western-Pennsylvania based Highmark – announced plans to merge. Under an agreement submitted to the Pennsylvania Insurance Department for approval, Highmark, which currently serves approximately 4.5 million Pennsylvania residents, would add over 500,000 new Blue Cross of NEPA members to its insured ranks. The transaction would reduce the number of Blues in Pennsylvania from four to three, which is still a larger number than in other states (only five states have more than one Blue entity in their state).

The transaction requires both Insurance Department and federal and state antitrust approval before it can be completed, and is notable because it is Highmark's first merger attempt in Pennsylvania since its failed attempt to combine with Philadelphia-based Independence Blue Cross in 2009. That transaction was approved by federal antitrust regulators, but the parties ultimately gave up on the deal in response to a very lengthy investigation by state regulators. Whether this transaction will face similar obstacles, at either the federal or state level, remains to be seen. Stay tuned.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions