In late February, the Iowa Supreme Court affirmed a lower court
ruling in Mueller v. Wellmark, ending a seven year battle
over whether the health insurer's agreement with employers
operating "self-funded" insurance plans to provide the
same rate concessions obtained from providers by Wellmark to these
plans constituted a per se antitrust violation. Finding
that "these arrangements are not the simple horizontal
conspiracies that historically have qualified for per se
treatment," the Iowa Supreme Court rejected the
plaintiffs' contention that they were per se unlawful.
In explaining its ruling, the Iowa Supreme Court began its analysis
by stating that "these arrangements are not naked price-fixing
arrangements, but are more akin to joint ventures."
Specifically, the Court explained that "the self-insured
[plans] are not entering into bare agreements to refrain from
competing on price with Wellmark – they are buying claims
administration services from Wellmark" and that "part of
that service consists of Wellmark negotiated pricing." As
such, the Court held, "Wellmark is not really competing with
these plans." Moreover, the Court continued, "If the only
lawful choice for a self-insured employer were the time-consuming
process of negotiating individual rates with health care providers
. . . almost all employers would avoid self insuring." Because
this would eliminate a "possible way to render the health care
market more efficient and reduce the cost of health care
coverage," the Court was unwilling to declare such an
arrangement per se unlawful, stating "Why should this
additional option for employers be per se
unlawful?"
In addition, in a ruling that may have implications far beyond
Iowa, the Iowa Supreme Court also held that the same principles
applied when Wellmark obtains discounts from providers on behalf of
out-of-state Blue affiliates. Stating that "similar
efficiency-related observations can be made about Wellmark's
reciprocal arrangements with out-of-state BCBS licensees," the
Court also refused to attach a per se label to these
agreements. As the Court explained, the challenged arrangement
allows Wellmark to "utilize the other licensees'
negotiated rates in their respective states, and [those
licensees'] can use Wellmark's negotiated rates in
Iowa," a relationship that "permits Wellmark to offer a
fifty-state product that meets the needs of its customers."
For this reason, the Iowa Supreme Court held, per se condemnation
of the practice was not appropriate. Given that the BCBS licensee
relationship is currently the subject of significant litigation
elsewhere (most notably in In re Blue Cross Blue Shield
Antitrust Litigation, MDL 2406), the Iowa Supreme Court's
analysis in Mueller v. Wellmark is likely to be the
subject of significant discussion in the coming months, and
constitutes a significant victory not only for Wellmark, but all of
the Blues.
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.