Justice Dept. Goes After Blue Cross Blue Shield Of Michigan

Crimefighters at the Justice Department put on their antitrust capes today, filing a lawsuit against Blue Cross Blue Shield of Michigan. The DOJ alleges the insurance company violated antitrust laws by asking hospitals to sign contracts that precluded other insurers from offering a better discount.

From Reuters:

There are two types of clauses criticized by the antitrust division. One requires the hospitals to charge other commercial insurers more than Blue Cross is charged, while another type bars the hospitals from giving Blue Cross’ rivals a deeper discount than Blue Cross receives, according to court papers.

The DOJ says that such clauses cause “substantial harm to the marketplace,” and effectively let the insurance company determine the level at which its rivals can set prices.

A rep for BCBS tells Reuters something very different — that the lawsuit will just lead to higher health care prices for the people of Michigan:

This lawsuit is without merit, and we will vigorously defend our ability to negotiate the deepest possible discounts for our members and customers with Michigan hospitals.

U.S. Justice Dept sues Michigan Blue Cross [Reuters]


Edit Your Comment

  1. LadyTL says:

    What doesn’t lead to higher health care prices these days?

    • blogger X says:


    • Applekid ┬──┬ ノ( ã‚œ-゜ノ) says:

      Dying. Death care prices, on the other hand…

      • missiv says:

        I think different deaths exist on different price lines. Although I do agree with you, just stating Death will not do. Some deaths will raise the prices of health care for the living. This is what we should be studying, in hopes of lowering Health care for the living. Cheap death versus expensive wasteful death.

    • Loias supports harsher punishments against corporations says:

      Public options.

  2. dolemite says:

    How does limiting your competition help you set the lowest prices for your customers?

    • Tim says:

      If you set the contractually-obligated lowest price, well … you’ve literally set the lowest price.

    • pecan 3.14159265 says:

      BCBS is right – this will lead to higher prices, because if BCBS has to compete with other insurance companies, it’ll mean that customers can see that BCBS’ prices are higher than those offered by the other insurance companies.

  3. AllanG54 says:

    Hell, the health insurance premium for my wife and myself went from $884/month to $1029/mo back in September and that’s still the cheapest I’ve paid in the last five years.

    • Nigerian prince looking for business partner says:

      We pay $850/month and I’m terrified to see what it will be at renewal time.

    • dolemite says:

      If I got insurance through my employer, it’s like $950 a month for a family of 4 with a $3000 yearly deductable *per person* and a $200 yearly prescription deductable per person.

      So basically you’d spend like $12000-$15000 a year for insurance if you used it moderately. Now, keep in mind, the average employee that works here makes about $7.50 an hour.

    • Lethe says:

      I’m sorry, I really don’t want to rub it in, but reading comments like that is so hard to believe. My supplementary insurance provided through my work costs me about $20 a month, and covers prescription drugs, dental, and even things like massage and chiropractics (to a limited degree). Any direct care through physicians and hospitals is automatically covered.

      I just don’t know how anyone can afford monthly bills like that. My parents raised 6 kids, two of whom required fairly frequent medical care (for asthma and repeated knee problems). I don’t know how they could have done that if they lived in the US.

  4. humphrmi says:

    “the lawsuit will just lead to higher health care prices for the people of Michigan”

    “we will vigorously defend our ability to negotiate the deepest possible discounts for our members and customers with Michigan hospitals”

    So basically what they’re saying here is, they’ll decide what the lowest price is, and if you don’t like it, they’ll start jacking up rates.

  5. katarzyna says:

    Oh! I wonder if this has to do with why my company dropped HAP and will only offer BCBS next hear.

  6. ARP says:

    Actually, this is common in the commercial setting, it’s called a “most favored nations” clause. Lot’s of companies ask for them, but rarely get them. But why have the prohibition? Just put in that you’ll get the best price of all the hospital’s customers, period. Putting in the belt and suspenders language saying that you can’t give someone a deeper discount is what got you in trouble.

  7. psm321 says:

    I don’t see anything wrong with the second kind of contract… how is that any different from hollywood contracts where a star demand that nobody make more than them? And it does help customers get the best prices because if another insurer does manage to get lower prices, then BCBS automatically gets them too. In fact, I see this as a way of insuring the best prices for insurers/customers

    • Gramin says:

      Can you read???

      “[The clause] bars hospitals from giving Blue Cross’ rivals a deeper discount than Blue Cross receives.”

      Another insurer can’t get a better discount since the contract with BCBS strictly forbids it. This isn’t helping competition at all. It’s completely eliminating it for BCBS.

      • psm321 says:

        Can you think? With your brain? Somebody else not getting a deeper discount than BCBSM means that if they want that deeper discount, BCMSM has to get it too. A lot of other industries have contracts like that.

        • ARP says:

          The problem is in the wording. I know it sounds strange but saying that the hosptial will always give BCBS the lowest price is very different than saying you are prohibited from giving another insurance provider a better deal. Functionally, they result in the same thing, but by prohibiting the hospitals ability to set prices with another insurance company, you’ve engaged in anti-competitive behavior. Chances are, this was drafted by a lawyer who decided he wanted belt and suspenders and now the suspenders could end up hanging them.

    • mindaika says:

      The fact that BCBS gets to dictate the prices of the competition makes it so that their price is always “the lowest price.” However, this does not mean that their price would not be lower with actual competition, or that the competitors prices could be lower without the anticompetitve agreement.

  8. psm321 says:

    I should point out by the way that BCBS of Mi is a non-profit insurer and generally has the most customer-friendly policies in my experience

    • smbizowner says:

      wish my experiences with BcBs were like yours.

      fair and reasonable my foot.

    • ecwis says:

      I completely disagree with you. Their customer service is non-existent after 5 PM and they won’t send you a contract explaining their acceptance policies and coverages. Humana has reasonable hours and sent me a complete contract explaining what will be covered.

  9. Duke_Newcombe-Making children and adults as fat as pigs says:

    b…b…b..but…if we harass poor BCBS, well…that will lead us to OMGWTFBBQ SOCIALISM!!!1111 What about our FREE-DOMZ!!!11

  10. chaelyc says:

    Maybe they meant that this lawsuit will force BCBS to charge more…