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Blue Cross Sued for Mich. Illegal Contracts

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By Admin on November 04, 2010 1:00 PM

What happens when an insurance company allegedly persuades hospitals to charge competing insurance companies higher rates?

A class action lawsuit, of course.

Blue Cross Blue Shield of Michigan is facing its second lawsuit over illegal contracts in the past month. The insurer is accused of using its market share for anti-competitive practices. Blue Cross allegedly used its dominant market share to get "most favored nation" status from hospitals.

Michigan Attorney General Mike Cox and the U.S. Justice Department filed a federal lawsuit in October against Blue Cross. The suit alleged that the insurer illegally negotiated contracts with Michigan's hospitals that prevented the hospitals from charging competing insurance companies lower rates. The suit alleged that the anti-competitive acts left consumers paying higher insurance costs.

The new lawsuit parallels the illegal contracts complaints made in October by the Michigan Attorney General and the Justice Department, The Detroit News reports. The Shane Group Inc. and Bradley A. Veneberg filed the lawsuit in federal court claiming that Blue Cross Blue Shield illegally inflated prices for health care services. Lead counsel David Fink said the lawsuit could include thousands of Michigan residents and businesses going back to 2007.

Plaintiffs are seeking treble (or triple) damages, attorney's fees and an injunction prohibiting Blue Cross from either negotiating or enforcing "most favored nation" clauses in their contracts with hospitals. In addition, the lawsuit seeks the reformation of contracts and damages for violations of the Sherman Act. The lawsuit does not specifically detail the damages that the plaintiffs have allegedly incurred.

Blue Cross contends that the lawsuit is without merit. "Negotiated hospital discounts are a tool that Blue Cross uses to protect the affordability of health insurance for millions of Michiganders," Blues spokeswoman Helen Stojic said.

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