Yesterday, the Department of Justice sued Blue Cross Blue Shield (BCBS) of Michigan for anti-competitive practices that increase health insurance costs for many Michiganders.
The federal government sued Michigan's largest health insurer Monday, alleging that it abused its market clout to inflate health-care costs and impede competition.
The government alleged that Blue Cross Blue Shield of Michigan negotiated contracts that prohibited hospitals from granting deeper price discounts to other insurers.
In some cases, Blue Cross's contracts required hospitals to charge other insurers significantly more than they charged Blue Cross, the federal antitrust suit said. In other cases, Blue Cross agreed to increase the prices it pays hospitals - boosting costs for its own customers - in return for commitments that other insurers would be charged no less, the lawsuit said.
"As a result, consumers in Michigan are paying more for their healthcare services and health insurance," Christine Varney, the assistant attorney general for antitrust matters, said in a statement.
BCBS of Michigan insures as many as 60% of insured Michiganders. It is a non-profit company that works with all of Michigan's 159 hospitals and over 99% of the nearly 30,000 doctors in the state. This position gives BCBS a unique opportunity to affect health insurance costs for all Michigan residents.
The Detroit Free Press has more on on the suit against Blue Cross:
The antitrust lawsuit alleges that Blue Cross -- the state's largest insurer -- used its muscle and size to negotiate deep discounts for itself.
The hospitals include Beaumont Hospitals, St. John Providence Health System and Botsford Hospital. The lawsuit alleges that the practice drove up prices for competitors such as Health Alliance Plan, one of the state's biggest health maintenance organizations, and at-large private insurers such as Aetna and Humana.
In some cases, Blue Cross paid hospitals more than what was proposed to close the deal, the Justice Department alleges. If it prevails, other insurers and their customers might get better deals on hospital prices…
Michigan insurance industry leaders say the lawsuit could have a major impact on hospital service pricing.
Around 70 hospitals cooperated with the investigation. Because BCBS is the dominant supplier of health insurance in Michigan, hospitals were essentially forced to cut deals with them lest they be cut off from the giant pool of patients. According to the Detroit News, Blue Cross forced the hospitals to charge their competitors as much as 39% more. "Blue Cross even agreed to cash payments to some hospitals in exchange for hiking costs on its competitors."
The suit alleges that Blue Cross Blue Shield of Michigan demanded that more than half of Michigan's acute care hospitals — or 70 of 131 — increase their prices to Blue Cross' competitors. Hospitals agreed to the deals, in part, the government said, because Blue Cross patients are far more profitable than those covered by Medicare or Medicaid.
According to Christine Varney, the Justice Department's assistant attorney general overseeing its antitrust division, Blue Cross Blue Shield of Michigan declined to settle the suit, Varney said. "If they had agreed to drop the practices, we wouldn't be here," she said.
Health insurance reform is one aspect of controlling health care costs in this country. Vigorous prosecution of anti-competitive practices and other business malfeasance by insurance companies is another. No matter how you feel about how the Obama administration and Democrats handled the battle for health insurance reform earlier this year, you have to feel good that they are actively pursuing these types of suits and holding health insurance companies accountable for their actions.
I know I am.
I'm just sayin'…