Saturday, June 1, 2013

This, Courtesy Of A Sweet Commenter -- Interesting, But McCarran–Ferguson Act May Present Obstacles

 Yesterday, a very kindly commenter pointed out a potential class action wending its way through the North Carolina courts, that alleges the Blue Cross Blue Shield system of "most favored nations" pricing violates the Sherman and Clayton Acts. Here is the story link.

While the allegations are thought-provoking, for about 70 years, the McCarran–Ferguson Act of 1945 has essentially exempted these sorts of practices from full-on federal antitrust review. That is, the Act granted health insurers a fairly broad exemption from the Sherman and Clayton Acts, so long as in the state the insurer operates, there is a state authority regulating the business of insurance. And there are state commissioners of insurance in North Carolina and Virginia. To be fair, Congressional Democrats are taking aim at this, as well -- as part of health care reform.

I'll gin up a better graphic later today -- and do go read the full story at the NewsObserver. Unless the law changes, via the efforts of the Democrats, though, I think the Blues are likely to prevail.
. . . .The plaintiffs – two small businesses and three residents of Mooresville, a town about 30 miles north of Charlotte – are represented by lawyers with a powerhouse firm in Washington, and some antitrust experts predict they will win in court.The various Blue Cross plans are independent insurance companies. But the lawsuit alleges that they have colluded through their national trade group – the Blue Cross and Blue Shield Association.More competition would mean lower prices, the lawsuit contends. Instead, the arrangement has allowed the insurers to dominate their markets and to charge inflated premiums. . . .

In court filings, Blue Cross said the N.C. Department of Insurance thoroughly regulates and approves its contracts with providers, including provisions like the “most favored nation” clauses.Blue Cross also said plaintiffs have yet to point to facts showing that the “most favored nation” clauses have driven up prices. . . .

We will, of course, keep an eye on it.

1 comment:

Anonymous said...

A bit more color on the issue, which was consolidated to Federal court:

A good read fr history of the Blue model:

Although the Blues operate as independent insurance providers, their collective link thrugh the Association allows for subscribers to see doctors in any Blue network. Those claims are paid using an internal program called Blue Exchange. If you are a resident and subscriber of the Blue FL, for example, and are on vacation in MA in need of medical care, you would go to a Blue MA provider who submits your claim to MA who then charges back the FL plan. The MA rates prevail for the provider and FL is charged an additional fee by MA (set by the Association) for claims processing and provider network rental.

Those fees are absorbed by the plans - in some cases as expenses (in the example that is FL) and in others as revenue (in the example, MA). For a plan lopsided on the expense end that could translate to higher premiums overall.

The provider rates are negotiated by the local plans but the 'power' they can exert is not only the majority of subscribers they enjoy in most states but the potential expansion of subscribers through the Blue Exchange program. Snow bird states, for example, will potentially bring providers more subscribers than the local rolls reflect - as well as revenue to themselves via fees.

Unfortunately rate calculations are not very straight forward or it would be interesting to compare premiums between a plan on the revenue end of the Blue Exchange program and one on the expense end. The lawsuit will, no doubt, be very closely watched by a good many.