A federal judge in Alabama overseeing a case involving 36 Blue Cross plans ruled Thursday a 1980s-era plan to divvy up service areas may violate antitrust laws, a finding attorneys said is a major blow to the companies' case.
The ruling is not final, but does provide a lens for the judge to use as the case goes to trial, said plaintiff's attorney Barry Ragsdale. The 2013 lawsuit, filed by providers and small-group subscribers, accuses the plans and the Blue Cross Blue Shield Association of violating antitrust laws that keep businesses from conspiring to affect the market. About 90 percent of people with health insurance in Alabama are covered by Blue Cross Blue Shield.
Blue Cross Blue Shield plans cover more than 100 million people nationwide, according to the Blue Cross Blue Shield Association. Ragsdale said it is the largest antitrust case in United States history.
"It really is a seismic event in this case," Ragsdale said. "I don't think you can overstate what a big ruling this is."
If the opinion stands, then it prevents attorneys for the Blues from arguing that their actions benefitted customers or providers, Ragsdale said.
Scott Nehs, senior vice president, general counsel and corporate secretary for the Blue Cross Blue Shield Association (BCBSA), issued a statement Friday regarding the judge's opinion.
"This is one step in a lengthy process; we will appeal the interim ruling and are confident that we will prevail. The District Court stated that it is constrained by authority from the late 1960s and early 1970s, which we and most antitrust experts no longer believe to be good law," Nehs stated. "The Blue Cross and Blue Shield System has served Americans well for almost a century, and we are disappointed by the court's ruling with respect to certain aspects of the BCBS System. BCBS companies provide substantial benefits to medical professionals and currently serve nearly 106 million people with competitive pricing, secure and stable health care coverage and reliable service. This decision does not change that history or our unwavering commitment to the American people.
"As the litigation process continues through the pre-trial phase, both consumers and health care professionals can continue to rely on their local BCBS companies just as they have for nearly 90 years," Nehs stated. "The BCBS System enables members to receive in-network medical care everywhere in the country and has substantial competitive benefits for consumers and medical professionals. "
U.S. District Judge David Proctor wrote that the association's creation of exclusive sales areas could have illegally hampered market competition. Before consolidation in the 1980s and 1990s, Blue Cross and Blue Shield plans often overlapped, according to the opinion. Agreements that keep them apart could potentially give the companies an unfair advantage in negotiations with doctors and subscribers.
Proctor wrote the agreement was "at least as anticompetitive" as two similar agreements struck down by the U.S. Supreme Court.
The first Blue Cross plans emerged during the Great Depression, as Americans struggled with low wages and high health care costs. The policies at issue in the case happened later, as Blues struggled with declining enrollment. The number of different plans decreased from 114 in 1980 to 36 today.
The question of whether it's legal for the different plans to agree to geographic service areas is key to the lawsuit. Attorneys representing Blue Cross have argued the agreements help plans compete against national insurers. Company attorneys have also argued that states regulate health insurers and have not found problems with the practice.
Some plans still overlap in California, Idaho, New York, Pennsylvania, Washington and Oregon.
Blue Cross Blue Shield of Alabama has played a central role in the litigation. The company has the largest market share of any state in the country, according to analyses by the American Medical Association. Those studies have found Alabama to be the least competitve for health insurance.
The company, which is a nonprofit, was founded in 1936 and has about 4,000 employees. It is a non-profit health benefit service plan under Alabama law.
The providers who sued Blue Cross alleged the company uses its market power to keep reimbursements low to doctors and other medical entitites. Subscribers allege the scheme could result in higher premiums.
Blue Cross Blue Shield of Alabama often touts its low rates for families and individuals in employer plans. In 2016, the state had the third-lowest average premiums in the country, according to the U.S. Department of Health and Human Services.
Ragsdale said the case could go to trial next summer, after the judge rules whether it can proceed as a class action.
"It's a big deal, and I'm optimistic we can move forward to reform practices by Blue Cross and Blue Shield," Ragsdale said.