Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Purchasers allege Blue Cross Blue Shield conspiracy to restrain trade, (Apr 13, 2015)

By Greg Hammond, J.D.

Blue Cross Blue Shield Association (BCBSA) and Triple S Salud (BCBS-Puerto Rico), among other Blue Cross Blue Shield entities, have been named in a class action lawsuit for allegedly engaging in an unlawful conspiracy to divide and allocate geographic markets for the sale of full-service commercial health insurance products to individuals and small groups. The plaintiffs, consisting of direct purchasers of individual or small group full-service commercial health insurance from nearly 60 “Individual Blue Plans,” filed suit in the federal district court in San Juan, Puerto Rico, seeking injunctive relief and treble damages (Galactic Funk Touring, Inc. v. Triple S Salud, April 6, 2015).

The complaint alleges that BCBS-Puerto Rico and the other Individual Blue Plans engaged in per se market division through Blue Cross and Blue Shield license agreements and BCBSA Membership Standards and Guidelines. The BCBSA is an association owned and controlled by all of the Individual Blue Plans.

Specifically, the license agreements and Membership Standards and Guidelines purportedly prohibit Individual Blue Plans, including BCBS-Puerto Rico, from competing against each other using the “Blue” name by allocating territories among the Individual Blue Plans; limit the Individual Blue Plans from competing against each other when not using the Blue name, by mandating the percentage of their business that they must do under the Blue name, both inside and outside each Plan’s territory; and restrict the right of Individual Blue Plans to be sold to a company that is not a member of BCBSA, thereby preventing new entrants into the Individual Blue Plans’ markets, including the home states or regions of the plaintiffs.

As a result of the purported anticompetitive conduct, the Individual Blue Plans allegedly restrained competition, prevented entry by Individual Blue Plans and their non-Blue affiliates into other markets, increased health care costs, inflated premiums, and deprived individuals and small groups of the opportunity to purchase health insurance in the relevant markets from one or more additional Individual Blue Plans and their affiliates at a lower premium rate or price set by a market free from the non-price restraints. The plaintiffs allege that they were damaged by paying supra-competitive premiums and by not being offered lower health insurance premium rates by competitors or potential competitors that have not entered the relevant market.

The plaintiffs seek injunctive relief on behalf of a nationwide class, including “all persons or entities in the United States of America who are currently insured by any health insurance plan that is currently a party to a license agreement with BCBSA that restricts the ability of that health insurance plan to do business in any geographically defined area.” They also seek damages on behalf of themselves individually and on behalf of various state classes, including Alabama, Arkansas, California, Florida, Hawaii, Illinois, Louisiana, Michigan, Mississippi, Missouri, New Hampshire, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, and Texas.

Common questions of law or fact common to the class include: (1) whether the restrictions set forth in the BCBSA license agreements are per se violations of Section 1 of the Sherman Act, or are otherwise prohibited under Section 1of the Sherman Act; (2) whether, and the extent to which, premiums charged by the Individual Blue Plans to class members have been artificially inflated as a result of the illegal restrictions in the BCBSA license agreements; and (3) whether, and the extent to which, premiums charged by the Individual Blue Plans have been artificially inflated as a result of the anticompetitive practices adopted by them.

The 32 count complaint asserts claims for conspiring in restraint of trade, in violation of Section 1 of the Sherman Act; conspiring to monopolize in violation of Section 2 of the Sherman Act; and similar allegations under various state laws.

The plaintiffs seek to obtain an injunction, prohibiting BCBS-Puerto Rico from entering into, or from honoring or enforcing, any agreements that restrict the territories or geographic area in which any BCBSA member plan may compete; a decree that BCBS-Puerto Rico has violated the Sherman Act and various state antitrust laws; treble and other damages, costs, and attorney fees; and trial by jury.

The case is No. 3:15-cv-01348.

Attorneys: John F. Nevares (John F. Nevares & Associates, PSC), David Boies (Boies, Schiller & Flexner LLP), and Michael Hausfeld (Hausfeld LLP) for Plaintiffs.

Companies: Galactic Funk Touring, Inc.; Blue Cross Blue Shield Association; Triple S Salud

News: Antitrust