With 2020 unleashing horrible twists and turns upon America every day, it’s de rigueur to expect the unexpected. A worldwide pandemic? Raging wild fires? Locusts? Sure, why the hell not? But amidst all the bad news, 2020 has apparently brought us an unexpected return worth welcoming. Blue Cross Blue Shield has agreed to a $2.7 billion settlement that will, more importantly, bring injunctive relief that should trigger big changes to the health insurance market around the country. It’s 2020 and the Sherman Antitrust Act lives!
Technically the Act never went away, but surveying the landscape of American business one would be hard pressed to know it. Whether it’s a function of apathy or complicity, the government doesn’t bring antitrust cases with anywhere near the frequency that John Sherman would’ve envisioned.
And that’s a problem since mounting a viable private antitrust action is a mammoth undertaking. It’s a brutal, document intensive uphill slog. Once in a while a private action will pique the interest of the government who can come in and perform some heavy lifting, but if the government is going to look the other way it’s immensely difficult to keep a case going. Thankfully, some folks are willing to go out there and invest the time and effort to get the ball rolling.
The last big ticket antitrust case most of us can remember was the Microsoft case in the late-90s. So it brings us full circle to find David Boies, who prosecuted the Microsoft case as hired counsel for the government, at the heart of the BCBS case as well.
Over 30 defendants, some 50 firms, and over 1000 lawyers got into this. David Boies recounts that the first mediation on the settlement agreement required finding a room big enough to fit 100 lawyers and capable of providing everyone a microphone. He told me that some meetings in hotel ballrooms required abandoning the big table and placing all the lawyers in rows like a standard seminar. It’s been a wild seven years for this case.
“It was like a soap opera,” I said. “It was! It was,” Boies replied. “But also very high stakes. The amount of money is obviously substantial — and probably what the headlines will focus on — but the injunctive relief was even more important…. If we’d only gotten the money it would’ve been historic — one of largest antitrust awards and probably the largest without government involvement — but it would not have made nearly as much difference for our clients.”
The lawsuit began over seven years ago when Boies Schiller brought claims on behalf of insureds arguing that BCBS acted as a cartel in requiring insurance carriers within its network to agree to geographic non-compete clauses and cap the share of revenue they can make from selling non-BCBS products. In a nutshell, BSBS said one of its member carriers would act as, say, “BCBS of Alabama” and no other BCBS carrier was allowed to compete for businesses headquartered in Alabama. And there’s a certain logic to that from a trademark perspective, but the plaintiffs noted that the insurance agreements went further to say that a BCBS member from outside the jurisdiction couldn’t enter the Alabama market even to sell non-BCBS plans. The proposition was basically “if you want to sell the BCBS brand anywhere, you have to agree to never enter the market of any other BCBS brand… oh and on top of all that you can’t have more than a third of your revenue from other brands.”
The implications of something like this should be obvious. The market power of BCBS — which provides health insurance to almost a third of the country — would convince players to steer clear of competing in defined markets for fear of losing BCBS plans in their own territories and consequently driving up prices for consumers. When Boies first brought the case, BCBS responded by noting that they’ve been doing this for 30 years and the DOJ has never complained, deploying the classic “it can’t be illegal if I’ve never been caught” defense. But, as Boies said, “that’s not a legal defense, but it’s a powerful atmospheric: ‘If experts from the Justice Department didn’t bring this, then why would you believe these plaintiffs?'” It’s a mindset that makes pursuing these cases that much harder, especially for private actors, but the stakes in the health insurance market are too high to keep letting it slide. “This shouldn’t have been left to us to do. The government should have done this,” Boies said.
For whatever reason, the government didn’t. One reason might be the fact that the BCBS system covers many underserved communities around the country, allowing them to claim that their business model is necessary to provide health care to many. “We said, ‘we’re not trying to break you up, we’re just saying you can’t use this as excuse not to compete,'” Boies told me. BCBS is made up of a number of separate companies forming a network to provide a unified product. “That’s obviously a good thing. But they said they wouldn’t compete with even different trademarks. In our view, that’s a per se unlawful restraint.” It’s also an argument that doesn’t make much sense. If competing in that area with a non-BCBS product wasn’t profitable then they wouldn’t compete there and nothing would change.
Even assuming the settlement is approved by all the defendant member companies and Judge David Proctor — who you may remember scolded the parties to the case via GIF in one of this saga’s lighter moments — the case goes on for BCBS. The Boies clients were the insureds arguing that the BCBS model artificially drove up prices, but the other half of the consolidated case came from health providers arguing that the model allowed BCBS to exert improperly inflated leverage in negotiations with providers. It made for a weird marriage at times with both groups working in concert to prove the existence of antitrust behavior, while fundamentally conflicting on the recovery. After all, the existence of a national BCBS product created by the network actually helps the insureds keep premiums down. Basically one side said the behavior kept prices too high and the other said it kept them too low — an unusual spot for cooperating counsel to find themselves in. The provider claims are ongoing.
Working on one case for over seven years can be a serious grind. We overuse the Bleak House reference sometimes but when you’re in a room discussing settlement with over 100 attorneys it’s hard not to jump to the Dickens classic. But for the insureds represented by Boies Schiller, this case may soon be over and the impact that the injunctive relief will have on the health insurance market should be monumental.
Blue Health Insurers Reach Tentative Antitrust Settlement for $2.7 Billion [Wall Street Journal]
Earlier: Federal Judge Vents Frustration In GIF Form
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source https://earn8online.com/index.php/101610/blue-cross-blue-shield-plans-to-settle-for-2-7b-and-thats-not-the-most-important-relief/
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