Highmark sues to block state review of Blues competition

The Pittsburgh-based insurer and three other Blues plans are under scrutiny by the Pennsylvania Insurance Dept.

By Emily Berry — Posted April 5, 2010

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Highmark Inc. has asked a state court to block the Pennsylvania Dept. of Insurance from investigating or releasing any findings about the state of competition between the state's four BlueCross BlueShield-affiliated plans.

In a lawsuit filed March 16, the Pittsburgh-based company accused Pennsylvania Insurance Commissioner Joel Ario of planning to try to break up the Blues plans' current licensing arrangement, set by the BlueCross BlueShield Assn.

The state's four Blues plans split their business into distinct territories. The only overlap is in central Pennsylvania, where Highmark, which has a Blue Shield trademark, and Capital BlueCross compete.

The lawsuit casts the review as one step in the department's quest to rearrange those territories, something Highmark believes the state has no right to do.

"We believe the insurance department and Commissioner Ario have no jurisdiction or authority over the BCBSA licensing agreements," the company said in a statement. "Today's lawsuit is a necessary next step in protecting our brand."

Highmark used similar language in January 2009 in announcing an end to its plans to merge with Philadelphia-based Independence Blue Cross. The companies withdrew their application when Ario made clear he wouldn't approve the deal unless one company gave up its Blues trademark. The plans declined to do so.

Months of testimony and a study of the consequences of the potential merger prompted Ario to announce a review of the Blues' competitive power beginning in summer 2009.

"The consolidation review was forward-looking in determining whether the consolidation would lead to a better marketplace for consumers," Ario said in a statement at the time. "These examinations have a different focus in determining whether the status quo gives consumers access to a healthy climate of competition."

Highmark is wrong in claiming that the review's outcome was a foregone conclusion, Ario said in an interview: "I have a completely open mind. My view of this is that tough questions ought to be asked on both sides."

He said it's completely possible that a state review could find that Highmark has its dominant place in the market because it has competed fairly and effectively. Highmark is the largest of the state's Blues plans, with 4.8 million members.

So far, the other plans, Capital BlueCross, Blue Cross of Northeastern Pennsylvania and Independence, have cooperated with the state's inquiry, and the department was preparing to release its report based on the examination of Capital BlueCross when Highmark sued to stop the entire process, Ario said.

"For somebody to say before you even do the review, 'We're nervous about what you might say about another company,' those are unusual and unprecedented approaches," he said.

Pennsylvania Gov. Ed Rendell criticized Highmark's decision to block the state's review. "I am disappointed -- but not surprised -- that Highmark has chosen to fight our efforts to ensure the protection of consumers and guarantee a free and fair marketplace," he said in a statement. "Health insurance is a big business. Historically, it has operated -- and especially here in Pennsylvania -- with limited regulation and weak oversight."

The Pennsylvania Medical Society had no comment on the lawsuit, though it welcomed the state's review when it was first announced.

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