Justice Dept. expands probe of Blues' contracting

The Dept. of Justice has asked BlueCross BlueShield-affiliated plans in at least six states and the District of Columbia for information about their contracting practices, specifically their use of "most-favored-nation" clauses. The probe comes a few months after the agency sued Michigan's Blues plan over its use of most-favored-nation clauses in its hospital contracts.

A most-favored-nation clause requires a physician or hospital to give the contracting insurer the deepest available discount on care -- in other words, barring the doctor or hospital from granting another health plan better rates.

A Justice Dept. spokeswoman confirmed that the department's Antitrust Division is "investigating the possibility of anticompetitive behavior in various parts of the country," as related to most-favored-nation clauses.

Blue Cross and Blue Shield of Kansas and BlueCross BlueShield of South Carolina confirmed receiving requests for information from the department. Blue Cross and Blue Shield of North Carolina, according to The Wall Street Journal, also was contacted about its contracting, but a company spokesman declined to comment.

Pittsburgh-based Highmark, a Blues licensee, said it received an inquiry about its West Virginia affiliate. CareFirst, which operates in the District of Columbia, Maryland and Virginia, did as well. WellPoint spokeswoman Kristin Binns said the company had received a request from the department regarding its Ohio and Missouri subsidiaries.

The Justice Dept. and the Michigan attorney general sued Blue Cross Blue Shield of Michigan in October 2010 over its use of most-favored-nation clauses.

In that case, the insurer was suspected of making deals with hospitals to pay more for care as long as other insurers were required to raise their rates as well. In some cases, the Justice Dept. alleged, the Blues required hospitals to charge as much as 39% more to other insurers.

The Michigan Blues denied any wrongdoing and defended its contracting practices.

"It does not make good business sense for Blue Cross Blue Shield of Michigan to reimburse a provider at a higher rate than we can otherwise negotiate," company spokesman Andrew Hetzel said in a statement.

The American Medical Association opposes most-favored-nation clauses and has worked to help pass legislation banning them. At least three states -- Indiana, Colorado and Maryland -- have made them illegal.

In 2010, former Georgia Insurance Commissioner John Oxendine said his department would go after insurers who used most-favored-nation clauses, though they are not explicitly outlawed in Georgia. He argued that the clauses qualified as an unfair trade practice, making them illegal. Blue Cross and Blue Shield of Georgia, which is owned by WellPoint, defended the contract clauses and sued Oxendine. The suit is pending.

Brett Lieberman, spokesman for the national BlueCross BlueShield Assn., defended the Blues' insistence on winning the lowest possible discounts from hospitals and doctors. "It guarantees low prices and helps keep prices down for consumers, and it hurts consumers to remove tools that help obtain the lowest cost," he said.