Aetna sues Michigan Blues over contracting practices

More than one judge could be faced with deciding how far an insurer may go in trying to get the lowest price for hospital care, now that Blue Cross Blue Shield of Michigan faces a second lawsuit over its use of "most-favored-nation" contracting.

The outcome of the new lawsuit could help determine whether competitors may claim damages -- and how quick they will be to litigate -- if a company is found to have violated antitrust laws using unfair contracts.

Insurers use most-favored-nation clauses in contracts with both physicians and hospitals. They typically require the doctor or hospital to guarantee that they won't give any other insurers' members a lower rate for care. The Michigan Blues are accused of going above and beyond that by requiring contracted entities to charge a certain percentage more to Blues' competitors.

In August, a U.S. District Court judge cleared the way for an antitrust lawsuit, brought in 2010 by the state Attorney General's Office and the U.S. Dept. of Justice Antitrust Division, to proceed to trial.

Now, in addition to preparing for that trial, tentatively scheduled for 2013, the Blues face a lawsuit from Aetna over the same issue.

Aetna's lawsuit, filed Dec. 6 in U.S. District Court in Eastern Michigan, says it spent millions of dollars -- specifically $290 million to buy HMS Healthcare, a PPO network in Michigan and Colorado -- beginning in 2009 in an attempt to break into the Michigan market. It alleges that it was blocked in that effort by the Blues' unfair practices. Blue Cross Blue Shield of Michigan does not deny using most-favored-nation contracting, but it defends the practice as the best way to get the lowest prices for its members.

The Blues plan believes that its status as insurer of last resort -- which makes it unable to reject any applicants regardless of their health status -- gives it special status.

The Michigan Blues also is critical of Aetna, which it says is trying to blame the competition for its own failures. "Aetna is not making the types of investments here it needs to compete successfully. Instead, Aetna is resorting to litigation as a business strategy to tear down a competitor that is invested here," a Blue Cross Blue Shield statement said.

But Aetna's Michigan market president, Bill Berenson, said the Michigan Blues is not the struggling nonprofit it makes itself out to be -- its main concern is maintaining its dominant market share. According to the most recent American Medical Association report on health insurance competition, the Michigan Blues has a statewide market share of 71%. This AMA report was released in 2011 and based on enrollment data from Jan. 1, 2009, gathered by HealthLeaders Interstudy. Berenson said Aetna's share is 5%.