New Entrants

How the Blues Antitrust settlement could shake up the health care industry

Gabriel Perna | November 18, 2020

The eight-year saga of the antitrust allegations against Blue Cross Blue Shield insurers continues for now. 

The suit, which began in 2012, alleged that Blues insurers conspired to stifle competition and increase rates for providers and members. After years of courtroom battles that spanned nearly a decade and the consolidation of a number of lawsuits, the Blue Cross Blue Shield Association (BCBSA) tentatively agreed to a $2.67 billion settlement in September. A few weeks later, Anthem, the biggest Blues plan in the country, agreed to pay $594 million as part of its share of the settlement. As the parties wait on a federal judge to approve the settlement, not everyone who filed the class action suit has agreed to the terms.  

Three non-consenting class members, representing individuals in California, Texas and Minnesota, say that those supporting the $2.67 billion settlement deal lack standing to dismiss claims from states without a class representative. According to Law360, on Monday, November 16, U.S. District Judge R. David Proctor told the non-consenting class members of the settlement that they should probably not second guess the “the tactical decisions of [the] class counsel.”  

However, even though he gently chided the non-consenting members, Proctor did not issue a kind of official approval of the settlement suit on Monday. According to the BCSBA in a Pittsburgh Post-Gazette article, it may be at least a year before Proctor signs off on the deal. Although he could issue a preliminary approval before that.  

In a statement acknowledging that the Blues companies had approved the settlement, BCBSA said that it rejected the claims plaintiffs made in the lawsuit. It stated that in order to reach a settlement, however, the association agreed to make some operational changes and provide payment to members of the class involved in the case.  

“Settling now is the right action at the right time because it allows us to remain focused on the goal we’ve had for more than 90 years: improving access to quality health care for all Americans and the health of our local communities,” the association said in its statement. 

Increased competition  

The settlement could have immediate short and long-term impacts for both payer and provider organizations. One obvious outcome is that Blues plans would be free to pursue opportunities outside specific geographic service areas.  

“This will clearly allow Blue Cross plans to compete more than they might have been able to under current association rules. More competition is throwing the proverbial stone into the pond. Ripples will result. I think one should expect increased competition among Blues plans to be reflected in the increased competition among health plans themselves,” says Bruce Fried, a partner in Dentons’ Health Care practice, who has served on numerous boards of health care organizations.  

On the topic of increased competition, BCBSA said to the Post-Gazette that the settlement allows “for certain large, national employers to request a second Blue bid as a fair and reasonable settlement term.”  

William Bednar, a Temecula, California-based Consulting Actuary at Axene Health Partners, says that he expects Anthem will be aggressive in its expansion efforts. 

“I don’t know if the other Blues plans would do that. A lot of them are regional. Anthem is the one that’s nationwide. They have over 60 million members,” says Bednar. For Blues consumers, the short-term benefit will be cash in their pocket from the settlement. Even more important, experts say they may see lowered rates from increased competition. “If Anthem wants to move into a new market, most likely they will go in with aggressive rates in order to get some of the market share,” Bednar adds.  

Ron Williams, former CEO for Aetna, agreed that the settlement would create a more competitive market. “The settlement says that everyone has to compete to earn the right to do business with their customers. There is preordained constraint on choices that larger employers would make. They may make the same decision, or they may go another route, but I think it’s good for competition,” Williams says.  

This will clearly allow Blue Cross plans to compete more than they might have been able to under current association rules. More competition is throwing the proverbial stone into the pond. Ripples will result.

Bruce Fried, Dentons Health Care Practice

Fried says that the increased competition may be a boon for provider organizations, which could see increased payments to clinicians as the plans seek to build out their networks. He also expects competition will improve quality outcomes since these metrics will help the different plans differentiate themselves to providers.  

On the flip side, non-Blues health plans could struggle in this new environment, says Bednar. He says more insurers in their market will mean more overhead costs and decreased bargaining power. Moreover, this could lead to an eventual downside for consumers, he says.  

“If they raise their reimbursement to providers, they’re either going to have to raise their rates to consumers or accept a lower profit margin. If they accept a lower profit margin that means they’d have to increase their profit margin in another region. It could hurt consumers in one region and them in another,” says Bednar.  

CEO outlook 

The full implications of this settlement will likely take years to develop, says Fried. He says that insurers have likely studied the impact—or will likely put resources into understanding how they can take advantage of a new marketplace. “Once it’s done, the corporate strategy people—the CFOs, law departments and actuaries will huddle and find opportunities in the marketplace,” he says. “I would assume that it will take a few years to fully digest what all this means.” 

One potential downstream impact, according to Bednar, is potential M&A activity in the health plan space. He says the increased competition may lead to Blues plans, as well as other insurers, to join forces. He also could see more vertical integration between payers and providers as a result of the settlement, a move that might allow health systems to offer an HMO plan and cheaper premiums.  

Fried says health system CEOs should think strategically about how to position themselves with potential new insurance company competitors and to improve their negotiating agreements. Beyond payers and providers, Fried says the ripple effects of this antitrust settlement could have an impact on tech and data analytics companies, government purchasers and other ancillary players in the health care industry.  

“I’ve been involved in health care for a long time and one of the things that always rings true is the health care system would be great if it worked in a real market fashion. I think this case and the settlement further bring market dynamics into the insurance industry. Given the nature of the American economy, we live in a capitalist system where competition is essential to the success of our economy, and this can only be a good thing,” says Fried. 

About the Author

Gabriel Perna, Senior Manager, Digital Content

Gabriel Perna is the Senior Manager of Digital Content at Health Evolution. He brings 10+ years of experience in covering the intersection of health care and business. Previously, he was at Chief Executive, Physicians Practice and Healthcare Informatics. You can reach him via email or on Twitter at @GabrielSPerna