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NC's Blue Cross fights lawsuit over pricing power

Emery p. Dalesio, AP Business Writer

RALEIGH, N.C. (AP) -- North Carolina's Blue Cross plan and the national Blue Cross licensing organization asked a federal court to reject a lawsuit claiming the company's network of insurance plans across the country are limiting competition.

The lawsuit contends the practice that bars 37 Blue Cross affiliates from competing against each other helps local plans accumulate market dominance in their home territories, which they then use to demand discount deals with hospitals that inflate medical costs.

North Carolina's largest health insurer and the Blue Cross and Blue Shield Association deny in court documents filed late Monday their business practices violate federal anti-trust laws by carving up the country into exclusive territories.

"If the court says this practice is illegal, it could open up competition to any Blue Cross plan that wants to compete in that part of the country," said Prof. Roger Feldman, who studies health insurance at the University of Minnesota.

The case is unusual because it features a law firm, run by high-profile attorney David Boies, acting without federal powers, Feldman said. The U.S. Justice Department filed a lawsuit based on similar issues against Michigan's Blue Cross plan in 2010 and is investigating the pricing power of North Carolina's Blue Cross as well as plans in other states.

The lawsuit filed in February seeks to be a class-action on behalf of Blue Cross's 3.6 million North Carolina customers or customers of all other Blue Cross plans. The case seeks triple damages for the amount North Carolina premiums were inflated.

North Carolina's Blue Cross said in its response that the restrictions that limit who can use the Blue Cross name and symbols have been in effect for decades and repeatedly upheld by courts. Second, buyers across a wide range of industries use preferred pricing deals to ensure they get the seller's lowest price, and North Carolina's insurance commissioner approves insurance rates, the not-for-profit company said.

The national Blue Cross organization said because the plans don't compete in each other's service areas, the plans are better able to compete against national competitors like Aetna, United Healthcare, and Cigna.

The lawsuit comes as the Justice Department investigates whether Blue Cross plans in North Carolina and several other states are raising health-insurance premiums by making deals with hospitals that stifle competition from rival insurers.

A lawsuit filed by the Justice Department and Michigan's attorney general In 2010 against Blue Cross Blue Shield of Michigan claimed the non-profit's "most favored nation" clauses with health care providers essentially guarantee that competing health care plans can't negotiate better rates. The deals require hospitals to provide services to Blue Cross competitors either at the same or higher prices than Blue Cross pays. Michigan's Blue Cross plan said the discounts it negotiates keeps hospital care and health insurance affordable.

North Carolina's Blue Cross has more than 80 percent of the market for coverage sold to individuals and small businesses, which prompted the U.S. Department of Health and Human Services in February to delay requiring the state's other insurers to meet a spending benchmark under the federal health reform law.

A lawyer for Boies' firm did not return calls seeking comment. A spokesman for Blue Cross of North Carolina declined comment Tuesday. A spokeswoman for the national Blue Cross association said the lawsuit lacked merit.

Boies represented Democrat Al Gore in the U.S. Supreme Court ruling that decided the 2000 presidential election and made headlines in 1990s for grilling former Microsoft Corp. CEO Bill Gates in the U.S. government's antitrust lawsuit against the company. Boies now represents business software maker Oracle Corp., which accused Google Inc. of building its Android software by stealing pieces of its Java technology.


Emery Dalesio can be reached at https://twitter.com/emerydalesio