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Michigan Blue Cross seeks antitrust suit dismissal

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DETROIT (Bloomberg)—Blue Cross Blue Shield of Michigan asked a federal court to throw out an antitrust suit brought by the U.S. and the state of Michigan that accused it of driving up competitors' costs.

The health care insurer, in papers filed with U.S. District Judge Denise Page Hood in Detroit Friday, argued that the federal and state governments hadn't shown its practices cause harm. It also said the court should refrain from hearing the case because of its “disruptive effect on state policy.”

“This case attacks Blue Cross's efforts to ensure that it is obtaining the best possible prices from hospitals—prices at least as good as, and hopefully better than, others,” it said in the filing, adding that nothing in antitrust law bars its practices.

Blue Cross Blue Shield Michigan is the largest insurer in the state, with about 4 million customers. About 90% of the company's business is with large group plans, insuring companies directly or providing administrative services, according to the company.

The Justice Department's Oct. 18 complaint said the nonprofit insurer negotiated contracts with 70 of the state's 131 general acute-care hospitals that led to higher prices for its competitors.

Hospitals that signed the contracts were barred from charging competing insurers less than they got from nonprofit Blue Cross. In some cases, the hospitals charged rivals 30% to 40% more, the department said in a press release announcing the lawsuit.

‘Most favored nation’

“Courts have been unanimous that Most Favored Nation clauses” such as those used by Michigan Blue Cross, “do not violate antitrust laws,” Andy Hetzel, a spokesman for the insurer, said in a telephone interview Friday.

The carrier is bound by state law to accept clients regardless of their medical condition, said Mr. Hetzel, making it the state’s “de facto insurer of last resort.”

Blue Cross chief legal counsel Jeffrey Rumley, in the same telephone interview, faulted the federal government for interfering with “local regulation of a state-related entity that is fulfilling a critical public policy objective.”

“We continue to maintain that Blue Cross Blue Shield of Michigan has substantially reduced competition in the sale of health insurance to Michigan employers and consumers,” Gina Talamona, a Justice Department spokeswoman, said in an e-mailed statement. The U.S. will oppose the motion, she said.

Joy Yearout, a spokeswoman for Michigan Attorney General Mike Cox, said that office doesn’t comment on pending litigation.

The case is U.S. vs. Blue Cross Blue Shield of Michigan, 10cv14155, U.S. District Court, Eastern District of Michigan (Detroit).

Copyright 2010 Bloomberg