Blue Cross uses clout to stifle competition, keep prices high

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Georgia state insurance commissioner John Oxendine loves Blue Cross Blue Shield. So much so that he’s insured by Blue Cross, who he thinks is a wonderful company. So why is Blue Cross suing the insurance commissioner?

Keeping prices artificially high?

In July of this year, Oxendine warned Blue Cross and other insurers in the state that certain clauses in contracts between insurers and hospitals were illegal and had to be removed. Those clauses, known as “most favored nation clauses” were being used by the giant insurer to effectively make sure that other insurers could not undercut the deals in place with Blue Cross.

States around the country are beginning to focus on the effects of the special clauses, and so far 16 states ban or limit the provisions. Recently, the Justice Department filed a high-profile lawsuit against Blue Cross Blue Shield inn Michigan over its use of the clause, on the basis that it kills off competition, helping to keep pricing artificially high while allowing the company to maintain its market dominance.

Usually, the clauses are used to make sure that other insurers can not get the same reimbursements rates as Blue Cross. In other instances, the clauses required hospitals to charge other insurers a premium of 30 to 40 percent over the Blue Cross rate.

The provisions often block smaller insurers from offering lower prices, and hospitals and doctors from benefiting from natural competitive forces. For example, if a new insurer to the market proposes to pay for a hospital’s excess rooms at a lower reimbursement rate, the clause prevent hospitals from doing so, with the end result of rooms staying empty and keeping prices high.

After Oxendine warned Blue Cross that the insurance commission was prohibiting the clauses as illegal, Blue Cross fired back with their response. The company filed a lawsuit against the commission, taking the position that not only are the clauses legal, but beneficial to consumers. The case is now pending in court.

The Atlanta Constitution-Journal

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