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From Antitrust Law Daily, March 2, 2015

Alleged price fixing conspiracy more akin to “traditional health insurance”

By Greg Hammond, J.D.

An Iowa-based health insurer’s agreements with self-insuring employers and out-of-state Blue Cross and Blue Shield affiliates did not amount to per seviolations of Iowa antitrust law, according to the Iowa Supreme Court. In affirming the lower court’s order of summary judgment in favor of the health insurer, the court determined that the arrangements at issue were governed by the rule of reason, not the per se rule (Mueller v. Wellmark, Inc., February 27, 2015, Mansfield, E.).

Background. Wellmark, Inc. is an Iowa-based health insurer that belongs to the national Blue Cross and Blue Shield (BCBS) network. Various chiropractors filed suit against Wellmark, alleging that the insurer contracted with health care providers in Iowa to provide services at certain reimbursement rates and entered into agreements to make those rates available to self-insured Iowa plans that it administers and to out-of-state BCBS affiliates when those entities provide coverage for services provided in Iowa. The agreements, according to the chiropractors, violated Iowa antitrust law.

After previous summary judgment proceedings, the chiropractors stipulated that their only remaining antitrust claims were: (1) Wellmark engaged in per se price fixing when it entered into agreements with self-insuring Iowa employers to make its network and claims administration available to them; and (2) Wellmark engaged in per se price fixing when it participated in the national BlueCard program under which BCBS entities agreed to make their in-state networks available to each other when their respective customers needed out-of-state services.

Specifically, the chiropractors alleged that Wellmark engaged in a conspiracy to fix prices by establishing a maximum price for services of Iowa chiropractors in the company’s provider network, or through a restrictive or capitated payment system in Wellmark’s HMO. The Iowa District Court for Polk County granted Wellmark’s motion for summary judgment on the remaining claims, rejecting the chiropractors’ per se theory. The chiropractors timely appealed the decision.

Traditional health insurance. The Iowa Supreme Court agreed with the state district court’s decision that Wellmark’s arrangements with self-insured employers and out-of-state BCBS affiliates were governed by the rule of reason, not the per se rule. Specifically, the court determined that the arrangements were not naked price fixing agreements, but more akin to joint ventures. In addition, efficiency-related observations could be made about the reciprocal arrangements with out-of-state BCBS licensees, enabling Wellmark to offer a nation-wide product that meets the needs of consumers and saving Wellmark from the expense of having to maintain a network and rate structure in states with very few claims.

The court also noted that the arrangements at issue do not truly represent a horizontal agreement between competitors and are not a “naked restraint,” but agreements that are ancillary to a broader venture with procompetitive potential. Instead, the court characterized the agreements as “significant relationships” under which Wellmark provides much more than a price list. Specifically, the court found that Wellmark appears to provide “traditional health insurance.” The only difference is that Wellmark is not the ultimate financial backstop.

Lastly, the court noted reasons for “judicial hesitancy” in classifying the challenged practices as per se violations of Iowa’s antitrust law. Specifically, it noted that the practices are widespread; a large percentage of Iowans are covered by self-insured employer plans administered by Wellmark; and the BlueCard network is a national program used by health insurers and clients all over the country. “We should be reluctant to declare these arrangements flatly illegal, without considering their relative procompetitive or anticompetitive effects,” the court stated. Because the plaintiffs’ claim was restricted to a per se theory of liability, the district court’s order of summary judgment in favor of Wellmark was affirmed.

The case number is 13-1872.

Attorneys: Glenn L. Norris (Hawkins & Norris, P.C.); Harley C. Erbe (Erbe Law Firm), and Steven P. Wandro (Wandro & Associates, P.C.) for appellants. Hayward L. Draper (Nyemaster Goode, P.C.) for appellees.

Companies: Wellmark, Inc.

MainStory: TopStory Antitrust IowaNews

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