Originally published in Antitrust News & Notes February
On December 6, 2011, Aetna, Inc. (Aetna) filed a complaint
against Blue Cross Blue Shield of Michigan (Blue Cross), claiming
that its use of most favored nation (MFN) clauses in contracts with
hospitals across the state violates Section 1 of the Sherman Act
and Section 2 of the Michigan Antitrust Reform Act.1
Aetna alleges that the MFN clauses raise the cost of health
insurance in Michigan by causing health insurance providers to pay
elevated rates for hospital services. The complaint follows the
district court's decision to deny Blue Cross' motion to
dismiss a separate complaint filed in October 2010 by the Antitrust
Division of the Department of Justice (DOJ) and the State of
Michigan involving the same alleged antitrust violations.
According to its complaint, Aetna attempted to expand its
network in Michigan by acquiring a Michigan-based health insurance
provider in 2005. Aetna achieved initial success, with revenues in
Michigan increasing from $12.9 million in 2005 to $110.8 million in
2007.2 The complaint alleges that, in an effort to
defend its position as the dominant health insurance provider in
Michigan, Blue Cross "used its incumbent power to impose
exclusionary contracts on hospitals" to thwart Aetna's
growth.3 As a result, Aetna contends that its membership
declined from 33,900 customers in 2007 to 14,900 in 2010.
Aetna alleges that the MFN clauses violate Section 1 of the
Sherman Act by restraining competition in the market for the sale
of insurance and administrative services in Michigan. By requiring
the contracting hospital to charge Blue Cross' competitors more
or no less than the amount Blue Cross pays for the same hospital
services, the complaint argues that the clauses were designed to
increase competing health insurance providers' costs, sometimes
by more than 25 percent. Unlike traditional MFN clauses, which
guarantee low costs for the contracting party, Aetna claims Blue
Cross' MFN clauses are anticompetitive by design because Blue
Cross agrees to increase the amount it pays to the contracting
hospitals in order to guarantee even higher costs for competitors.
Aetna asserts that the hospitals have no choice but to agree to the
MFN clauses because Blue Cross serves at least 60 percent of the
commercial health plan population in Michigan.4
Blue Cross has filed a motion to dismiss the complaint claiming
that Aetna failed to allege specific anticompetitive effects in the
relevant market caused by the MFN clauses. Although the complaint
contains allegations that the MFNs hurt Aetna's membership,
Blue Cross' motion argues that Aetna failed to show injury to
the overall market, not just a private competitor. Blue Cross
alleges that use of the MFN clauses is strategic, competitive
behavior, not anticompetitive acts. Blue Cross also claims that
Aetna failed to establish a causal relationship between its decline
in membership and the MFN clauses.
If successful, Aetna seeks treble damages and an injunction to
prevent Blue Cross from using MFN clauses in hospital contracts.
The hearing on Blue Cross' motion to dismiss is set for April
1 Complaint, Aetna, Inc. v. Blue Cross Blue Shield of
Michigan¸ No. 2:11-cv-15346 (E.D. Mich. Dec. 6,
2 Aetna states its revenues for fully insured large
accounts ("Select Accounts") and "small group"
membership separately in the Complaint. See id. at
3 Id. at 14.
4 Id. at 21. Antitrust News &
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Though similar legislation failed to pass last year, Representative Ehrlich said that she believes there is now greater support in the legislature for limitations on the use of non-competes. Significantly, however, Governor Baker has yet to take a position on the issue.
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