The Honorable Richard Shelby
The Honorable Gary Palmer
The Honorable Steve Marshall
The Honorable Dan Roberts
The Honorable Jim Carns
Re: BCBS antitrust class action settlement; reducing health care costs
The settlement notice says in part:
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION If you purchased or were enrolled in a Blue Cross or Blue Shield health insurance or administrative services plan between 2008 and 2020, a $2.67 billion Settlement may affect your rights A federal court authorized this Notice. This is not a solicitation from a lawyer. • Class Representatives (“Plaintiffs”) and the Blue Cross Blue Shield Association (“BCBSA”) and Settling Individual Blue Plans reached a Settlement in a class action antitrust lawsuit called In re: Blue Cross Blue Shield Antitrust Litigation MDL 2406, N.D. Ala. Master File No. 2:13-cv-20000-RDP (the “Settlement”). 1 BCBSA and Settling Individual Blue Plans are called “Settling Defendants.” • Plaintiffs allege that Settling Defendants violated antitrust laws by entering into an agreement not to compete with each other and to limit competition among themselves in selling health insurance and administrative services for health insurance. • Settling Defendants deny all allegations of wrongdoing and assert that their conduct results in lower healthcare costs and greater access to care for their customers. • The Court has not decided who is right or wrong. Instead, Plaintiffs and Settling Defendants have agreed to a Settlement to avoid the risk and cost of further litigation. The Court certified two Settlement Classes in this case―a Damages Class and an Injunctive Relief Class. These Classes are further defined in Question 5. • If approved by the Court, the Settlement will establish a $2.67 billion Settlement Fund. Settling Defendants will also agree to make changes in the way they do business that will increase the opportunities for competition in the market for health insurance.
I, as a possible member of the plaintiff class, may object to the settlement because I think the past harm to the plaintiff class is entirely speculative and should not be a basis for monetary damages and attorneys fees. Further, I think the benefits of the agreed changes in business practices should not get imposed via the class action settlement because the parties agreeing to the changes are not sufficiently motivated by the goal of achieving such benefits. Rather, such changes should come within the purview of governmental lawmakers and regulators who are more clearly charged with responsibility for imposing changes that achieve the benefits in question.
I request Governor Ivey, Attorney General Marshall, Senator Roberts and Rep. Faulkner to review Alabama's health care costs problems, make a determination of whether or not you support the settlement as furthering in a desirable way the objective of reducing health care costs in Alabama, and make a submission to the court regarding the same.
I request of Senators Shelby and Tuberville and Rep. Palmer that they, with the help of the Department of Justice, the Federal Trade Commission, and the Department of Health and Human Resources, to do a similar review of America's health care costs problems, make a determination of whether or not they support the settlement as furthering in a desirable way their objective of reducing health care costs, and either themselves make a submission to the court regarding the same or seek to have the Department of Justice, the Federal Trade Commission and/or the Department of Health and Human Resources make a submission.
APPENDIX:
A. Problems of high costs and inadequate coverage in United States health care
There is ongoing years long national political battles over the health care law that establishes and governs how health care is provided and how it is financed in the United States.
The main problems are too high cost, too many Americans being uninsured and not having access to adequate health care, and fractured delivery and financing systems under private insurance, Medicare, Medicaid and public health.
In 2009 and 2010 there was the tumultuous enactment by Congress of The Affordable Care Act (the "ACA"), which was done on party lines of President Obama and the Democrats favoring the law and the Republicans adamantly opposed.
Donald Trump and the Republicans spent 2016 to 2020 trying to repeal or dismantle the ACA. They were not successful in repealing it in Congress, but Trump and the Republicans succeeded in significantly dismantling the ACA, including by taking away a key financial underpinning of the ACA Affordable Care Act, to wit, the individual mandate.
The ACA reduced the uninsured problem and expanded health care coverage, but the high cost problem remained and, in fact, has been worsened under the ACA.
The Medicare trust fund is currently projected to run out in 2026.
The current stand off between Republicans and Democrats can be gleaned by reading ACHIEVING UNIVERSAL, AFFORDABLE, QUALITY HEALTH CARE on the Democratic National Committee website and Conservative Perspectives on Health Care Reform
The two sides agree there is and continues to be a major cost problem, which still needs addressing.
From ACHIEVING UNIVERSAL, AFFORDABLE, QUALITY HEALTH CARE "The United States spends more per capita on health care than any other advanced economy, and has less to show for it. Health care costs have been increasing for decades, with average premiums for an employer-provided family plan topping $20,000 in 2019."The Democrats say
Private insurers need real competition to ensure they have incentive to provide affordable, quality coverage to every American. To achieve that objective, we will give all Americans the choice to select a high-quality, affordable public option through the Affordable Care Act marketplace. The public option will provide at least one plan choice without deductibles; will be administered by CMS, not private companies; and will cover all primary care without any co-payments and control costs for other treatments by negotiating prices with doctors and hospitals, just like Medicare does on behalf of older people. [quoted from ACHIEVING UNIVERSAL, AFFORDABLE, QUALITY HEALTH CARE]
Conservative Perspectives on Health Care Reform indicates the Republican side in this way:
Many conservatives believe families, individuals and businesses should be able to purchase health insurance nationwide to heighten competition for their business and provide a variety of choices.Further, individuals should be permitted to obtain insurance privately or through organizations of their choice: employers, churches, professional associations or others. Such policies would automatically bridge the gap between retirement and Medicare eligibility and cover multiple years.More choices in coverage is just one aspect of a free-market health care system. Another is allowing consumers to shop for treatment options. This would promote competition between conventional and alternative providers and make patients the center of care. Permitting providers to practice nationwide also would build genuine national markets and give consumers greater responsibility in their own health care decisions.Competition ensures the public is better educated about preventive health care and treatment options. It forces providers to be more transparent regarding medical outcomes, quality of care and the costs of treatment.It also means more competitive pricing. Lesser quality providers get weeded out, because—like elsewhere in the free-market economy—they get priced out of malpractice insurance and have no way to raise their prices. Developing national standards of care to measure and record treatments and outcomes ensures only top-quality providers remain in business.Dramatic reforms in Medicare would have to supplement a free-market health care system. Under this scenario, the Medicare payment system, which compensates providers for prevention, diagnosis and care, would have to be overhauled into a tiered system, with providers not bein
The main culprit in the battle over health care costs is the extensive damage awards doled out by activist judges every day across the country. Thanks to these inflated awards, defendants hoping to avoid a court appearance are left with no other option than inflated settlements.
Special mention needs to be made of Medicaid. An important element of the ACA was an option for states to expanding Medicaid. About ten states, including Alabama have not taken up that option. In those that have refused to expand Medicaid, Republicans in power have maintained that their states cannot afford to pursue the measure. Biden's Covid-19 relief bill has made an offer of of increased federal dollars over two years to states that adopt expansion for the first time.
B. Complaint's allegations about Blue Cross limiting competition
Competition is central in the class action lawsuit, with the essence being that Blue Cross has business practices that limits competition, that this enables Blue Cross to charge higher premiums than would obtain were the competition not limited, and the higher premiums mean higher health care costs.
Plaintiffs allege that Settling Defendants violated antitrust laws by entering into an agreement not to compete with each other and to limit competition among themselves in selling health insurance and administrative services for health insurance. • Settling Defendants deny all allegations of wrongdoing and assert that their conduct results in lower healthcare costs and greater access to care for their customers. • The Court has not decided who is right or wrong. Instead, Plaintiffs and Settling Defendants have agreed to a Settlement to avoid the risk and cost of further litigation.
From the complaint
The Individual Blue Plans often have substantial market power within their respective Service Areas throughout the United States. The restraints summarized above enabled the Plans to entrench and perpetuate those respective market positions, thereby insulating them from competition by other Blue licensees. This was the direct result of the illegal conspiracy to unlawfully divide and allocate the geographic markets and limit competition for commercial health benefit products in the United States. 11. The Individual Blue Plans’ anticompetitive agreement and implementing conduct and foreclosure of competition have prevented subscribers and enrollees from being offered competitive premium prices and self-funded accounts from being offered competitive ASO fees. 12. These inflated premiums and ASO fees would not be possible if the market for commercial health benefit products in these Individual Blue Plans’ Service Areas were competitively unrestrained. Competition is not possible so long as the Individual Blue Plans and BCBSA are permitted to enter into agreements that have the actual and intended effect of restricting their ability to compete with each other, either as a Blue or a non-Blue Plan.
Pages 69 through 124 of the complaint detail extensively the history and business practices of Blue Cross. that are alleged to limit competition and result in higher premiums and higher health care costs.
527. The Blue Plans wield collective nationwide economic power. BCBSA’s own factsheet admits this.44 528. The 36 Individual Blue Plans serve 106 million people—one out of every three Americans. The various Plans service 88 of the Fortune 100 companies, including major firms like Wal-Mart, Microsoft, General Motors, and UPS. They also service over seven million people who work for small employers. They are the number one choice for organized labor, serving 17 million organized workers, retirees, and their families. They offer coverage through Affordable Care Act insurance exchanges and service millions of Americans through government-supported healthcare programs. The BCBS provider network includes more than 90% of doctors and hospitals 44 Page 124 of 142 120 nationwide. More than 62 million BCBS members across all 50 states have access to care from more than 342,000 providers. As described above, the market shares of Individual Blue Plans in various states are indicative of market power.
Further the complaint alleges the non-regulation by Federal and state authorities of divisions of markets and allocation of customers and non-regulation of premiums.
529. The state insurance authorities in any of the Defendant Individual Blue Plans’ states do not regulate the division of markets and allocation of customers that are the subject of this Complaint. 530. No state insurance authority in any of the Defendant Individual Blue Plans’ states clearly articulates and affirmatively expresses as state policy the challenged restraints on trade that are the subject of this Complaint, i.e., division of markets and allocation of customers. Nor does any state insurance authority in any of the Individual Blue Plans’ states actively supervise the challenged restraints on trade that are the subject of this Complaint. 531. Prior to the Affordable Care Act, no Defendant Individual Blue Plan filed its insurance rate(s) with a federal regulatory agency. 532. Even since the Affordable Care Act has been implemented, no federal regulatory agency has had the authority to prevent the Defendant Individual Blue Plans from increasing premiums. 533. No Defendant Individual Blue Plan has detailed the challenged restraints on trade that are the subject of this Complaint to any insurance authority
. . . . .
These damages consist of having paid artificially inflated, unreasonable, and/or supra-competitive premiums and Case 2:13-cv-20000-RDP Document 2616 Filed 11/02/20 Page 128 of 142 124 ASO fees to the Individual Blue Plans; these premiums and ASO fees were higher than Plaintiffs and Members of the Nationwide Damages Class and the Self-Funded Subclass would have paid but for the Sherman Act violations. These damages further consist of being deprived of the opportunity to purchase health benefit products from one or more of the other Individual Blue Plans and/or their non-Blue affiliates at a lower premium or contractual rate and/or at a price set by a market free from the non-price restraints imposed by Defendants’ anti-competitive agreements. As described above, Plaintiffs and other Members of the Nationwide Damages Class and the Self-Funded Subclass have also been deprived of consumer choice and increased innovation
C. Settlement agreement
The settlement agreement provides for a settlement amount of $3.67 billion to compensate for, from which the attorneys will receive approximately $770 million.
WHEREAS, Class Representatives have contended that they and the Settlement Classes are entitled to actual damages, treble damages, and injunctive relief for loss or damage, and threatened loss or damage, as a result of violations of the laws as alleged in the Subscriber Actions, arising from Settling Defendants’ conduct; WHEREAS, Settling Defendants deny any and all purported wrongdoing in connection with the facts and claims that have been or could have been alleged against them in the Subscriber Actions, and have asserted a number of defenses to Class Representatives’ claims;
WHEREAS, Settlement Class Counsel and Self-Funded Sub-Class Settlement Counsel consider the settlement herein to be fair, reasonable, and adequate, and in the best interests of the Settlement Classes because of the substantial uncertainties of litigation, payment of the Settlement Amount, and the value of the Injunctive Relief that Settling Defendants have agreed to provide pursuant to this Agreement; WHEREAS, Settling Defendants, despite their beliefs that the claims asserted lack merit and that they have valid defenses to such claims, have nevertheless agreed to enter into this Agreement to avoid further expense, inconvenience, and distraction to their business of burdensome and protracted litigation, and to obtain the releases, orders, and judgment contemplated by this Agreement, and to put to rest with finality this controversy, including releases of all claims that have been or could be asserted against Settling Defendants based on the allegations in the Subscriber Actions;
The actual damages of higher premiums in the past resulting from the business practices, compared to if the business practices had not been effect, is grossly speculative, and the settlement amount is correspondingly arbitrary. This speculativeness is reflected how minuscule the settlement amount is in the context of actual health care costs involved.
To get a sense of this, consider that Blue Cross says it serves 106,000,000 people. The settlement covers 12 years from 2008 to 2020, The settlement amount of $3.67 billion is approximately $25 per person, which is somewhere in the range of .25% to .5% or less of the premiums the person paid during the 12 years.
The value of the Injunctive Relief in reducing premiums compared to what they would be if the Injunctive Relief was not in place, is equally or more speculative.
Evaluating the settlement agreement needs to take account the extent of the motivation of the plaintiffs' attorneys to receive their $770 million in attorneys fees and and their likely indifference to the arbitrariness of the settlement and indifference to the frossly speculative nature of the benefits to be provided by the Injunctive Relief
The Defendants are equally aware of the speculative nature of the damages from their business practices and the speculative nature of how adversely their businesses will be impacted by the Injunctive Relief if at all. The settlement amount is minuscule compared to the total premiums received during the years 2008 to 2021.
The officers and directors of the Defendants are congnizant, as the complaint points out that and the speculative side, the complaintd364. While nominally still characterized as not-for-profit, a number of the Individual Blue Plans generate substantial earnings and surpluses, and pay their senior administrators and officials substantial salaries and bonuses – often in the multi-million dollar range. The officers and directors have a motivation to keep up their compensation in the future, and there is probably little motivation to resist the settlement agreement because they will have their compensation signifivantly affected in future.
D. Court should have views of other governmental parties
There are governmental parties who have or should have a greater genuine interest in reducing health care costs for individuals who are served by Blue Cross and also for all other Americans. At the state level, these include state insurance departments, state health departments, and state governors and legislatures. At the Federal level, these include the antitrust division of the Department of Justice, the Health and Human Resources Department, and Congress and the President.
I think, in passing on the fairness of the settlement, the court should hear from these other governmental parties their views about how the Blue Cross business practices have limited competition and resulted in increased premiums and health care costs in the past and their views about how the Injunctive Relief will benefit in the future individuals who are served by Blue Cross.
Such views may be that the Injunctive Relief is not strict enough, or that the Injunctive Relief will not have a beneficial effect unless it is part of a more comprehensive regulation that encompasses insurance companies other than Blue Cross, or that the Injunctive Relief is inconsistent with other things that are needed to reduce costs.
These parties have not been unaware of the Blue Cross business practices. Taking as an example the most favored nation clause, paragraph 519 fo the complaint says this
519. Use of MFNs and related techniques is widespread and pervasive among Blue plans. The member plans of BCBSA have discussed the legality and usefulness of MFNs at BCBSA gatherings, such as the BCBSA 41st Annual Lawyers Conference, held May 3, 2007 in Miami, Florida. There, a presenter informed representatives of the member plans that “DOJ and FTC have focused on potential anticompetitive character of MFN clauses, particularly on exclusionary impact” and that “[w]here [an] MFN has overall exclusionary effect on competition and entrenches market power, it could be actionable.”
As indicated above, the Democrats and Republicans are deeply divided about how to reduce health care costs.
E. Request of addressees
I request those of the addresses who are my state officials and/or my representatives in the Alabama legislature review the big picture of reducing health care costs, make a determination of whether or not they support the settlement as furthering in a desirable way their objective of reducing health care costs, and make a submission to the court regarding the same.
I request of Senators Shelby and Tuberville and Rep. Palmer that they solicit the Department of Justice and Department of Health and Human Resources to do a similar review of the settlement agreement, make a determination of whether or not they support the settlement as furthering in a desirable way their objective of reducing health care costs, and make a submission to the court regarding the same.
9/26/21
See also