IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
IN RE: BLUE CROSS BLUE SHIELD
ANTITRUST LITIGATION Master File No.
2:13-cv-20000-RDP
MDL 2406
MEMORANDUM REGARDING OBJECTION OF ROBERT SHATTUCK
In "Managing Class
Action Litigation: A Pocket Guide for Judges, Barbara J. Rothstein & Thomas
E. Willging Federal Judicial Center 2009, (which is at Managing
Class Action Litigation: A Pocket Guide for Judges, Second Edition) (“Pocket Guide”), there is "III.
Settlement Review: Risks and Issues." Under said III, there is "B.
Obtaining information about the settlement", and under said B, there is
"5. Information from objectors,", which starts out "Before and
during the fairness hearing, you might receive written objections and testimony
from objectors. Objectors might contribute to your review in various
ways."
This Memorandum is
submitted in the vein of providing information relative to my objection which
may contribute to the Court's settlement review.
I. The Pocket Guide;
Professor Sharkey
In trying to provide
information in this Memorandum that may contribute to the Court's review, I am
guided by a number of things said in the Pocket Guide, and also by Professor
Catherine Sharkey in Sharkey, Catherine, "CAFA SETFTLEMENT NOTICE
PROVISION: OPTIMAL REGULATORY POLICY? 156 U. PA. L. Rev. 1971 (2008)
(“Sharkey”), set out Cafa Settlement Notice Provision: Optimal Regulatory
Policy
From the Pocket Guide, I
cite the following statements:
"Class
actions may also help regulators control conduct that threatens to harm various
markets." (p.1)
"Members
of Congress and others who assert class actions’ general utility also point,
however, to abuses that threaten to undermine their usefulness. Critics single
out cases in which the benefits accruing to the class as a whole and to the
public seem minimal" (p.1)
" Recent empirical research indicates that class
action settlement administration has often not produced the transparent
information that judges and policy makers need for reviewing class action
settlements and setting clear standards for such reviews. " (p.2)
"Be
aware that the adversarial clashes usually end with the settlement. Indeed,
most settlements preclude the parties and attorneys from opposing the
settlement’s provisions, especially the stipulations about attorney fees. Thus,
you need to take independent steps to get the information you’ll undoubtedly
need to review a settlement agreement." (p.10)
" . You may need to search elsewhere for
information that will allow you to take an independent and hard look at the
merits of the claims and defenses. " (p.11)
“Expert
evaluations of the costs and present monetary value of all aspects of the
settlement to the class may be avail information they used to satisfy their professional
obligation to advise their clients about the value of the proposed settlement.”
(pp.12-3)
",
consider whether you need an expert’s appraisal of the value of nonmonetary (or
deferred monetary) components of the settlement." (p.14)
"Before
and during the fairness hearing, you might receive written objections and
testimony from objectors. Objectors might contribute to your review in various
ways."(p.15)
"
Ask yourself—and perhaps the parties—the
following questions: How much is the
injunction worth to the class as a practical matter? What is the dollar value
the relief might yield? What is the real cost to the defendant?" (p.19)
"The
idea is to encourage government regulators to participate in reviewing
settlements and lend their expertise (and perhaps an adversarial note) to the
fairness hearing. You may want to consider extending an express invitation to
any regulatory body you have found to be effective in dealing with the subject
matter in question." (p.23)
"The
Federal Trade Commission (FTC) has extensive statutory authority and expertise
in dealing with antitrust, unfair competition, and consumer protection matters
. . . You may also decide to exercise your discretion to invite the FTC to
participate in settlement and fee reviews as a friend of the court if the
subject matter of the case makes this appropriate, but you may need to take
steps to avoid delaying the proceedings, such as setting a firm deadline for
government responses. (pp.23-4)
"In
pursuing public goals of advancing fair competition, protecting consumers, and
policing the marketplace against false and misleading information, such
agencies may invest substantial resources in investigating a defendant’s
alleged malfeasance" (p.31)
"Special
masters, court-appointed experts, and other judicial adjuncts with special
expertise may be useful in a variety of contexts in class action
litigation." (p.33)
From Sharkey, I quote
the following:
Little
is known about why this provision was added to CAFA, and the legislative
history is scant. Nonetheless, it has been an enduring feature since the
legislation was first proposed in 1997.12 At the most basic level, the
provision ensures that "a responsible state and/or federal official
receives information about proposed class action settlements and is in a
position to react if the settlement appears unfair to some or all class members
or inconsistent with applicable regulatory policies."' 3 Specialized state
regulatory authorities (or the state AG in the absence of a state regulator)
are likely to be familiar with the business practices at issue in the
litigation, and they are well situated to "voice concerns if they believe
that the class action settlement is not in the best interest of their
citizens."'14 The overriding purpose seems to have been to prevent lawyers
from crafting abusive settlements favoring themselves over consumers or other
injured parties.' In this vein the provision provides "a check
against inequitable settlements in these cases," which could arise from
"collusion between class counsel and defendants to craft settlements that
do not benefit the injured parties." 6
II. What in the
Settlement needs review
The Court needs to apply
what the Pocket Guide says about review of a settlement to the case at hand and
decide what particularly needs its attention.
How the Settlement treats the different classes needs much attention
by the Court. My objection does not concern directly how the different classes
are treated.
In providing information
in this Memorandum, I have keyed to things that Plaintiffs say or contend in
their SUBSCRIBER PLAINTIFFS’ MEMORANDUM OF LAW IN
SUPPORT OFMOTION FOR FINAL APPROVAL OF CLASS SETTLEMENT (“Plaintiffs’ Memorandum”). I have keyed on the
below statements made in Plaintiffs’ Memorandum:
"The
Settlement represents a monumental achievement. The Settlement secures
“historic and substantial” structural changes that will reshape competition in
the health insurance industry and offer increased choice in the market for
health insurance to millions of Americans, along with one of the largest
monetary recoveries ever achieved in an antitrust class action
settlement." (p.1)
"As
a threshold observation, however, it is worth reminding the Court that many of
the core features of the BCBS rules and practices challenged in this case were
public knowledge for decades before this case was filed, yet neither the
government agencies charged with enforcing the Sherman Act nor any of the
objectors ever sought to challenge those rules and practices. One can find
public statements by BCBS executives going all the way back to 1946 that
describe a system in which “only one Blue Cross Plan is established in each
enrollment area.” ECF No. 1353-94. In 1971, the Blue Cross president testified
before a Senate antitrust subcommittee that the Blue Plans had “exclusive
territorial arrangements.” ECF No. 1353-95 to -96. In 1979, a report by the
Federal Trade Commission (“FTC”)—which is tasked with enforcing the nation’s
antitrust laws— recognized that “Blue Shield plans generally do not compete
with each other.” ECF No. 1353- 21 to -22. A number of courts also recognized
the existence of the ESA restrictions.3 And despite knowing about the BCBS
system for decades, the federal antitrust enforcement agencies chose never to
challenge them. Even as this litigation has been pending for almost a decade,
they never chose to bring any action or to submit anything in support in this
case." (p.3)
"Recognizing
this history is critical to understanding the achievements of this Settlement
in their proper context. This was not a case in which government agencies
uncovered a secret cartel, followed by the inevitable class action lawsuits.
This was not even a case in which private actors uncovered some secret
arrangement that was previously not public. Instead, this was a case in which a
small group of class representatives and their counsel (which was initially a
small group too) chose to challenge a well-known, decades-old, and overtly
public system for arranging the activities of the entire BCBS system. It was an
audacious challenge, and it is not surprising that it resulted in close to a
decade of trench-warfare litigation, with hundreds of lawyers deployed by the
parties. Since the cases’ inception, no government agencies saw fit to
intervene or do anything else to support the private plaintiffs. Nor did any of
the objectors, not even the handful of Fortune 500 companies that have now been
signed up to object. General Motors, Home Depot, FedEx, Boeing, Dollar
General—these are companies that have the resources to fight any injustice that
harms them, yet they chose never to challenge the BCBS system, not even during
the eight long years between when this case was first filed and when this
Settlement was announced. Instead, they chose to remain on the sidelines, only
to come to Court now to complain that the Settlement does not go far enough,
leaves too many things in place, or fails to give them as much as their lawyers
now say they deserve. The Court should not give credence to these objections
for the reasons set forth below." (p.4)
"The
Settlement creates substantial benefits and opens pathways to more competition,
lower
costs, greater innovation, more consumer choice, and increased availability of
products for
millions of Settlement Class Members. (p.5)
"In
the accelerated Alabama actions, Subscriber Plaintiffs put forward a sophisticated
damages model estimating, for purposes of their class certification motion,
impact and damages based on entry by Blue and Green competitors into Alabama.
The but-for world constructed by Subscriber Plaintiffs’ experts involved a
complex modeling of factors estimating the impact of the entry of significant
competition within the market, including estimated profitability of entry,
timing of entry, type of entry, strength of entry, progression of entry, and
competitive response to entry. Based upon these elements, Subscriber
Plaintiffs’ expert then modeled an estimate of damages in Alabama. Defendants’
experts aggressively challenged Subscriber Plaintiffs’ damages model and
vigorously attacked Subscriber Plaintiffs’ findings and experts’ calculations."
(p. 35)
"Subscriber
Plaintiffs developed a damages estimate only for the Alabama damages class due
to the acceleration of the Alabama actions, and Subscriber Plaintiffs’ expert
Ariel Pakes calculated an overcharge ranging from 3.4% to 5.5% for Alabama class
members. ECF No. 2411-1 ¶ 10 (Executive Summary of Dr. Pakes’ Class
Certification Expert Report). In support of Preliminary Approval, in
extrapolating the Alabama damages model nationwide through 2019, Dr. Pakes
estimated a potential maximum single damages recovery ranging from $18.6
billion to $36.1 billion. ECF No. 2610-11, Declaration of Dr. Ariel Pakes
(“Pakes PA Decl.”) ¶ 10. A recovery of $2.67 billion represents 7.3% to 14.3%
of that estimated maximum full recovery, which is a reasonable recovery and
consistent with other approved settlement amounts. (pp 43-4)
“Despite
the public knowledge over how the BCBS system is structured, the federal
agencies tasked with enforcing our antitrust laws have chosen never to
challenge the system. Even after this litigation was pending for almost a
decade, no antitrust enforcement agency chose to bring any action or submit
anything in support of the Subscriber Plaintiffs in this case. Now that the
Class Representatives and Subscriber Class Counsel have spent close to another
decade, and hundreds of millions of dollars in resources, challenging that
system, certain entities have emerged (seemingly at the behest of a small
number of law firms) to criticize a Settlement that provides a multi-billion
dollar damages recovery and injunctive relief that will enable enormous amounts
of new competition. Keeping the nature of this Settlement in historical
perspective is warranted.” (p.63)
Also, below
are paragraphs 364, 529 through 533 from the class action complaint.
364.
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.
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
III My steps
to get information
My information comes in
the form of things I have said and say herein relative to the Settlement and my
own steps to get information relative to the settlement (which may inform the
Court relative to the information the Court obtains about the settlement, as
the Pocket Guide says the Court should do).
The steps I have taken
to get information are the following:
In May, I initiated
communication to Alabama Gov. Kay Ivey, United States Senator Richard
Shelby, United States Senator Tommy Tuberville, U.S. Rep. Gary
Palmer, Alabama Attorney General Steve Marshall, Alabama state Senator Dan
Roberts, and Alabama state Rep. Jim Carns, such communication being the letter that is set out in Exhibit A.
In July I submitted my
objection, which is set out in Exhibit B
On September 26 I directed to the Alabama Civil
Justice Reform Committee the communication that is set out in Exhibit C. I
directed this communication to ACJRC in care of directors Danne Howard and
Robin Stone, because Ms. Howard is deputy director of the Alabama Hospital
Association; Mr. Stone was Vice President of Governmental Affairs of Blue Cross
Blue Shield of Alabama; those two organizations have special knowledge relative
to the subject matter of the class action lawsuit; and Ms. Howard and Mr. Stone
should be specially qualified to evaluate my objection to the class action
settlement.
On October 5, I sent to Ms. Emily T. Marsal, Executive Director of the Alabama
State Health Planning & Development Agency the email set out as Exhibit D.
The Agency's mission is "To ensure that quality health care facilities,
services, and equipment are available and accessible to the citizens of Alabama
in a manner which assures continuity of care at a reasonable cost." My
email solicited the Agency's views about whether the instant class action
settlement is helpful to the Agency's mission, or whether it is unhelpful to
the Agency's mission, or whether the settlement is of no material consequence
for the Agency's mission.
Another person on the Alabama State Health Planning & Development Agency is
Dr. Carol J. Ratcliffe, Professor and Chair of the School of Public Health,
Department of Healthcare Administration and Informatics, at Samford University.
I sent to Dr. Ratcliffe the email I had sent to Emily Marsal. I asked Dr.
Ratcliffe whether, given her position in the Agency and her relevant
professional qualifications, she would provide an affidavit for submitting to
the Court that set forth her views about the effect on health care costs of the
Blue Cross practices that are the subject of the class action against Blue
Cross.
I also sent Emily Marsal's email to Dr. Nancy M. Borkowski, DBA, CPA, FACHE, FHFMA,
Distinguished Professor, Department of Health Services Administration, UAB
School of Health Professions because of her status as "UAB Site
Co–Director, NSF I/UCRC Center for Health Organization
Transformation."
Further, I contacted one Gil Hanahan, who is the
state Healthcare Liaison for Senator Tuberville's office.
I also sent to Reyn Norman, general counsel of the Alabama Department of
Insurance the email I had sent to Emily T. Marsal.
I contacted Michael A. Morrisey PhD, Professor Emeritus of the UAB School of
Public Health, who teaches a course "Health Insurance/Managed Care," by
sending him the email I had sent to Emily T. Marsal,
I contacted Andrew Burnett, who was previously on Senator Shelby's staff for
health policy.
Lindsey L. Lewis, Executive Legislative Assistant to Senator Dan Roberts and
Clerk of Senate Healthcare Committee (Sen. McClendon-Chair) replied to me on
behalf of Sen. Roberts, and I sent Ms. Lewis the email set out at Exhibit E.
J. Fairley McDonald, III, Chief Counsel – Legal Division, of the Alabama
Department of Insurance advised me that he believed the CAFA notice was served
on Attorney General Marshall, and not on the Commissioner of Insurance. He
indicated the Commissioner does cause “licensing” of, and regulate, Blue Cross
and Blue Shield of Alabama, Inc., and, in that sense, is a proper recipient of
a CAFA notice for that entity but that the Commissioner, though, is not chief
regulator nor licensing authority of other Blue Cross entities in this
multi-district litigation or the Blue Cross Association. Mr. McDonald said
that, as far as he knew, neither the Attorney General nor the Commissioner had
filed anything in opposition to the proposed settlement and the Department of
Insurance did not propose to appear at the upcoming “fairness” hearing.
I only recently learned
about the CAFA notice requirement. I obtained from the class action attorneys a
copy of the CAFA notice and a list of federal and state officials to whom the
CAFA notice was sent. I was advised that there were no responses to the CAFA
notice, except that the Department of Labor raised the matters discussed in Plaintiffs’
Memorandum.
IV. Court review; my
review
The Court, of course,
decides what should be the focus of its review, and how it should do its
review. I offer the review I have done in making my objection, for whatever the
same is worth to the Cout in its review.
As indicated above, how
the Settlement treats the different classes needs much attention by the Court.
My objection does not concern directly how the different classes are treated,
and I have made no review of that.
As indicated above, I
have focused on the things said in Plaintiffs’ Memorandum (and in the Complaint)
that are set out in II above.
I divide those things
into (i) those related to the Plaintiffs complex modeling of factors estimating
the impact of the entry of significant competition within the market, including
estimated profitability of entry, timing of entry, type of entry, strength of
entry, progression of entry, and competitive response to entry, and (ii) those
things that I will refer to as the “bigger picture” effect of the Injunctive
Relief
A. Review of Plaintiffs’
modeling
Plaintiffs modeling is
done for computing alleged damages during the 2008 to 2020 period, and it is
implicitly offered as guidance for evaluating the Injunctive Relief going
forward.
I have made no study of
Plaintiffs' "sophisticated damages model" or of how "Defendants’
experts aggressively challenged Subscriber Plaintiffs’ damages model and
vigorously attacked Subscriber Plaintiffs’ findings and experts’
calculations."
Even without studying
the model, I can do rudimentary thinking about the real world that can be
brought to bear on the credence to be given to Plaintiffs' modeling.
That real world includes
the real world during the period of 2008 to 2020, and the real world going
forward during which the Injunctive Relief is in effect.
In such real world, each
Defendant is keenly attuned to its level of profits and maintaining (or
increasing) its level of profit. In simplest terms, a Defendant's profitability
is premiums received minus amounts paid under its insurance polices
Plaintiffs say that if the Injunctive Relief had
been in place during 2008-2020, the Defendants' premiums would have been less,
and their premiums will be less going
forward if the Injunctive Relief is put into effect now.
Rudimentary thinking says, in the real world of
2008 to 2020, less premiums may or may not have happened if the Injunctive
Relief had been in effect then, and, in the real world going forward, less
premiums may or may not happen, and to judge what would or would not have
happened hypothetically in the past, and whether it will or will not happen in
the future requires great knowledge and lots of historical experience in the
conduct of a health insurance company business.
If “in fact” less premiums would have happened
in the 2008 to 2020 period if the Injunctive Relief had been in effect then,
and, if in fact, less premiums will happen if the Injunctive Relief goes into
effect, a Defendant could have maintained the same level of profit in 2008 to
2020 period, or can maintain the same level of profit in the future, by finding
ways to reduce payments it is required to make under its insurance
policies.
In the real world, insureds under health
insurance policies have little sense of all the benefits, their costs, and who
will provide the benefits, and do little monitoring of the same. This allows
health insurance companies to reduce benefits and costs without insureds being
aware of that. Currently, this can be done, for example, by insurance companies
altering their “networks” from year to year and even during an insurance
contract year, without insureds being aware. Such reduction of benefits and
costs negates the value of premiums being less.
Possibly a Defendant can get hospitals, doctors
and other medical providers to accept being paid less for their services. If
those parties agree to accept less, such parties may find ways to deliver less
service to Defendant's insureds, which negates the benefit of the lesser
premiums.
Also a lot of cost shifting happens in the
nation's health care system, such as government subsidies to less well off
persons for paying their insurance premiums. This cost shifting can increase
demand for health insurance, and such increased demand can allow a Defendant to
increase premiums.
Rudimentary thinking includes appreciation that the working of competition and
competitive markets is significantly impaired in the health care system at the
consumer level.
Competitive markets work on the basis of buyers spending their own money for
what they purchase and making subjective comparisons of the value to them of
what they purchase, compared to the value to them of alternative purchases.
With health insurance, once the insurance is purchased, the insured is not
required to pay the full price for an item of health care but only the
applicable deductible and co-pay, and usually the item of health care is
obtained automatically and without comparing the value of the item received to
the full price, Frequently the item is obtained without the insured even
knowing what the full price is.
Further rudimentary thinking informs one that the effect of the Injunctive
Relief (whether hypothetically in place during 2008 to 2020 or actually in
effect going forward) is affected by the laws as in effect at the time
governing a Defendant's business. For example, the Affordable Care Act requires
insurance companies to pay out certain percentages of its premiums for medical
costs, i.e. a limitation on profits. With such a limitation, the Injunctive
Relief may have less effect.
Another example is the Affordable Care Act’s provisions for standardizing
insurance plans. That lessened the ability of insurance companies to reduce
benefits and costs under its insurance policies without insureds being aware.
Such is to be compared to when insurance companies sold “skinny insurance” that
was more profitable. .
With the elimination of the penalty under the Affordable Care Act for
individuals not having qualified insurance, health insurance companies may
return to selling “skinny insurance,” which is more profitable.
In the real world, the individual Defendants
have dedicated, and are dedicating, significant corporate resources to
exploring the possible ways they can negate the
financial and business effects on them of the Injunctive Relief (if it goes
into effect), and are well along in having concrete business plans regarding
the same. In the real world, the Defendants not voluntarily inform the Court
about how they will go about endeavoring to
negate the financial and business effects on them of the Injunctive
Relief (if it goes into effect).
It is also likely in the real world that
plaintiffs’ attorneys, in their decade long investigation of Defendants’
business practices, have gained a sense of possible things the Defendants can
and will do to negate the financial and business effects on the Defendants of the
Injunctive Relief. The plaintiffs’ attorneys as well may not be voluntarily
forthcoming to the Court about such things the plaintiffs’ attorneys have
learned.
I have not studied the different treatments of
the different classes of plaintiffs, or objections related to same, but that
matter may also tend to show how speculative are the past harms of Defendants’
business practices.
The foregoing discussion is put forth for the
Court’s consideration of whether it is so speculative what would have happened
in the period 2008 to 2020 if the Injunctive Relief had been in effect, that a
class action recovery is not warranted. At a minimum, the Court needs to
consider the extent to which it should get independent expert evaluation of how
speculative Plaintiffs’ sophisticated model is. This will be discussed more in
B below regarding the bigger picture effect of the Injunctive Relief.
B. The bigger picture effect of the Injunctive Relief
Besides being presented
with Plaintiffs sophisticated model, the Court is presented with Plaintiffs'
Memorandum saying (quoted above as well):
"The
Settlement represents a monumental achievement. The Settlement secures
“historic and substantial” structural changes that will reshape competition in
the health insurance industry and offer increased choice in the market for
health insurance to millions of Americans, along with one of the largest
monetary recoveries ever achieved in an antitrust class action settlement."
"The Settlement creates substantial benefits and opens pathways to more
competition, lower
costs, greater innovation, more consumer choice, and increased availability of
products for
millions of Settlement Class Members. p.5
Given that the Plaintiffs
say the foregoing, the Court needs to decide whether, if it approves the
settlement, the Court will be tagged with having a belief that the settlement
it is approving will in fact cause "historic and substantial
structural changes that will reshape competition in the health insurance
industry" and “create substantial benefits and opens pathways to more
competition, lower costs, greater innovation, more consumer choice, and
increased availability of products for millions of Settlement Class Members.”
If the Court approves the settlement, the Court
will be exposed to possible criticism, including from members of Congress, such
as that the Court was wrong in its belief about the settlement, the settlement
in fact achieves no such result, and the settlement in fact is an impairment in
the national effort to lessen health care costs and health insurance premiums
and achieve other national health care goals.
In extreme form, the Court may be criticized for
having no defensible idea about the effects of the settlement and had no
business relying on the plaintiffs and Defendants agreeing on the settlement.
To protect against the foregoing, it would seem
that the Court would want to have advice from independent experts.
As part of this, it would seem that the Court
would want to know why the federal antitrust regulators have known for decades
about the Defendants' business practices and have done nothing about them.
Even though state insurance departments may not
have authority to regulate the Defendants' business practices at issue, the
Court might want to know what state insurance departments think about the
practices and what they think will be the effect of the Injunctive Relief, if
it goes into effect.
In considering the foregoing, the Court might further
want to reflect on the national political contentiousness over health care laws
that has been going on for 25 years, and the strenuously conflicting views
about how to reduce health care costs, how to make health care accessible, and
how to make health insurance affordable, and how those objectives interact.
Some persons may contend the Injunctive Relief provides no help in achieving
those objectives, or is even counterproductive.
V. Conclusion
I hope the information provided by this objector
is helpful to the Court in making its decision to approve the Settlement or
not.
Date: October 17, 2021
Respectfully submitted
/s/ Robert Shattuck
Robert Shattuck
EXHIBIT A
LETTER TO:
The Honorable Kay Ivey
The Honorable Richard Shelby
The Honorable Tommy Tuberville
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
Dear Gov. Ivey, Sen. Shelby, Sen.
Tuberville, Rep. Palmer, Attorney General Marshall, Sen. Roberts, and Rep.
Carns,
America's and Alabama's health care
systems are in a rolling crisis of high and ever increasing costs, coupled with
inadequate health care services for large segments of their populations. Trying
to fix the inadequacy problem entails adding large additional health care
costs. Further, the Republicans and Democrats have been stalemated for years
about what should be done to mitigate this rolling crisis of high health care
costs and inadequate health care coverage for many.
In the middle of this rolling
crisis, I have received a class action
settlement notice.
The class action concerns Blue Cross allegedly restricting competition in
health care insurance during years 2008 through 2020 and thereby increasing
health care premiums and health care costs. The settlement amount is $2.67
billion, of which plaintiffs' attorneys will receive about $770 million in
attorney fees.
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."
Both sides think more competition
will lower health care costs, but they have different approaches, with the
Democrats saying a public option is needed for obtaining effective competition,
and the Republicans saying more private competition.
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
Also, the two sides agree that too
high drug prices are a significant component of the health care cost problem.
The Republicans further add a need
for tort reform to reduce health care costs. Conservative
Perspectives on Health Care Reform expresses this:
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.
EXHIBIT B
Robert D. Shattuck, Jr
3812 Spring Valley Circle
Birmingham, AL 35223
(205) 967-5586
rdshatt@aol.com
July 12, 2021
BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED
Blue Cross Blue Shield
Settlement
c/o JND Legal Administration
PO Box 91393
Seattle, WA 98111
copies to
BLUE CROSS BLUE SHIELD SETTLEMENT
C/O MICHAEL D. HAUSFELD HAUSFELD
LLP
888 16th Street NW, Suite 300
Washington, DC 20006
BLUE CROSS BLUE SHIELD
SETTLEMENT
C/O DAVID BOIES
BOIES SCHILLER FLEXNER LLP
333 Main Street
Armonk, NY 10504
DAN LAYTIN
KIRKLAND & ELLIS LLP
300 N. LaSalle St.
Chicago, IL 60657
Dear Sirs:
I object to the settlement in In re: Blue Cross Blue Shield Antitrust
Litigation.
A. Description of my objections
I believe that the effect that
Defendants' business practices had on health insurance premiums and health care
costs during the years 2008 through 2020, and the effect of the Injunctive
Relief in the future, are grossly speculative.
With said effects being grossly
speculative, Plaintiffs' attorneys are in a position to agree to any
settlement, practically no matter how small, and thereby receive very large
attorneys' fees.
Defendants' officers and directors
can go along with a small settlement that will not have a material adverse
effect on Defendants' business, and the stakeholders in the Defendants will not
be bothered to complain about the settlement being excessive (since the
settlement is small).
In the foregoing situation there is
potential for Plaintiffs' attorneys abusing the judicial branch of government
to get large attorneys' fees on grounds that are grossly speculative, so
grossly speculative that there was no detriment from the business practices for
2008 through 2020, and, in the future, the Injunctive Relief will in fact be
detrimental, and not beneficial, to class members and to other consumers of
health insurance.
To appreciate how grossly
speculative the effect of the Defendants' business practices was, and of the
Injunctive Relief in the future, requires extensive knowledge about health care
markets and health insurance markets. These markets are extremely complex in
their workings, and there are many different business practices by many
different actors in the said markets that are interrelated and have
interrelated effects. For example, if a business practice of an actor is
precluded, it is speculative about what other practices will be adopted or
modified, and what the net effect will be on health insurance premiums and
health care costs
With things being so grossly
speculative, Plaintiffs' attorneys will not lose sleep over whether Defendants'
business practices in 2008 to 2020 were, and Injunctive Relief will be,
beneficial, neutral or detrimental to health insurance markets and consumers of
health insurance.
There are, however, governmental
officials and entities who are charged by law to be concerned about
how health insurance markets work for consumers and what changes will
improve or not improve their operation for consumers.
Even these knowledgeable and
experienced governmental officials and entities may be beset by great
uncertainty in judging the detriment, if any, of Defendant's business practices
in 2008 through 2020, and the benefit, if any, that will come from the
Injunctive Relief, in the complex and interrelated markets for health insurance
and health care.
To protect the judicial branch from
being abused by Plaintiffs' attorneys, the Court should hear from one or more
of these governmental officials and entities about what their opinion is
concerning the detriment of Defendants' business practices in 2008 to 2020, and
net benefit the Injunctive Relief will provide to class members and other
consumers in the health insurance market.
To that end, I have solicited
governmental officials to review the settlement agreement and to give the court
the benefit of their views, as aforesaid.
I have been doing this in the form
of a letter I have disseminated to them by various means in the form set out
at https://al6thcongdist-ihaveuntiljan13.blogspot.com/2021/05/bcbs-settlement-reducing-health-care.html
The named addressees of said letter
are my state and Federal officials consisting of Alabama Gov. Kay Ivey, United
States Senator Richard Shelby, United States Senator Tommy Tuberville,
U.S. Rep. Gary Palmer, Alabama Attorney General Steve Marshall, Alabama
state Senator Dan Roberts, and Alabama state Rep. Jim Carns. Said
officials may forward my solicitation to appropriate other governmental
officials and governmental departments and agencies having the needed expertise
to review the settlement.
I have not received any responses as
of this time.
I will continue my solicitation of
them and of possibly other appropriate Federal and state governmental
officials. In my further solicitation, I may revise the foregoing form of
letter and also include a copy of this letter of mine making my objection.
I will supplement this objection by
providing to the addressee and copied parties on this letter such written
responses as I receive from governmental officials and entities in response to
my foregoing solicitation.
I am uncertain at this time whether
I will attend the Fairness Hearing on October 20, 2021. A main factor affecting
whether I will attend is whether any governmental official or officials will
attend with me and speak to the Court or whether I have been provided with a
written submission or submissions to the Court that I want to present in person
to the court.
B. Information related to me
My full name, address, email
address, telephone number are set out above.
I turned 65 in 2012. To the best of
my knowledge and belief, from 2008 until 2012 I was insured under the Blue
Cross Blue Shield of Alabama Individual Plan that Blue Cross Blue Shield of
Alabama provided from 2008 to 2012. I contacted toll-free (888) 681-1142
to try to obtain confirmation of my Blue Cross Blue Shield of Alabama dates of
coverage and was told that the Administrator did not have such information at
this time, but that information would be obtained when needed. An automated
message on (888) 681-1142 said I should not contact Blue Cross Blue Shield for
the information because it was not set up to respond to inquiries from members
of the class related to the class action.
My objection applies to both
Settlement Classes. I have no counsel representing me in this objection,
and there are no former or current counsel who may be entitled to compensation
for any reason related to my objection There is no agreement trelating to my
objection or the process of my objecting between me and any other person or
entity:
Signed
_______________________________
Robert D. Shattuck, Jr.
I declare under penalty of perjury
that the information provided in my above objection is true and correct.
_________________________________________
EXHIBIT C
To: Alabama Civil Justice
Reform Committee, c/o directors Danne Howard and Robin Stone,
Re: $2.7 billion Blue Cross Blue Shield class action settlement
I believe the organizational
purposes of the Alabama Civil Justice Reform Committee should give the
Committee an interest in the above class action settlement and in the objection
to the settlement that I have filed, which objection is set out at https://al6thcongdist-ihaveuntiljan13.blogspot.com/2021/08/my-objection-in-bcbs-class-action.html.
I am directing this
communication to ACJRC in care of directors Danne Howard and Robin Stone,
because Ms. Howard is deputy director of the Alabama Hospital Association; Mr.
Stone was Vice President of Governmental Affairs of Blue Cross Blue Shield of
Alabama; those two organizations have special knowledge relative to the subject
matter of the class action lawsuit; and Ms. Howard and Mr. Stone should be
specially qualified to evaluate my objection to the class action settlement.
My above objection
describes my objection as follows:
Reducing health care costs
is an important national objective. The class action purports to recover past
health costs that were allegedly excessive because of anti-competitive
practices that Blue Cross Blue Shield had in the conduct of their health
insurance business, and to end those practices to prevent those excessive
health care costs going forward.
I believe that the effect that Defendants' business practices had
on health insurance premiums and health care costs during the years 2008
through 2020, and the effect of the Injunctive Relief in the future, are
grossly speculative.
With said effects being grossly speculative, Plaintiffs' attorneys
are in a position to agree to any settlement, practically no matter how small,
and thereby receive very large attorneys' fees.
Defendants' officers and directors can go along with a small
settlement that will not have a material adverse effect on Defendants'
business, and the stakeholders in the Defendants will not be bothered to
complain about the settlement being excessive (since the settlement is small).
In the foregoing situation there is potential for Plaintiffs'
attorneys abusing the judicial branch of government to get large attorneys'
fees on grounds that are grossly speculative, so grossly speculative that there
was no detriment from the business practices for 2008 through 2020, and, in the
future, the Injunctive Relief will in fact be detrimental, and not beneficial,
to class members and to other consumers of health insurance.
To appreciate how grossly speculative the effect of the Defendants'
business practices was, and of the Injunctive Relief in the future, requires
extensive knowledge about health care markets and health insurance markets.
These markets are extremely complex in their workings, and there are many
different business practices by many different actors in the said markets that
are interrelated and have interrelated effects. For example, if a business
practice of an actor is precluded, it is speculative about what other practices
will be adopted or modified, and what the net effect will be on health
insurance premiums and health care costs
With things being so grossly speculative, Plaintiffs' attorneys
will not lose sleep over whether Defendants' business practices in 2008 to 2020
were, and Injunctive Relief will be, beneficial, neutral or detrimental to
health insurance markets and consumers of health insurance.
There are, however, governmental officials and entities who are
charged by law to be concerned about how health insurance markets work for
consumers and what changes will improve or not improve their operation for
consumers.
Even these knowledgeable and experienced governmental officials
and entities may be beset by great uncertainty in judging the detriment, if
any, of Defendant's business practices in 2008 through 2020, and the benefit,
if any, that will come from the Injunctive Relief, in the complex and
interrelated markets for health insurance and health care.
To protect the judicial branch from being abused by Plaintiffs'
attorneys, the Court should hear from one or more of these governmental
officials and entities about what their opinion is concerning the detriment of
Defendants' business practices in 2008 to 2020, and net benefit the Injunctive
Relief will provide to class members and other consumers in the health
insurance market.
To that end, I have solicited governmental officials to review the
settlement agreement and to give the court the benefit of their views, as
aforesaid.
I have been doing this in the form of a letter I have disseminated
to them by various means in the form set out at https://al6thcongdist-ihaveuntiljan13.blogspot.com/2021/05/bcbs-settlement-reducing-health-care.html
The named addressees of said letter are my state and Federal
officials consisting of Alabama Gov. Kay Ivey, United States Senator Richard
Shelby, United States Senator Tommy Tuberville, U.S. Rep. Gary
Palmer, Alabama Attorney General Steve Marshall, Alabama state Senator Dan
Roberts, and Alabama state Rep. Jim Carns. Said officials may forward my
solicitation to appropriate other governmental officials and governmental
departments and agencies having the needed expertise to review the settlement.
I solicit the Alabama Civil
Justice Reform Committee to support me in what I am doing relative to my
objection.
EXHIBIT D
From:
Rob Shattuck <rdshatt@aol.com>
To: karen.mcguire@shpda.alabama.gov
<karen.mcguire@shpda.alabama.gov>
Cc: dan.roberts@alsenate.gov
<dan.roberts@alsenate.gov>; jwcarns@gmail.com <jwcarns@gmail.com>
Sent: Tue, Oct 5, 2021 4:28 pm
Subject: BCBS antitrust class action settlement;
reducing health care costs
Ms. Emily T. Marsal,
Executive Director (c/o karen.mcguire@shpda.alabama.gov)
Alabama State Health
Planning & Development Agency
Dear Ms. Marsal
The Agency's mission is
"To ensure that quality health care facilities, services, and equipment
are available and accessible to the citizens of Alabama in a manner which
assures continuity of care at a reasonable cost."
The purpose of this
letter is to solicit the Agency's views about whether the above referenced $2.7
billion Blue Cross Blue Shield class action settlement is helpful to the Agency's mission, or
whether it is unhelpful to the Agency's mission, or whether the settlement is of
no material consequence for the Agency's mission.
A. The class action
The class action concerns Blue Cross allegedly restricting
competition in health care insurance during years 2008 through 2020 and thereby
increasing health care premiums and health care costs. The settlement amount is
$2.67 billion, of which plaintiffs' attorneys will receive about $667,500,000 in attorney fees.
I have objected to the
settlement.
I have sent to Gov. Kay Ivey, Senator Shelby, Senator Tuberville, Rep. Gary Palmer,
Attorney General Marshall, Senator Dan Roberts, and Rep. Jim Carns, a letter
soliciting them to review the settlement and express to the Court whether they
think the Court should approve the settlement. This letter I sent to them can
be found at https://al6thcongdist-ihaveuntiljan13.blogspot.com/2021/05/bcbs-settlement-reducing-health-care.html. My objection to the
class action settlement can be found at https://al6thcongdist-ihaveuntiljan13.blogspot.com/2021/08/my-objection-in-bcbs-class-action.html
The "fairness"
hearing for the Court to consider objections to the class action settlement
will be at 10 am on October 20, 2021 at the United States District Court for
the Northern District of Alabama, Hugo L. Black United States Courthouse, 1729
5th Avenue North, Birmingham, Alabama 35203
The crux of my objection
to the settlement is that I think it is grossly speculative that, had the
practices in question been prohibited during years 2008 through 2020, how much,
if at all, health care premiums and health care costs, would have been reduced
during that period, and it is grossly speculative how much, if at all, they
will reduced going forward.
In judging whether the
settlement is "fair, reasonable, and adequate," the Court should
endeavor a comparison of the $667,500,000 in attorneys fees to the amount that
that there were higher health care premiums and costs in the past and there
will be lesser health care premiums and costs going forward.
To do that judging, the
Court needs to evaluate how speculative those higher health care premiums and
costs were and how much less those premiums and costs will be going forward. If
the Court evaluates that such is entirely speculative, the Court should not
approve the settlement on the grounds of it not being fair and reasonable.
In doing the foregoing,
there are several things the Court should take into account.
The reality is that
health care and the health care industry and markets are extremely large and
complex, there are numerous actors (doctors, hospitals, governments, patients,
insurance companies, etc.), and these actors make and receive payments and
provide and receive health care services in myriad of non-transparent
interconnections, and alternative choices, transactions and relationships. All
of these make it extremely difficult to know how a change of one set of
practices of one actor will or will not be accompanied by offsetting changes in
that actor's business or in its counterparty's business or elsewhere in the
health care industry, so that the result is a net zero change in health care
costs
Also, the class action
needs to be viewed in the context that America's and
Alabama's health care systems have for many years been in a rolling
crisis of high and ever increasing costs, coupled with inadequate health care
services for large segments of their populations. Trying to fix the inadequacy
problem entails adding large additional health care costs. Further, the
Republicans and Democrats have been stalemated for years about what should be done
to mitigate this rolling crisis of high health care costs and inadequate health
care coverage for many, and there there is not consensus about what laws and/or
regulation should be enacted or promulgated to reduce health care costs, or
even consensus about whether they should be reduced. In other words, there may
be little support for the idea that prohibiting the defendants' practices is a
worthwhile or effective mode for reducing health care costs.
The Court should also
consider that those in charge of making the settlement likely have a personal
interest and preference for settling the litigation, and that the
speculativeness of the effect on health care costs gives them cover and
protection from attack that the agreement they signed is not fair and reasonable.
While the settlement
amount of $2.7 billion is a lot of money, it is minuscule compared to the total
amount of health premiums and health care costs that are involved, and that
minuscule amount tends to manifest how speculative the effects on health care
costs of the presence or absence of the defendant's practices in question
are.
In the settlement, the
parties make no agreement about whether defendants' practices increased costs
in the past or will continue to increase costs in the future if the practices
are not prohibited. The defendants in fact maintain their practices reduce
costs and increase access of their customers.
In connection with the
settlement agreement, the Court expresses no view to the class action
plaintiffs about which of the parties the Court thinks are right or wrong in
their contentions about the effect on health care premiums and costs of
defendants' practices in the past and about the effect going forward of
defendants ceasing the practices.
While, under class
action procedure, the Court refrains from having and expressing to the class
action plaintiffs the Court's views about which side is right or wrong in their
contentions about the effects on health care costs of defendants' practices, it
is submitted that the Court needs to have a reasonable belief with some degree
of certainty that there are material effects on health care costs as plaintiffs
allege (i.e., such effects are not entirely speculative). Perhaps there
is something in the record that the Court is relying on in this regard. I think
the Court should get the benefit of the views of knowledgeable experts about
the effect on health care costs of the presence or absence of defendants'
practices. Such is what I am attempting to do in pursuing my objection.
B. Views of Alabama
State Health Planning & Development Agency
As stated at the outset
of this letter, the Agency's mission is "To ensure that quality health
care facilities, services, and equipment are available and accessible to the
citizens of Alabama in a manner which assures continuity of care at a
reasonable cost."
The purpose of this
letter is to solicit the Agency's views about whether the subject $2.7 billion
Blue Cross Blue Shield class action settlement is helpful to the Agency's
mission, or whether it is unhelpful to the Agency's mission, or whether the
settlement is of no material consequence for the Agency's mission.
I think the Agency can
aid the Court in judging whether the settlement agreement is "fair and
reasonable" if the Agency says any of the three things of (i) the
settlement agreement is helpful to the Agency's mission and the Agency is
therefore in favor of the settlement agreement being approved, (ii) the
settlement agreement is unhelpful to the Agency's mission and the Agency
is not in favor of the settlement agreement being approved , or (iii) the
settlement is of no material consequence for the Agency's mission and the
Agency is indifferent to the settlement agreement being approved. Any statement
of reasons that the Agency gives for whichever of the three things it chooses
to say would, I think, also aid the Court in deciding whether the settlement
agreement is "fair and reasonable."
Please refer this letter
to the Governor's office, or to Attorney General Marshall's office, or to
another agency or department in the Executive Branch as you deem appropriate.
Thank you very much for
your attention to this letter. Any response that is given to me before October
20 will be most appreciated.
Sincerely,
Robert Shattuck
3812 Spring Valley
Circle
Mountain Brook, AL 35223
(205) 967-5586
EXHIBIT E
From:
Rob Shattuck <rdshatt@aol.com>
To: lindsey.lewis@alsenate.gov
<lindsey.lewis@alsenate.gov>
Sent: Thu, Oct 14, 2021 1:48 pm
Subject: Re: BCBS antitrust class action
settlement; reducing health care costs
Thank you very much for replying to me, Lindsey.
It is propitious to see that you are Clerk of
the Senate Healthcare Committee.
Where this matter stands at the moment is that I
am seeking to obtain from the class action lawyers the so-called CAFA notice
that is required to be sent to "appropriate" federal and state
officials and copies of any responses that were received back from such federal
and state officials.
For a law review article about CAFA notices and
their purpose, see Cafa Settlement Notice
Provision: Optimal Regulatory Policy (upenn.edu).
See particularly the below discussion appearing
on pages 1173-4 of the article.
Little is known about why this provision was
added to CAFA, and the legislative history is scant. Nonetheless, it has been
an enduring feature since the legislation was first proposed in 1997.12 At the
most basic level, the provision ensures that "a responsible state and/or
federal official receives information about proposed class action settlements
and is in a position to react if the settlement appears unfair to some or all
class members or inconsistent with applicable regulatory policies."' 3
Specialized state regulatory authorities (or the state AG in the absence of a
state regulator) are likely to be familiar with the business practices at issue
in the litigation, and they are well situated to "voice concerns if they
believe that the class action settlement is not in the best interest of their
citizens."'14 The overriding purpose seems to have been to prevent lawyers
from crafting abusive settlements favoring themselves over consumers or other
injured parties.' In this vein the provision provides "a check against
inequitable settlements in these cases," which could arise from
"collusion between class counsel and defendants to craft settlements that
do not benefit the injured parties."
I think the settlement is not in the best
interest of Alabamia citizens, and I am preparing a Memorandum in support of my
objection to the settlement, which will include a discussion of why I
think the settlement is not in the best interest of Alabamia citizens.
I don't know how much standing I will have in
the eyes of the Court to argue that the settlement is not in the best
interest of Alabamia citizens, and the Court will want to hear that from
federal and state officials, and not from me.
I am trying to track down the receipt of the
CAFA notice by AG Marshall's office (or other "appropriate" Alabama
official), and whether a response was made to the CAFA notice. If no response
to the notice has been given, I would like to urge that a response be given.
One of my points of focus is that plaintiffs
allege that individual states don't regulate the Blue Cross Blue Shield
practices that are the subject of the class action lawsuit, and that there has
been a failure of federal regulators to regulate the practices, and that plaintiffs
are acting to remedy this failure of the federal regulators.
Paragraphs 529 to 530 of the class action
complaint allege as follows:
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
On page 63 of SUBSCRIBER PLAINTIFFS’ MEMORANDUM
OF LAW IN SUPPORT OF MOTION FOR FINAL APPROVAL OF CLASS SETTLEMENT, the
plaintiffs say
Despite the public knowledge over how the BCBS system is
structured, the federal agencies tasked with enforcing our antitrust laws have
chosen never to challenge the system. Even after this litigation was pending
for almost a decade, no antitrust enforcement agency chose to bring any action
or submit anything in support of the Subscriber Plaintiffs in this case. Now
that the Class Representatives and Subscriber Class Counsel have spent close to
another decade, and hundreds of millions of dollars in resources, challenging
that system, certain entities have emerged (seemingly at the behest of a small
number of law firms) to criticize a Settlement that provides a multi-billion
dollar damages recovery and injunctive relief that will enable enormous amounts
of new competition. Keeping the nature of this Settlement in historical
perspective is warranted.
Insofar as plaintiffs are arguing that the Court should approve
the settlement on the grounds that federal regulators fell down in doing their
job and plaintiffs class action was needed to remedy this failure, I think both
federal and state regulators should have something to say to the Court about
this, including federal regulators explaining why they did not act as
plaintiffs are complaining, and state regulators saying whether or not they
were aware of the Blue Cross Blue Shield practices, whether they thought the
practices had the detrimental effects that plaintiffs allege, and whether they
made any effort to get federal regulators to act.
I am trying to get Senators Shelby and Tuberville and Rep. Gary
Palmer (my representative in Congress) to review the class action settlement,
with a view to getting appropriate federal regulators to explain why they have
not acted as plaintiffs are complaining. Thus far, I have gotten little
attention from the offices of
Senators Shelby and Tuberville and Rep. Gary Palmer.
This is a long email in response to your question of what I am
asking of Senator Roberts.
My answer at this juncture to your question is that I only want
Senator Roberts to be informed about what I am doing, and for Senator Roberts
to take such interest in the CAFA notice given to Alabama officials, and the
response thereto, as Senator Roberts thinks is in the interest of his
constituents, and to the extent Senator Roberts thinks spending his time on the
matter is warranted.
Thank yo for your attention to this long email.
Rob Shattuck
