Georgia Regulator Goes After Blue Cross ‘Favored’ Contracts

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Georgia’s largest health insurer has such a strong hold on the market that hospitals can’t make better deals with other insurers, which is raising flags for the state’s insurance commissioner.

A routine clause in the contract that Blue Cross Blue Shield of Georgia signs with hospitals means the company’s customers get the lowest prices for hospital stays and related expenses. But some say it also allows Blue Cross to restrain competition and keep prices high, The Atlanta Journal-Constitution reported.

“To have contracts that legally prevent someone from lowering their health care costs … that’s pretty unconscionable,” said state Insurance Commissioner John Oxendine.

Oxendine said such contractual requirements aren’t legal in Georgia. In July, he told Blue Cross and other insurers to rid their contract of such clauses.

Blue Cross refused and instead sued Oxendine, claiming that not only are the clauses legal, they’re beneficial to consumers. That case is pending.

Blue Cross, which has 2.5 million members in Georgia, declined to comment.

The clauses are known as “most favored nation” or “most favored customer” provisions. They are coming under attack across the country as health care costs rise.

At least 16 states ban or limit the clauses in contracts. The federal government, which has objected to the clauses for years, recently stepped up its efforts against them. The U.S. Department of Justice in October filed an antitrust lawsuit against Blue Cross Blue Shield of Michigan over its “most favored nation” clauses.

The government claims Blue Cross, which dominates the insurance market in Michigan, used the provisions unfairly, even requiring some hospitals to charge competitors higher rates.

Experts are divided on whether the clauses are an unfair trade practice or simply a natural part of the marketplace.

A clause that says competitors must pay more is a much bigger antitrust concern than one that just says no one else can get a better deal, said Georgia State University professor William Custer, an expert on health care.

Blue Cross has said in court filings that there is “robust competition” among insurers in Georgia and no evidence that its clauses are hindering competition.

Oxendine said most hospitals would find it hard to turn down Blue Cross because of its size.

“If you’re a hospital you cannot tick off Blue Cross,” he said. “If you don’t have Blue Cross your hospital is in trouble.”

Oxendine said his office’s research shows that “most favored nation” provisions prevented some hospitals and insurers from entering beneficial contracts. The current dynamic makes it difficult for some smaller companies to break into the market and grow, he said.

While some states have passed laws specifically targeting the clauses, Oxendine said he thinks the provisions are illegal under Georgia’s unfair trade practices statute. If the courts don’t agree, Oxendine said the Legislature should consider passing a law similar to those in other states.

“I have nothing against Blue Cross,” he said. “I am insured by Blue Cross. But I don’t think you need to have anybody interfering with free trade and negotiations