It was recently reported that Blue Cross and Blue Shield (BCBS), along with the Blue Cross Blue Shield Association, was sued across all states in a class action brought by two types of plaintiffs. One plaintiff class reflects consumers saying that the BCBS consolidation has led to higher insurance prices and less competition. The second group of plaintiffs reflects providers stating that BCBS consolidation has led to lower reimbursement for them. The combined message is essentially that BCBS is able to buy services as a cartel and is not passing savings on to consumers.
The Advocate reports that BCBS has 97 percent of the small-group health plan market in Alabama and 81 percent of the small-group health plan market in Louisiana. According to this report, the lawsuit states that from 2000 to 2007, Louisiana health insurance premiums increased by 75.3 percent — more than three times faster than Louisiana wages.
The case survived a motion to dismiss, and is advancing in an Alabama federal court. BCBS has previously been sued over the years on anti-trust claims, including a $2 billion lawsuit filed by Aetna against Blue Cross Blue Shield of Michigan that was recently settled just before it went to trial.
It is unclear where the class action suits will go. It is an interesting case for investors to understand and arises in the context of much consolidation amongst insurance companies. Between Cigna, United, Aetna and BCBS, in many states there remains just one or two dominant payors, with resulting dramatic impacts on the local market.