On March 25, the U.S. Department of Justice (DOJ) and the State of Michigan agreed to dismiss an antitrust case against Blue Cross Blue Shield of Michigan (BCBSMI) that had been brought in October 2010. The DOJ had alleged that BCBSMI was illegally using “most favored nation” (MFN) clauses in its contracts with hospitals to prevent smaller insurers from entering the market and obtaining competitive pricing. MFN clauses in provider contracts guarantee that an insurer obtains the best rates for services, and often require the provider to charge significantly higher prices to competing health insurers.

A new Michigan law enacted March 18, 2013 and to be effective beginning January 1, 2014, will broadly prohibit the use of MFN clauses and make the lawsuit moot. In addition, the Commissioner of the Michigan Office of Financial and Insurance Regulation had ordered as of February 1, 2013 that no insurer may use an MFN clause unless it is first approved by the Commissioner.

The DOJ is expected to continue investigating the use of MFN clauses in other states for potential antitrust violations.