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North Carolina Blue Faces Antitrust Suit

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RALEIGH, N.C. (AP) — Blue Cross and Blue Shield of North Carolina and the national Blue Cross and Blue Shield Association have asked a federal court to reject a lawsuit claiming the Blues’ approach to dividing up the U.S. market limits competition.

Lawyers at a firm led by David Boies, a high-profile attorney, are seeking court permission to bring a class-action lawsuit on behalf of the 3.6 million Blue Cross and Blue Shield enrollees in North Carolina, or on behalf of customers of all other Blue Cross plans.

The plaintiffs, who filed their suit in February, are attacking an agreement among the 37 Blue Cross and Blue Shield Association members that divides the country into exclusive territories. That practice helps local Blues plans accumulate market dominance in their home territories, which they then use to demand discount deals with hospitals, the plaintiffs say.

The Blues’ hospital discount deals end up inflating hospital costs for patients who have no insurance, or who have other types of health coverage, the plaintiffs say.

North Carolina Blue, Durham, N.C., and the Blue Cross and Blue Shield Association, Chicago, deny in court documents filed late Monday that their business practices violate federal anti-trust laws.

“If the court says this practice is illegal, it could open up competition to any Blue Cross plan that wants to compete in that part of the country,” said Prof. Roger Feldman, a University of Minnesota professor who studies the health insurance market.

The U.S. Justice Department filed a lawsuit based on similar arguments against Blue Cross and Blue Shield of Michigan, Detroit, in 2010, and it is investigating the pricing power of North Carolina Blue and other states’ Blues plans.

The North Carolina case plaintiffs are seeking triple damages for the amount North Carolina premiums were inflated.

North Carolina Blue said in its response that the restrictions that limit who can use the Blue Cross name and symbols have been in effect for decades and repeatedly upheld by courts.

Buyers across a wide range of industries use preferred pricing deals to ensure they get the seller’s lowest price, and North Carolina’s insurance commissioner approves insurance rates, the not-for-profit company said.

The Blue Cross and Blue Shield Association said that, because the Blues don’t compete in each other’s service areas, the Blues are better able to compete against national players such as Aetna Inc., Hartford (NYSE:AET), and UnitedHealth Group Inc., Minnetonka, Minn. (NYSE:UNH).

North Carolina Blue has more than 80% of its state’s market for commercial coverage sold to individuals and small businesses. Because of the company’s dominance in the state, the U.S. Department of Health and Human Services decided in February to delay requiring the state’s other insurers to meet the minimum medical loss ratio (MLR) benchmarks set by the Patient Protection and Affordable Care Act of 2010 (PPACA).

A lawyer for Boies’ firm did not return calls seeking comment. A spokesman for North Carolina Blue declined comment Tuesday. A spokeswoman for the Blue Cross and Blue Shield Association said the lawsuit lacked merit.

Boies represented Democrat Al Gore in the U.S. Supreme Court ruling that decided the 2000 presidential election.

He made headlines in 1990s for grilling former Microsoft Corp. CEO Bill Gates in the U.S. government’s antitrust lawsuit against that company.

Boies now represents business software maker Oracle Corp., which has accused Google Inc. of building the Android software system by stealing pieces of Oracle’s Java technology.



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