This story is reprinted with permission from the Insurance Coverage Law Center, an ALM digital resource for legal professionals. Visit the website to subscribe.
The U.S. Department of Justice (DOJ) has filed a statement of interest in an antitrust lawsuit involving Oscar Insurance Company of Florida — a health insurer co-founded by Joshua Kushner. Joshua Kushner is the brother of Jared Kushner, who is a senior advisor to President Donald Trump.
Oscar has filed the lawsuit against Blue Cross and Blue Shield of Florida, Inc., Health Options Inc., and Florida Health Care Plan Inc. Those three entities are known, collectively, as Florida Blue.
In its statement, the DOJ asserted that the McCarran-Ferguson Act does not provide a basis for dismissing Oscar’s Sherman Act antitrust claims against Florida Blue.
The Oscar v. Florida Blue Case
Oscar has challenged Florida Blue’s exclusivity policy. That policy prohibits a broker selling certain Blue Cross plans from selling plans offered by competing insurers.
Given Florida Blue’s dominant market share in Florida, the exclusivity policy has foreclosed competitors such as Oscar from working with brokers responsible for selling the vast majority of individual health plans in the Orlando area, Oscar alleged in its complaint.
Oscar also alleged that Florida Blue’s conduct has caused consumers to pay more for health insurance, limited consumer choice, and impeded innovation. Oscar claimed that Florida Blue has violated Sections 1 and 2 of the Sherman Act.
Oscar also alleged that Florida Blue has enforced its exclusivity policy through “coercion and intimidation.”
Oscar asserted that Florida Blue had threatened to terminate permanently any broker appointed by Oscar, meaning that “brokers face losing the right to sell Florida Blue plans in all product lines throughout the entire State of Florida if they decide to sell Oscar plans in a single county in the state.”
After Oscar entered the Orlando market, Florida Blue updated its exclusivity policy, directing its brokers to sign new exclusivity forms, Oscar asserted. According to Oscar, Florida Blue threatened to withhold commission payments from brokers who violated the exclusivity policy.
Florida Blue asserted that the exclusivity policy falls within the exemption from federal antitrust law created by the McCarran-Ferguson Act.
The McCarran-Ferguson Act exempts from the Sherman Act activities that constitute “the business of insurance,” are “regulated by State law,” and do not amount to “boycott, coercion, or intimidation.”
The DOJ’s Statement of Interest
In its statement of interest, the DOJ said the federal government is principally responsible for enforcing the federal antitrust laws, and that the federal government seeks to ensure that antitrust exemptions, including the McCarran-Ferguson Act exemption, are “not interpreted any more broadly than necessary to carry out their purposes.”
The DOJ asserted that McCarran-Ferguson does not apply to the Oscar case for two reasons.
First, the DOJ said, as alleged by Oscar, Florida Blue’s exclusivity policy was not the business of insurance because it did not transfer risk or figure as an integral part of the policy relationship between the insurer and the insured. The DOJ asserted that Florida Blue’s contention that its exclusivity policy spread risk because it “affect[ed its] ability to attract customers” was “overly broad.”
Moreover, the DOJ continued, as alleged by Oscar, Florida Blue’s exclusivity policy was not an “integral part of the policy relationship,” the exclusivity policy was not integral to Florida Blue’s relationships with its policyholders, and the “threat to withhold commissions” had “nothing to do with the relationship between the insurer and the insured.”
The DOJ asserted further that McCarran-Ferguson does not apply to the conduct described by Oscar because, according to Oscar’s allegations, Florida Blue’s exclusivity policy involved coercion. The Sherman Act does apply to insurance company conduct if the conduct involves an “act of boycott, coercion, or intimidation,” according to the DOJ.
The district court should not dismiss Oscar’s Sherman Act claims on the basis of Florida Blue’s “flawed interpretation of the McCarran-Ferguson Act’s antitrust exemption,” according to the DOJ.
The case is Oscar Ins. Co. of Florida v. Blue Cross and Blue Shield of Florida, Inc., No. 6:18-cv-1944-PGB-TBS (M.D. Fla.).
A copy of the DOJ statement of interest is available here.
Steven A. Meyerowitz, a Harvard Law School alumnus, is the director of the Insurance Coverage Law Center and the editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. He is also the founder and president of Meyerowitz Communications Inc.