Hospitals and other providers have filed 10 federal lawsuits in two states since Tuesday against Regence BlueCross BlueShield, its parent company, Cambia Health Solutions and other Blues insurers accusing them of collusion and price-fixing to keep reimbursements down — even as a $2.8 billion national class-action settlement of the allegations appears to be splintering.
The litigation filed in Illinois and California by health systems based outside Oregon is part of a larger wave. It could interrupt the flow of compensation to qualifying providers in Oregon and other states if the class-action settlement goes away. Over time, it could also fuel an increase in the number of health insurers selling plans in Oregon.
The new suits could also hit Regence — among the most publicly aggressive Oregon health insurance companies when it comes to provider contract negotiations — with increased losses to be split between hospitals, other providers and the law firms representing them.
Contacted for comment, Cambia and Regence referred The Lund Report to the Blue Cross Blue Shield Association that represents the Blues around the country. The association last October issued a statement denying the anticompetitive practices claimed in the suit.
“We deny the allegations made in the lawsuit. However, to reach a settlement and put years of litigation behind us, we have agreed to make some operational changes and a monetary payment to the provider class involved in the case.”
The more plaintiffs that peel off from the national litigation, the more likely it is that the federation of Blues insurers withdraws from the $2.8 billion settlement. That means the decade-old case at the heart of the case could resume.
Losses from the litigation could be passed on to some consumers and providers, but their costs also could be passed on to members in their monthly premiums. Oregon’s proportional share of the national settlement would have been $75.6 million on a population basis, and now that number could grow.
“It may raise the price of insurance. This is a big cost. It has to absorb that somehow,” said Douglas Ross, a top health care antitrust expert and attorney who has followed the litigation while teaching at the University of Washington School of Law. “On the other hand, this is $2.8 billion flowing to providers, and maybe they're going to use that to — and this is Pollyannish — lower prices, or perhaps more likely invest in things they need to invest in.”
Regence covers about 500,000 Oregonians. Earlier this week The Lund Report reported that Regence’s net worth – meaning all assets minus all liabilities such as debts and pending claims – has nearly doubled since 2019, growing from $776 million to $1.33 billion last fall.
Cases have historical roots
The roots of the litigation go back to the history of the Blues, which are credited with a crucial role in the rise of health insurance and health policy in the United States. Hospitals formed nonprofit Blue Cross insurers in some parts of the country, while physicians formed Blue Shields. They were viewed as almost part of the social safety net, or a public utility, and they formed a national association while agreeing to largely not intrude in each others’ territory.
Starting in the 1980s and 90s, however, “the distinction between not for profit and for profit got blurred” among the Blues, Ross said. From being county-based in some cases, the Blues merged and crossed state lines. “These companies became huge ... And there's not much to distinguish a Blue Cross or a Blue Shield plan from Aetna or UnitedHealth these days.”
Meanwhile, antitrust law was evolving, too, Ross added, and a little over a decade ago several law firms “decided that they had enough ammunition” against the Blues and accused them of divvying up the market around the country.
Seemingly ending the long-running litigation, the $2.8 billion settlement reached with providers in October comes on top of an earlier $2.67 billion settlement by the Blues of similar litigation filed on behalf of consumers — which is slated to be divvied up by 6 million people.
The overall sum, $5.47 billion, might seem like a lot — and it is, reportedly the largest of its kind in health care.
It's not far short of some of the settlements reached by Purdue Pharma in the face of lawsuits accusing the firm of knowingly engaging in misleading marketing to peddle highly addictive painkillers blamed for a deadly epidemic of addiction and overdoses.
“It clearly reflects the recognition of the risk by Blue Cross, Blue Shield,” said Ross, the legal expert, but added it doesn’t mean the insurers felt they’d violated the law.
When it comes to cases like those facing the Blues, companies defending them have an incentive to settle even if they think they can win them. That’s due to a facet of antitrust law that requires paying triple any damages found by a jury — a multiplier that’s not common among other kinds of cases.
“This automatic trebling is a powerful weapon plaintiffs have, to beat defendants into settling cases,” Ross added.
The health systems that were part of the class action had until last week to opt out of the settlement, and some law firms had been actively urging their clients to do so.
