Antitrust Law Daily $2.67B settlement in Blue Cross Blue Shield antitrust litigation gets preliminarily approval
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Wednesday, December 2, 2020

$2.67B settlement in Blue Cross Blue Shield antitrust litigation gets preliminarily approval

By Peter Reap, J.D., LL.M.

The proposed settlement classes and agreement, including substantial injunctive relief to enhance competition in the health insurance market, were fair, reasonable, and otherwise satisfactory.

In their antitrust action against defendants Blue Cross Blue Shield Association (BCBSA) and its licensee Blue Plans, health insurance subscriber class representatives (Subscriber Plaintiffs) were entitled to preliminary approval of their proposed settlement classes and proposed settlement that called for the defendants to pay $2.67 billion into a settlement fund and included injunctive relief that "provid[es] for opportunities for more competition in the market for health insurance and allow[s] the potential for Class Members to achieve greater consumer choice, better product availability, and increased innovation." The Subscriber Plaintiffs alleged that the defendants divided and allocated insurance markets throughout the United States in violation of the Sherman Act and state laws. The Subscriber Plaintiffs’ proposed Damages Class (and its Self-Funded Sub-Class) and Injunctive Relief Class satisfied the Rule 23(a) requirements of numerosity, commonality, typicality, and adequacy. Further, the Injunctive Relief Class met the requirements of Rule 23(b)(2) and the Damages class met the predominance and superiority requirements of Rule 23(b)(3). Moreover, the proposed settlement terms themselves were sufficiently fair, reasonable, and adequate to warrant presentation to the class members. In particular, although the amount of the monetary settlement was clearly significant, the prospective and far-reaching injunctive relief was of greater importance to the class, offering forward-thinking, pro-competitive reforms that would change the way that BCBSA and the Blue Plans conducted business in the future (In re Blue Cross Blue Shield, November 30, 2020, Proctor, R.).

Background. In 2012, nine antitrust actions concerning licensing agreements between and among the defendants were centralized for pre-trial proceedings by the Judicial Panel on Multidistrict Litigation in the federal district court in Birmingham. The claims alleged that the 38 Blue Plans are independent health insurance companies that would compete with one another, but for an agreement to the contrary. Working together with and through the BCBSA, the Blue Plans divided and allocated among themselves health insurance markets throughout the nation in violation of the Sherman Act and various related state laws, it was alleged. Specifically, the defendants were accused of: (1) allocating geographic territories; (2) limiting the member plans from competing against each other, even when they are not using a Blue name, by mandating a minimum percentage of business that each member plan must do under that name, both inside and outside each member plan’s territory; (3) restricting the right of any member plan to be sold to a company that is not a member of BCBSA; and (4) agreeing to other ancillary restraints on competition

In 2018, the court decided that the defendants’ aggregation of a market allocation scheme together with certain other output restrictions should be analyzed under the per se standard of review rather than rule-of-reason analysis. The U.S. Court of Appeals in Atlanta denied the petition for interlocutory review without elaboration.

Specifics of the settlement. The terms of the proposed settlement agreement, achieved after nearly five years of good faith, arm’s-length negotiations called for:

  • Payment by the defendants of $2.67 billion to the Settlement Fund, which will include distributions to the Damages Class and the Self-Funded Sub-Class, Notice and Administration costs, and any fee and expense award.
  • elimination of the Blues’ national revenue cap on competition when they are not using the Blue names and marks—that cap, which the Blues call the "National Best Efforts" provision, requires that two-thirds of each Member Plan’s national healthcare-related revenue come from Blue-branded products as opposed to non-Blue (i.e. "Green") business—and limits on a corresponding local revenue cap known as the "Local Best Efforts" provision;
  • the ability for certain Qualified National Accounts who could only seek one Blue bid, to now seek bids from two Blue Plans;
  • limits on BCBSA’s restraints on acquisitions;
  • guidelines to permit direct contracting between Non-Provider Vendors and Self-Funded Accounts;
  • limits on use of Most Favored Nations Clauses and Differentials; and
  • a five-year monitoring period during which a Monitoring Committee and the court shall review new rules or regulations submitted by BCBSA and mediate disputes related to the injunctive relief.

There was no admission of wrongdoing.

Preliminary class certification. As a preliminary matter, the court first determined that the Subscriber Plaintiffs easily satisfied the necessary elements of standing and that the proposed classes were clearly ascertainable. Similarly, the proposed classes easily met the first requirement of Rule 23(a), numerosity.

Next, it was clear that there were common issues to all members of all proposed classes that satisfied the commonality requirement. Because at least some of the Subscriber Plaintiffs’ claims can be established by common proof of the defendants’ restrictive policies, and because the Class Representatives and Settlement Class Members appeared to have suffered the same injuries and damages, typicality was satisfied. And the adequacy-of-representation requirement was satisfied because the named plaintiffs and the lawyers seeking appointment as class counsel would properly and adequately prosecute the case.

The requirements for certification of a class under Rule 23(b)(2) were satisfied as to the Injunctive Relief Class because the court determined it was likely to conclude that the proposed injunctive relief will prevent injuries similar to those at issue in this case from recurring, greatly increase competition among the Blues, and substantially benefit all members of the classes. As to the Damages Class, each Class Member’s claims arose from substantially uniform licensing agreements and uniform policies, leading the court to conclude that common issues predominated over any individual issues. In addition, resolution of these claims in one action would be far superior to individual lawsuits.

Preliminary approval. Under Rule 23e(2), and after conducting an analysis of the six Bennet factors set out by the Eleventh Circuit for courts to consider in deciding whether a proposed settlement is fair, adequate, and reasonable, preliminary approval was granted. The class representatives and counsel adequately represented the class; the settlement was negotiated at arm’s length without any fraud or collusion; the settlement will avoid lengthy, highly complex, and expensive litigation involving significant risks; and the factual record was sufficiently developed to allow for a fair assessment of the merits of the settlement. Only three class members raised concerns over the proposed settlement and the court addressed those concerns in detail but found that the nearly unanimous approval of the settlement agreement by 67 of the 70 members indicated that preliminary approval was appropriate. Overall, the benefits provided by the settlement agreement were fair, reasonable, and adequate when compared to the range of possible recovery and, in light of the uncertainty of future continued litigation, the settlement agreement was an "excellent achievement," in the court’s view.

As for other issues that did not neatly fit under Rule 23e(2) or the Bennet factors, the proposed request for attorney fees from the $2.67 billion common fund not to exceed 25%, plus up to $7 million from the Notice and Administration Fund was in line with benchmarks in the Eleventh Circuit. The proposed plans of notice and distribution also were approved.

The case is No. 2:13-cv-20000-RDP.

Attorneys: Lauren R. Kennedy (Cravath Swaine & Moore LLP) and M. Patrick McDowell (Brunini Grantham Grower & Hewes PLLC) for Blue Cross Blue Shield Antitrust Litigation. Alan McQuarrie Mansfield (Whatley Kallas, LLP) and Alicia L. Shelton (Zuckerman Spaeder LLP) for Plaintiffs' Counsel. Alyssa C. Kalisky (Kirkland & Ellis LLP) and Brooke Jones Oppenheimer (Axinn, Veltrop & Harkrider LLP) for Defendants' Counsel. Claudine Columbres (White & Case LLP) for Anthem, Inc. Stephen A. Walsh (Weinburg, Wheeler, Hudgins, Gunn & Dial, LLC) for Excellus Health Plan, Inc. d/b/a Excellus BlueCrossBlueShield.

Companies: Blue Cross Blue Shield Antitrust Litigation; Anthem, Inc.; Excellus Health Plan, Inc.

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