By Jeffrey May, J.D.
The U.S. Court of Appeals in Atlanta has denied the Blue Cross and Blue Shield Association’s petition for an immediate appeal of a district court’s decision imposing the per se rule on the Blue Cross Blue Shield Plans’ geographically-based health insurance system. The appellate court denied the petition for interlocutory review without elaboration. The decision is a significant victory for complaining subscribers and health care providers who had argued before the district court that the geographic market allocations constitute per se anticompetitive conduct under two Supreme Court precedents—U.S. v. Sealy, Inc., 388 U.S. 350 (1967) and U.S. v. Topco Associates, Inc., 405 U.S. 596 (1972). Pursing rule of reason claims is far more risky, costly, and time-consuming (In Re: Blue Cross Blue Shield Antitrust Litigation, December 12, 2018, per curiam).
In April, the federal district court in Birmingham, Alabama, held that the defendants’ aggregation of a market allocation scheme together with certain other output restrictions should be analyzed under the per sestandard of review rather than rule-of-reason analysis. However, the court held that price fixing and boycott claims based on the defendants’ BlueCard program, which requires plans to make their local provider discounts available to all Blue Members, even if they lived in another plan’s service area, were to be analyzed under the rule of reason.
The defendants argued in their petition that the district court's decision to apply the per se rule to the market allocation claims "contravenes history and logic, and could expose the Blue Plans to massive antitrust liability, including treble damages, without any opportunity to show the Blue System actually produces substantial benefits to competition." They noted that, in the 80 years of the Blue System, the federal government has not challenged the exclusive service areas (ESAs) or National Best Efforts rule, which requires a Plan to derive at least 66 2/3% of its national health insurance revenue from its Blue brand. The plaintiffs contend that the rule operates as an output restriction on a Plan’s unbranded non-Blue brand business.
In reaching its conclusion to apply the per se rule, the district court pointed out that it did not hold that the allocation of ESAs alone qualified as a per se Sherman Act violation. Rather, other conduct that restrained the plans’ ability to compete, such as the National Best Efforts rule, was considered as well. The district court considered a series of the arguments raised by the defendants in rejecting their position that the geographic market distributions should be analyzed under the rule of reason.
The case is No. 18-90020.
Attorneys: Paul D. Clement (Kirkland & Ellis, LLP), Craig A. Hoover (Hogan Lovells US LLP), Cavendar C. Kimble (Balch & Bingham LLP), and Kimberly West (Wallace, Jordan, Ratliff & Brandt LLC) for defendants. David Boies (Boies Schiller & Flexner, LLP) for Joseph D. Ackerson, Charles Barnwell, DC and BreakThrrough Physical Therapy, Inc.
Companies: Blue Cross and Blue Shield Association; Health Care Service Corp.; California Physicians' Service; Blue Cross Blue Shield of Arizona; Blue Cross and Blue Shield of Kansas, Inc.; Blue Cross of Idaho Health Service, Inc.; BreakThrrough Physical Therapy, Inc.
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