Antitrust Law Daily Health insurance continues to face claims over alleged conspiracy with provider
Wednesday, August 16, 2017

Health insurance continues to face claims over alleged conspiracy with provider

By Robert B. Barnett Jr., J.D.

In an antitrust class action filed by a Pennsylvania hotel alleging that it was overcharged for health insurance as the result of a conspiracy between the area’s largest health insurance provider and its largest healthcare provider, the federal district court in Pittsburgh refused to grant summary judgment to the health insurer under either the Noerr-Pennington doctrine or the filed rate doctrine. The Noerr-Pennington doctrine, which prohibits antitrust actions where the anticompetitive activity results from valid governmental action rather than private action, did not apply here because the complaint alleged that the higher rates were charged as the result of the conspiracy rather than as the result of any action taken by the state insurance department. The filed rate doctrine, which bars antitrust actions based on rates approved by government agencies, also did not apply because no evidence existed that the state insurance department had any rate-making authority over the rates that the health insurer charged during the relevant time period (Cole’s Wexford Hotel, Inc. v. Highmark, Inc., August 15, 2017, Conti, J.).

Cole’s Wexford Hotel, Inc. purchased small group health insurance coverage from Highmark, Inc. and its subsidiaries, including Highmark Health Insurance Co. (HHIC). Cole’s alleged in its class action suit that it suffered damages from July 1, 2010, through June 30, 2011, as a result of a sustained and orchestrated anticompetitive conspiracy entered into by the University of Pittsburgh Medical Center (UPMC)—the area’s largest health care provider—and Highmark, the area’s largest health insurance provider. Cole’s subsequently settled with UPMC, leaving Highmark as the only defendant (see UPMC settles monopolization claims, discharged from suit, August 1, 2016). Highmark filed a motion for summary judgment, arguing that the suit was barred by either of two theories: (1) the Noerr-Pennington doctrine or (2) the filed rate doctrine.

Noerr-Pennington doctrine. The Noerr-Pennington doctrine is based on three Supreme Court cases from the ‘60s and ‘70s that held that plaintiffs cannot bring antitrust cases where (1) market participants attempt to influence the government to enact laws that produce anticompetitive effects and (2) the government’s response causes the alleged injuries. In this case, Highmark had engaged in significant lobbying efforts to get the Pennsylvania legislature to change the laws governing the small business health insurance market. Pennsylvania regulated not-for-profit insurers and for-profit insurers differently, in essence allowing for-profit insurers more leeway in setting rates. Highmark, as a not-for-profit insurer, made every effort to get the legislature to regulate both groups of entities equally. Those lobbying efforts, however, failed. Highmark then created HHIC, which Highmark intended to operate as a for-profit PPO. To do so, Highmark needed separate approval from both the Pennsylvania Insurance Department and the state Department of Health. After a long, drawn-out process, Highmark finally received approval to operate HHIC as a PPO.

In its summary judgment motion, Highmark argued that Noerr-Pennington operated to bar the suit because it could not offer any products through HHIC until Pennsylvania approved its PPO application. The court, however, agreed with Cole’s argument that the damages that it sought were based on Highmark’s role in the alleged conspiracy, which was not the direct result of any governmental action. In Cantor v. Detroit Edison Co., 428 U.S. 595 (1976), the Supreme Court held that, in situations involving a mix of private and public decision-making, a plaintiff has the right to pursue an antitrust claim where the "private party exercised sufficient freedom of choice" over the conduct causing the antitrust injury. In this case, the higher rates resulted from the alleged conspiracy, not from any action that Pennsylvania took with respect to its approval of the PPO application. Under Cantor, where the injury results from a choice made by a private defendant, the Noerr-Pennington doctrine does not apply. Nothing in Pennsylvania’s agreement with Highmark in approving the PPO application required Highmark to charge any specific rate.

Filed rate doctrine. Highmark also argued that the filed rate doctrine barred the antitrust suit because the measure of damages was determined by rates set by the Pennsylvania Insurance Department in approving its PPO application for HHIC. Under the filed rate doctrine, antitrust suits based on rates charged to the plaintiff are prohibited where those rates have been filed and approved by federal or state agencies (McCray v. Fidelity Nat’l Title Ins. Co., 682 F. 3d 229 (3d Cir. 2012)). The theory behind the filed rate doctrine is nonjusticiability and the notion that courts should not involve themselves in the ratemaking process. The concept of nonjusticiability, however, is not implicated where the agency has no legal authority to regulate the rate. In this case, Highmark never demonstrated that the state insurance department had any legal authority to regulate HHIC’s rates. Yes, it approved the PPO application, but it did not otherwise have any authority to regulate the rates that HHIC charged, at least not during the timeframe alleged in the complaint. Furthermore, an agreement reached in April 2010 between Highmark and the state did not confer on the state any right to regulate HHIC’s rates.

As a result, the court denied Highmark’s motion for summary judgment, rejecting both the Noerr-Pennington and the filed rate arguments.

The case is No. 10-1609.

Attorneys: Andrew M. Stone (Stone Law Firm, LLC) and Arthur H. Stroyd, Jr. (Del Sole Cavanaugh Stroyd LLC) for Royal Mile Co., Inc. and Cole's Wexford Hotel, Inc. Keith E. Whitson (Schnader Harrison Segal & Lewis LLP) and Paul M. Pohl (Jones Day) for UPMC. Alexander W. Saksen (Gordon Rees Scully Mansukhani, LLP) and Alfred C. Pfeiffer (Latham & Watkins LLP) for Highmark, Inc.

Companies: Royal Mile Co., Inc.; Cole's Wexford Hotel, Inc.; UPMC; Highmark, Inc.

MainStory: TopStory Antitrust PennsylvaniaNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More

Antitrust Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on antitrust legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More