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Published: 10/22/2010

Health insurance blues

A lawsuit against Michigan's largest health insurer is attracting national attention because of its explosive central allegation: that Blue Cross Blue Shield of Michigan has exploited its market dominance in the state to maintain unfair economic advantages and restrain insurance competition. The charge, which the company denies, requires thorough examination and prompt resolution.

The identities of the plaintiffs in the case — the Obama Justice Department and Michigan Attorney General Mike Cox, a very partisan Republican — suggest the suit is not being brought for political or partisan reasons.

The Blues command a larger share of Michigan's private health insurance market than all its competitors combined. The nonprofit company has a unique role in the state, since it is legally required to insure all customers who seek coverage, whatever the state of their health. In return, the Blues get special tax treatment.

The lawsuit contends that the Blues insisted that hospitals give the insurer volume discounts. That's to be expected, given the company's size. But the suit alleges that the company also sought to dictate the rates — sometimes as much as 40 percent higher — that hospitals could charge other private insurers.

Such hardball tactics, the plaintiffs assert, artificially inflated costs for all health insurance consumers in Michigan. Blues executives say the company has done nothing illegal — that it uses its size to get the best deal for its customers, saving them money. That's no different, they say, from the way the federal Medicare and Medicaid programs negotiate with suppliers.

As health-care reform proceeds fitfully throughout the United States, finding ways to enhance competition among insurers will be an essential element of change. So will efforts to prevent insurers from denying Americans coverage at an affordable cost because of pre-existing health conditions.

The Blues lawsuit touches on both these issues. Its resolution will have resonance not just in Michigan, but across the country.



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