Blue Cross Michigan Sued by Justice Department in Antitrust Case

Blue Cross Blue Shield of Michigan (BCBSM) was sued by the U.S. Justice Department for what regulators say are actions by the insurer that boost hospital and consumer costs while stifling competition.

Michigan's largest provider of commercial health insurance engaged in practices that guarantee higher hospital rates to other

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insurance providers, protecting the company from competition, the Justice Department said in a statement today. The provisions, better known as most favored nation (MFN) clauses, were used by BCBSM at more than half of the state's 131 acute-care hospitals, according to the Justice Department.

The insurance company said the lawsuit is without merit and that MFNs are key to providing its subscribers with low insurance premiums.

"We will vigorously defend our ability to negotiate the deepest possible discounts for our members and customers with Michigan hospitals," BCBSM spokesman Andrew Hetzel said in a separate statement today. "At a time when insurance premiums are increasing because of medical costs, it hurts consumers to remove tools that insurers use to negotiate the lowest possible cost for medical care in the hospital."

The insurer, which has about 4.5 million members, last year had $10.9 billion in revenue, but almost tripled its operating loss to $319.5 million as the financial value of benefits it provided rose faster than revenue.