Two Dallas County Men Are Suing Blue Cross, Claim Its Market Share Lets It Screw Texans

If you live in Texas and have health insurance, chances are your coverage is through either Aetna or Blue Cross and Blue Shield of Texas, and it's about twice as likely to be the latter. The insurance giant covers 7.7 million Texans, controlling roughly 40 percent of the market.

Some might argue that BCBS controls such a large share of the market that it raises prices and hurts consumers. That was the line the Department of Justice took two years ago when it filed an antitrust lawsuit against BCBS' affiliate in Michigan.

Brett Watts and Dale Ward are taking a somewhat different approach. The Dallas County residents and BCBS-Texas customers agree, in a lawsuit filed Monday in federal court, that the insurer controls a "grossly disproportionate" share of the state's market. But the real issue stems from BCBS' byzantine ownership structure, which they say violates several provisions of antitrust law.

BCBS-Texas is part of the national Blue Cross Blue Shield Association, an umbrella group that licenses its 38 member insurance plans, which are owned by a smattering of different companies. Health Care Services Corporation owns the plan in Texas and a handful of surrounding states. The problem, Watts and Ward argue in their lawsuit, is that the supposedly independent plans have conspired to reduce competition by agreeing not to operate only within certain geographical boundaries -- states in most cases.

This artificially reduced competition has allowed BCBS affiliates, including the one in Texas, to hike up premiums and rack up a $620 million surplus, while using their dominance of the market to elbow would-be competitors aside. Watts and Ward argue that they should be entitled to monetary relief based on the insurer's alleged violations of the Sherman and Clayton antitrust acts. They also filed the suit as a class action, since the victims of BCBS-Texas' allegedly anti-competitive behavior would include anyone enrolled in its plan who's pissed off at high premiums.

BCBS-Texas said it doesn't comment on pending litigation.

This isn't the first time BCBS has been challenged in federal court over its ownership structure. In February, customers filed a similar complaint against BCBS of North Carolina, and other, copycat suits are popping up elsewhere, Barak Richman, a Duke University law professor and expert on antitrust in the healthcare industry, told Unfair Park on Tuesday.

The North Carolina suit at least has merit, Richman told an industry trade publication earlier this year "I would say this could open up competition amongst the Blues in territories they are now unable to compete."

Whether that happens, and whether it will result in lower prices for consumers, will be interesting to watch.

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Eric Nicholson
Contact: Eric Nicholson