State seeks injunction and hundreds of millions in damages from nonprofit insurer

Michigan Attorney General Dana Nessel filed an antitrust lawsuit Thursday against Blue Cross Blue Shield of Michigan, alleging the state’s largest health insurer cooperated with other Blue plans to limit competition and inflate coverage prices for the state and other purchasers. The suit, filed in U.S. District Court in Detroit, seeks hundreds of millions of dollars in damages and an injunction to halt the conduct alleged in the complaint.

The complaint alleges violations of both federal and state antitrust statutes and marks a new state-level challenge to the decades-old arrangement under which the Blue Cross Blue Shield Association licenses its brand to member insurers, which typically hold exclusive rights to the Blue names within a certain territory. Blue insurers affiliated with the association cumulatively cover more than 100 million Americans, according to the lawsuit and association materials.

“At a time where everybody in Michigan is experiencing an affordability crisis, Blue Cross of Michigan’s unlawful conduct has resulted in everyone paying more,” Nessel said.

In a statement, Blue Cross Blue Shield of Michigan said the complaint mischaracterized the state’s insurance market. “We fundamentally disagree with the Attorney General’s characterization of an uncompetitive insurance market in Michigan,” the insurer said. “Competition exists everywhere in our state’s insurance markets, with strong local and national insurers competing with us every day.”

The nonprofit had about $43 billion in revenue last year and covers more than five million people in the state, according to figures cited in the suit.

Michigan’s complaint contends that Blue Cross Blue Shield of Michigan used its dominant position in two ways. First, it alleges the insurer cooperated with other association members to limit competition, leading the state government and other purchasers to pay inflated prices for health coverage. Second, the suit argues the insurer used its strong market position to drive down payments it makes to Michigan hospitals and other healthcare providers — discounts the state believes are not translating into lower premiums for Blue Cross customers.

Nessel said the damages sought would total hundreds of millions of dollars and that the state is seeking an injunction to end the activities alleged. The complaint does not name a specific damages figure. The lawsuit is filed against the Michigan-based nonprofit.

The Blue Cross Blue Shield system is unique among major U.S. health insurers. Under the licensing arrangement, association member companies typically hold exclusive rights to the Blue names within a certain territory. The largest member, Elevance Health, is a publicly traded company with Blue plans in 14 states, according to the suit and association materials.

Michigan’s suit is not the first antitrust challenge to the arrangement. Opponents have long argued that the territorial structure throttles competition among association members. The Blue insurers previously faced antitrust suits over the arrangement and reached settlements worth more than $5 billion total in parallel class-action cases brought by customers and healthcare providers, according to the lawsuit. Blue insurers have defended the legality of the structure in those prior cases.

The Michigan suit could become a more significant test if other state attorneys general follow with their own cases.