Blue Cross insurers reach tentative settlement in lawsuit

The nation’s Blue Cross plans have reached a tentative $ 2.7 billion settlement in a federal lawsuit filed by their customers that accuses the group of engaging in a conspiracy to thwart competition among the individual companies, according to two people with knowledge of the discussions.

The settlement, which was first reported by The Wall Street Journal, would need to be agreed to by each of the three dozen Blue Cross insurers that make up the trade group, the Blue Cross Blue Shield Association. Judge R. David Proctor of the U. S. District Court for the Northern District of Alabama, who is overseeing the case in that state, also still needs to approve the proposed settlement.

Under the proposed terms, the Blue Cross plans, which operate independently, would no longer have to adhere to some of the rules established by the association that the plaintiffs said prevent the companies from engaging in head- to- head competition.

“The reported terms are a very good settlement for everybody,” said David Boies, one of the lead lawyers representing the plaintiffs in the case. “It will significantly increase competition in the health insurance market, which is obviously a critical market for Americans today. It will result in more competitive offerings and lower prices.”

While the dollar amount said to have been reached is significant, Boies pointed to the injunctive relief as fostering much more competition among the individual companies that do not vie with one another for the same business. “That has the capacity to be much more valuable for individuals and companies that purchase health insurance,” he said.

One in three Americans is covered by a Blue Cross plan, and these plans are often the largest health insurer in their respective state or region. The plans include those operated by the for- profit giant Anthem in states such as California and New York. Another large operator is Health Care Service Corp., which runs nonprofit Blue Cross plans in five states, including Illinois and Texas.

The association said it could not comment on ongoing litigation but said, “Blue Cross and Blue Shield companies will remain committed to improving the health of our members and our local communities.”

The dominance of these plans in markets with only a handful of major competitors has long raised concerns about a dearth of competition that can lead to higher prices for both employers and individuals.