Blue Cross and Blue Shield Antitrust Case

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Table of Contents

Introduction
Anti-trust case
Lessons learned
Recommendations
Conclusion
References

Introduction

Blue Cross and Blue Shield Association (BCBSA) is an organization that provides health insurance to more than 99 million Americans (Bailey, 2013). It comprises health insurance organizations and companies. The association offers health insurance to people in all American states and participates in administration of Medicare. It offers health insurance coverage to all government employees under Federal Employees Health Benefit Plan.

In 2010, claims emerged that some organizations under the association were engaging in antitrust activities thus affecting the healthcare market negatively. They were increasing insurance rates by avoiding competition thus creating a monopoly (Bailey, 2013). The association was accused of running an anticompetitive scheme that resulted in high costs of insurance premiums and healthcare services.

Anti-trust case

The anti-trust case involving Blue Shield and Blue Cross Association involved running of an anticompetitive scheme. The scheme led to high costs of insurance premiums thus making healthcare services unavailable to many people (Hylton, 2003). The association benefited greatly because they dominated the health insurance market in the United States. The association was also accused of conspiring with its members to divide the healthcare market into regions that facilitated eradication of competition among members (Hylton, 2003). The litigation raised doubts over the legality of agreements between the association and its members. The illegal activity increased costs in the healthcare sector making many healthcare services inaccessible to low-income earners.

The association violated the Sherman Act and other antitrust laws because it restricted competition between members (Bailey, 2013). The ongoing case might cost the association greatly because plaintiffs are demanding for triple the amount of damages incurred. In addition, plaintiffs are demanding for legal action against the association to stop it from restricting competition among members.

In response to the charges, the association maintained that the charges lack merit. The association’s spokesperson, Tilden Katz said that the litigation was baseless and unimportant (Hylton, 2003). In mitigation, BCBSA argued that the terms contained in its agreement with members allowed it to act that way in order to protect its brand. In addition, it claimed that their insurance system is committed to providing affordable health insurance to hospitals and doctors, while at the same time improving lives of people (Longstreth, 2010). This is evident from their long-term plan of transitioning into a nonprofit association that will contribute $ 1.56 billion to offer insurance service to the community.

Lessons learned

Many lessons were learnt from the litigation. First, competition in the healthcare sector is healthy and necessary (Longstreth, 2010). Lack of competition leads to monopoly by certain organizations thus raising the cost of healthcare. This makes healthcare services inaccessible to low-income earners. Secondly, it is necessary to adhere strictly to antitrust laws that govern the healthcare market (Longstreth, 2010). Antitrust lawsuits are very expensive and have negative impacts on organizations. For example, more than 38 lawsuits were lodged against Blue Shield and Blue cross Association. Antitrust litigation tarnishes both the image of the organization and drains their finances by paying damages.

Recommendations

To avoid a Federal Trade Commission investigation because of an antitrust litigation, the firm should follow requirements of the law on merger between organizations (Chin and Royall, 2000). To enhance competition and productivity, the firm should avoid entering into agreements that compromise competition in the market. In addition, it will help avoid violating antitrust laws. Another thing that the firm should do is to get acquainted with antitrust legislation to avoid violating any of its provisions. The firm should also seek to establish competition in order to improve efficiency and productivity (Chin and Royall, 2000).

Competition encourages organizations to develop new ways of doing things that are absent in other organizations plying a similar market. This encourages creativity and innovativeness, aspects necessary for growth. Conducting research on benefits of competition will help the firm to avoid antitrust litigation (Chin and Royall, 2000). The firm should hire a professional who is well conversant with antitrust legislation. The professional will have the sole responsibility of advising the firm on matters concerning mergers so that t can avoid violating antitrust laws (Chin and Royall, 2000). The professional could be a lawyer who will serve as a legal adviser. In addition, he will be responsible for monitoring whether requirements of antitrust laws are implemented correctly.

Conclusion

Antitrust litigation is meant to eradicate illegal business practices and abolish monopolies by organizations that tale advantage of others. It serves to encourage competition between organizations or firms plying a similar market.

In 2010, Blued Shield and Blue Cross association was accused of promoting anticompetitive schemes among its members. It allegedly agreed with its members to divide healthcare sector into regions so that they could eradicate competition. This was against antitrust laws. In mitigation, the association claimed that their agreement allowed them to act that way. In addition, it argued that they are committed to providing cost-effective healthcare insurance to Americans. To avoid such litigation, firms should adhere to litigation laws strictly and hire professionals to help them avoid such violations during mergers.

References

Bailey, B. (2013). Blue Cross, Blue Shield Accused in Antitrust Lawsuit of Anti-Competitive Scheme. Web.

Chin, Y., and Royall, M. (2000). Antitrust Litigation: Strategies for Success, 2000. New York: Practicing Law Institute.

Hylton, K. (2003). Antitrust Law: Economic Theory and Common Law Evolution. London: Cambridge University Press.

Longstreth, A. (2010). Blue Cross and Blue Shield Antitrust Lawsuit Pile Up. Web.

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