Michigan’s insurance commissioner has issued an order that insurers can’t put certain restrictions in their hospital contracts without his approval.
In an order dated Wednesday, Insurance Commissioner R. Kevin Clinton said he is giving insurers six months to get approval for existing or future hospital contract requirements.
Starting on Feb. 1, Clinton will prohibit the use of “most favored nation” clauses — requirements that opponents argue stifle competition and drive up rates for consumers — unless he approves them. Any attempts by insurers to enforce those kinds of requirements after Feb. 1 are banned and would result “in appropriate administrative action,” Clinton said in his order.
Aetna Inc., the federal government and former state Attorney General Mike Cox have filed antitrust lawsuits against Blue Cross Blue Shield of Michigan for the use of the controversial hospital contract requirements. In some cases, the Blues’ contract conditions prevent hospitals from charging other insurers lower rates than the Blues or boost reimbursement to hospitals if they charge higher rates to other insurers.
Federal judges have rejected requests by Blue Cross to dismiss the federal and Aetna lawsuits and are letting them proceed to trial.
Although the order said most favored nation clauses “may violate the Michigan Insurance Code,” Clinton said the order isn’t a “determination regarding the permissibility of the use of any particular most favored clause, nor is it issued with the intent to preempt general antitrust enforcement in this area.”
“This action by the state of Michigan is a fair, formal regulatory review of both existing and new contracts to ensure any MFN provisions are proper,” said Jeffrey Rumley, Blue Cross Blue Shield of Michigan vice president and general counsel.
The Blues have argued that the hospital contract requirements help lower rates and get discounts for its more than 1 million customers.
Rumley added in a statement that commissioner’s oversight re-enforcesthe Blues’ argument that the hospital contract provisions are overseen by state regulation, not federal regulation.
“These orders will help create a more competitive market for health insurance in Michigan and are a start toward leveling a playing field that has been tipped toward Blue Cross for many years,” said Rick Murdock, executive director of the Michigan Association of Health Plans.
From The Detroit News: http://www.detroitnews.com/article/20120719/BIZ/207190469#ixzz21TKHw0j6
Editor’s Note: See http://blog.riskmanagers.us/?s=favored+nations