Most Favored Nation Clauses Restricted By Michigan Insurance Commissioner

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.

Critics disagreed.

“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

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