The reason competition is so low and prices so high in Indiana’s health insurance market is that Anthem Blue Cross and Blue Shield has participated in a vast conspiracy to inflate prices, a federal lawsuit alleges.
The suit, filed last week by two Anthem customers in Indiana, claims Anthem’s agreements with the Blue Cross and Blue Shield plans in other states to each have exclusive market territories is inherently anticompetitive.
The other way to look at the situation is that Anthem is simply a member in good-standing of the Chicago-based Blue Cross and Blue Shield Association, which typically grants just one Blues license per state.
The Association, or BCBSA, does not prevent Blues plans from competing in states where they do not have the Blues license, they just can’t do it using the Blues brand names.
“The Blue Cross and Blue Shield model of service has been in place for more than 80 years and has been validated and enforced by numerous courts and regulatory agencies, including the Federal Trade Commission and Department of Justice,” Anthem spokesman Tony Felts wrote in an e-mail.
But the Blues arrangements are being tested in the courts like never before. The Indiana lawsuit, filed by Ryan Ray and Trent Kelso, likely will be folded into a two-year-old class-action lawsuit in Alabama, which accuses Anthem and other Blues health plans of anti-competitive conspiracy and price fixing.
The Alabama litigation has been led by 36 health care providers, mostly doctors and hospitals. The lawsuit names 38 Blue Cross and Blue Shield plans, including four operated by Indianapolis-based Anthem Inc.
There’s no arguing that Anthem is dominant in Indiana. All told, its health plans covered 3.5 million Hoosiers in 2013. Its share of the fully insured market here was 59 percent in 2012, according to an analysis by Citi Research.
Among that kind of insurance, Anthem pulled in premiums in 2013 of $2.6 billion, turning a profit of $191 million (before any investment returns are factored in).
That’s a profit margin of 7.4 percent, which would have ranked second-highest among all Indiana health insurers in 2012 and would have ranked Indiana as Anthem’s most profitable state in which it operates a Blue Cross or Blue Shield plan.
Anthem’s profits in Indiana have tended to be higher than even in the other 13 states in which it operates Blues plans.
“These inflated premiums would not be possible if the market for health insurance in Indiana were truly competitive,” wrote Indianapolis attorneys Jonathan Little and David Miller on behalf of Ray and Kelso.
Indiana’s health insurance market has become substantially less competitive over the past 10 years, according to data filed by the plaintiffs in the Alabama litigation.
The four largest insurers selling comprehensive hospital and medical insurance plans claimed 99 percent of all customers this year, up from 71 percent claimed by the four largest insurers in 2004, according to data from the National Association of Insurance Commissioners.
By another measure, known as the Herfindahl-Hirschman Index, competition among comprehensive medical insurance plans is three times less now than it was a decade ago.
The index calculates a score for each market by squaring the market share percentages of the 50 largest companies. A score of 2,500 or more is perceived as an uncompetitive market.
In 2004, Indiana’s comprehensive health insurers were in a competitive market, with a Herfindahl-Hirschman Index score of 1,937, according to data from the NAIC. But now, Indiana’s index score is a whopping 6,373.
Referring to Anthem by its previous corporate name, the attorneys added, “Full and fair competition is the only answer to artificially-inflated prices, and competition is not possible so long as WellPoint and BCBSA are permitted to enter into agreements that have the actual and intended effect of restricting the ability of the thirty-seven of the nation’s largest health insurance companies from competing in Indiana.”