DOJ: News Release

Bullock, USDOJ Announce Settlement with Montana Health Insurance Companies

Bullock, USDOJ Announce Settlement with Montana Health Insurance Companies

The Montana Attorney General’s Office, in conjunction with the U.S. Department of Justice, today reached a settlement with two of Montana’s three largest health insurance companies over a proposed deal that raised significant antitrust concerns.

The settlement, which involves a deal between Blue Cross and Blue Shield of Montana and the hospitals that own New West Health Services, divides New West services in a way that is intended to preserve competition in Montana’s health insurance sector.

In August, Blue Cross and five of the six hospitals that collectively own New West entered into an agreement in which Blue Cross agreed to pay the hospitals for their collective promise to stop purchasing their own employees’ health insurance from New West and instead buy it from Blue Cross for the next six years.

“Anyone who has ever lost a game of Monopoly knows that prices go up when one player controls most of the board,” Attorney General Steve Bullock said.  “When we learned that Montana’s dominant health insurance company, Blue Cross Blue Shield, was planning to take over a substantial portion of New West’s business, we were very concerned that the reduced competition could lead to higher premiums for Montana consumers.”

New West was created in 1998 specifically to provide options to consumers in a Montana-based insurance market that had historically been dominated by Blue Cross.  By working hard to provide competitive rates and a large and diverse network of doctors and hospitals for its customers, New West did just that.  Today, New West and a small handful of other insurance companies are able to foster competition in the health insurance marketplace.   Were the deal between Blue Cross and the hospitals that own New West to have gone through without intervention, much of the competitive good New West had accomplished would have been undone, Bullock said.

Bullock also cited the most recent Kaiser Family Foundation survey, which found that in 2011, the average total family premium nationwide climbed to over $15,000 a year.  Since the survey began in 1999, worker contributions to health insurance premiums have increased 168 percent, while wages have gone up only 50 percent.
“Montanans simply can’t afford to keep paying a bigger and bigger slice of their income for health insurance,” Bullock said, “so my Consumer Protection staff worked closely with the U.S. Department of Justice to preserve competition in Montana’s marketplace.  New West has been the most significant competitor for Blue Cross.  By encouraging another company to take over a portion of New West’s business here, the settlement will help provide health care consumers a viable option when they are seeking coverage.”

The settlement negotiated by the U.S. Department of Justice and the Montana Attorney General’s Office will enable Blue Cross to purchase from New West only the health insurance policies of the five hospitals’ employees.  It also requires New West to sell all of its remaining business, except for its niche Medicare Advantage business.  PacificSource of Oregon has entered into negotiations to purchase the remaining portion of New West’s business.  In this scenario, the state of Montana preserves insurance market competition and protects consumers from having no real choice.

“The bottom line is that, without some sort of intervention, their agreement would have substantially reduced competition.  As Attorney General, my concern is that the agreement between Blue Cross and the hospitals was an end run around our antitrust laws because, at the end of the day, New West would disappear and no other company would step in to fill that void,” Bullock said.  “Without the effective competition New West provided, it would be even more difficult to have a check on premium increases and quality of service issues.”

Bullock noted that the settlement does not interfere with each of the private insurance firms’ opportunity to increase their businesses.  He also said that the Montana Department of Justice will monitor the situation to assure the settlement achieves its goals.

The joint complaint and settlement documents were filed Tuesday in U.S. District Court in Billings. The settlement is subject to court review and approval.

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