State law requires insurance companies to file their rates with state regulators at the Department of Insurance. In most instances, though, the filing requirement actually creates a bar to litigation over exorbitant prices called the filed-rate doctrine. Unfortunately for them, Blue Cross Blue Shield of Alabama (BCBS-AL) had a policy for years of charging rates different from those filed with state regulators, a practice that violated state law.

The policy resulted in both overcharges and undercharges for different groups, according to depositions. BCBS-AL’s practice of not charging the rates it filed with the Department of Insurance came to light after U.S. District Judge David Proctor unsealed depositions on Oct. 18 in a massive antitrust case against 38 Blue Cross Blue Shield (BCBS) affiliates, including BCBS-AL.

In earlier issues, we have discussed the basics of the BCBS multidistrict litigation (MDL) and Beasley Allen’s role in that litigation. The central issue in the case is whether BCBS affiliates in different states conspired to limit competition in order to charge higher rates to subscribers and offer lower payments to medical providers.

The Alabama case is the first of the class actions consolidated in the MDL to move forward. Blue Cross Blue Shield of Alabama dominates the market for health insurance in the state, with more than 93 percent of the market for large group policies, according to the Kaiser Family Foundation. The company has a virtual monopoly in Alabama. Next year, BCBS-AL will be the only company offering individual plans through the marketplace set up under Obamacare.

“We believed and continue to believe Blue Cross is understating the amount of the overcharging,” said Barry Ragsdale, a lawyer representing subscribers and providers. Lawyers at Beasley Allen are working closely with several other national firms on the provider side of the case. However, this issue affects subscribers – individuals who purchase BCBS insurance.

In a media response, a BCBS-AL spokeswoman said the policy actually saved $75 million for a vast majority of small group subscribers, which includes businesses with 50 employees or less. The statement read:

Despite the significant overall savings, our research also revealed that a marginal portion of our small business customers may not have received the most favorable rate when renewing their health insurance. This past summer, Blue Cross self-reported this matter to our regulator, the Alabama Department of Insurance, and is fully cooperating with the Department in its review. The Company will refund affected small employer groups upon the conclusion of the Alabama Department of Insurance’s review.

Blue Cross has argued that affiliates’ rates have been approved as reasonable by state regulators and shouldn’t be challenged in court. Department of Insurance actuary Steven Ostlund and Blue Cross Blue Shield Chief Actuary Noel Carden both testified about the charged rates in the unsealed depositions. In his testimony, Ostlund said the department had not yet determined whether the company violated a law or rule by charging different rates. A second deposition unsealed by Judge Proctor, Carden of BCBS-AL, said the policy of holding rates steady from year to year was intended to reduce the shock of big rate increases.

However, it’s very significant that the company never told the Department of Insurance about the policy, Ostlund testified to that in his deposition. The company stopped holding rates in 2014, at the beginning of the Affordable Care Act. The discrepancy was discovered by Blue Cross Blue Shield officials earlier this year, according to Ostlund’s testimony, a part of which reads as follows:

Q. Right. But as early as March 2012, you had put Mr. Carden on notice that violation of the Trade Practices Act was a violation of state law, correct?
A. Correct.
Q. Okay. Did you ask or were you told the dollar figures of the rates charged by Blue Cross of Alabama that were different from the filed rates?
A. They indicated that – current information indicated that they had undercharged thirty-five million to some carriers – to some employers and overcharged five million to others.

The depositions of Carden and Ostlund focus on how the Alabama Department of Insurance regulates health insurance rates submitted by Blue Cross. To further complicate the matter – and undermine the filed-rate doctrine as a defense for BCBS-AL – Federal officials declared in 2013 that Alabama had an ineffective rate review system, but recently reversed that decision – giving the state power to approve rates for Affordable Care Act plans in 2017. Barry Ragsdale said the department’s failure to sanction the company for charging rates that differed from the filed rates shows that the state still does not have an effective system for policing big insurance companies. Barry said:

[BCBS-AL has] attempted to argue that they are immune from antitrust law because they have their rates approved by the Department of Insurance and that is their get-out-of-jail-free card. What this [testimony] does is knocks that leg out of their defense. It illustrates again that the Department of Insurance is underfunded and ill-equipped to regulate a market player with as much power as Blue Cross Blue Shield.

This case implicates concerted actions by all of the BCBS entities, but BCBS-AL is one of the worst players in the field with one of the highest market shares of both providers and subscribers. The big problem for both groups of Plaintiffs is that BCBS absolutely controls what they charge subscribers, and physicians have no say in determining the value of their own services. Hopefully, this litigation will even things out by reducing prices charged to subscribers and increasing provider pay, as well. If you need more information, contact Rebecca Gilliland, a lawyer in our firm’s Consumer Fraud & Commercial Litigation Section, at 800-898-2034 or by email at

Source: and The Birmingham News

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