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By DAN REYNOLDS, senior editor of Risk & Insurance®

A nonprofit health insurer under investigation by the Pennsylvania Insurance Department has launched a counterattack against Insurance Commissioner Joel Ario.

The spat all began early last year when Ario announced that he wanted to increase what he referred to as "Blue on Blue" competition in Pennsylvania to offer consumers better prices, more choice and improved service.

Highmark and the other Pennsylvania-based "Blues" operate under licensing agreements with the Blue Cross Blue Shield Association (BCBSA), which restrict the geographic territories in which each respective health carrier operates.

Under the terms of the agreements, Highmark cannot compete for customers located in Capital BlueCross's territory. Capital BlueCross in turn is forbidden from poaching customers in Independence Blue Cross's territory.

It all sounds civil enough. Reading between the lines, through, Ario clearly believes all four companies operate monopolies within their assigned geographic areas.

HARASSING HIGHMARK?

Ario's department is making requests that are exposing Highmark to an "unprecedented and extraordinary volume" of material, according to the company's latest legal salvo. Further rankling Highmark is the fact that Ario's office is planning to make the results of its review public.

Highmark argues that the information Ario is requesting in his review is confidential. Releasing the information will have meant that Ario has "wrongly utilized" the information, Highmark alleges.

One of the focal points of Ario's review is whether the BCBSA licensees use their market power to "unfair and anti-competitive" advantage in the areas in which they do business, including provider contracting.

Highmark rejects that notion. The company insists it is governed not by the insurance commissioner but by statute, in this case the Pennsylvania Unfair Insurance Practices Act.

The law describes acts of "boycott, coercion or intimidation" as examples of "unfair methods of competition," and Highmark insists it engages in none of those behaviors.

Ario's department claims it has the authority to investigate Highmark under the Pennsylvania Insurance Act, and alleges that Highmark has refused to cooperate with the department in its investigation.

A separate federal investigation is under way into whether Highmark colluded with the University of Pittsburgh Medical Center in an attempt to drive a UPMC competitor, the West Penn Allegheny Health System, out of business by reimbursing UPMC at higher rates than it did West Penn.

It's not the first time Highmark's practices have come under scrutiny. In an earlier suit against the healthcare insurer, commercial and personal lines giant Travelers has alleged Highmark engaged in unfair practices with its healthcare providers. The courts found that Highmark's agreements with hospitals were not prejudiced against Travelers.

April 6, 2010

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