After nearly eight years of litigation, on Monday, Judge Eduardo C. Robreno of the Eastern District of Pennsylvania dismissed a complaint by LifeWatch Services Inc. against Blue Cross Blue Shield Association and five plan administrators alleging that Blue Cross violated federal antitrust laws in a conspiracy to deny coverage of LifeWatch’s telemetry monitor products.
At least 30 Blue Cross insurance plans for more than 10 years have abided by a policy that denies coverage of telemetry monitors, devices that detect changes in cardiac rhythm. “The insurers reached this decision despite multiple medical studies concluding that telemetry monitors are effective and, in some cases, superior to other cardiac monitoring devices,” the court explained.
LifeWatch, a seller of telemetry monitors, claimed that Blue Shield violated the Sherman Act in its denial to cover LifeWatch’s telemetry monitors. In May 2016, Blue Cross moved to dismiss the complaint, arguing that the plaintiff failed to state a claim and lacked antitrust standing and that the McCarran-Ferguson Act gives Blue Cross immunity from antitrust liability; the court agreed that the plaintiff failed to allege anticompetitive effects and dismissed the complaint.
However, the Third Circuit reversed, arguing that LifeWatch had stated a claim and indeed did have antitrust standing. The matter then remanded to this court was whether the McCarran-Ferguson Act actually does give immunity from antitrust liability to Blue Cross; the judge decided it does.
The McCarran-Ferguson Act was passed by Congress after the Supreme Court found that the Sherman Act may apply to insurance companies to clarify that this regulation “should be preserved for the states,” the court explained. “Congress’ primary concern with respect to the antitrust exemption was that ‘cooperative ratemaking efforts be exempt from the antitrust laws’ because of ‘the widespread view that it is very difficult to underwrite risks in an informed and responsible way without intra-industry cooperation.’ ”
Under McCarran-Ferguson, the defendant must establish its immunity from antitrust liability. Conduct that renders a defendant exempt is such that “(1) ‘constitutes the business of insurance,’ (2) is ‘regulated by state law,’ and (3) does not ‘amount to a boycott, coercion, or intimidation,’ ” the court explained. In dispute by the parties are the first two criteria.
The judge found that Blue Cross satisfies the first criterion because “the insurance contract between Blue Cross and its subscribers, by excluding from coverage all telemetry treatment under all circumstances, allocates the risk between the parties,” the services offered in Blue Cross’ subscriber contracts are “integral to the policy relationship,” and, although Blue Cross Blue Shield is technically an association and not itself an insurer, “it owns the rights to Blue Cross and Blue Shield trademark names and licenses those trade names and trademarks to insurance plans,” rendering the association an insurance industry entity under McCarran-Ferguson.
Regarding the second criterion, LifeWatch argued that Blue Cross “fail(ed) to identify a single state statute that deals even generally with collusive agreements to deny coverage for telemetry.” However, according to the judge, “McCarran-Ferguson does not require state laws to contain the level of specificity for which LifeWatch advocates. Instead, ‘the presence of even minimal state regulation, even on an issue unrelated to the antitrust suit, is generally sufficient to preserve the immunity.’ ” In satisfying the two disputed criteria, the judge decided Blue Cross has a right to immunity under McCarran Ferguson.
The plaintiff was represented by Shook, Hardy & Bacon, Artz McCarrie Health Law, and Honigman LLP. The defendants were represented by Kirkland & Ellis, Hogan Lovells, Reed Smith, and The Axelrod Firm.
