Top Insurance Regulatory Developments of 2020: Part 2 By Brian Casey, Zach Lerner and Ben Sykes | January 26, 2021
This is the second installment of a two-part look at the top 10 insurance regulatory developments of 2020 by attorneys at Locke Lord. The first part on Jan. 22 covered COVID-19, Insurtechs, Data Privacy, Race Equality and Pharmacy Benefit Managers. Here they look at Antitrust, Captives, Service Contracts, Travel Insurance and Surplus Lines.
Health Insurers and Antitrust Laws
Blue Cross Blue Shield Anti-Trust Case Settlement
After more than eight years of contentious multi-district antitrust litigation between the Blue Cross and Blue Shield Association (“BCBSA”), its 36 member insurance plans (“BCBS Member Plans”) and their policyholders, regarding restrictions on competition among BCBS Member Plans, the parties finally came to a tentative settlement in the fall of 2020, including a $2.7 billion restitution fund to
cert. denied, 2013 WL 598864 (U.S. 2013).
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See Federal Trade Com n v. National Casualty Co., 357 U.S. 560, 564, 78 S. Ct. 1260, 2 L. Ed. 2d 1540 (1958);
Ohio AFL-CIO v. Insurance Rating Bd., 451 F.2d 1178, 1183 (6th Cir. 1971);
Commander Leasing Co. v. Transamerica Title Ins. Co., 477 F.2d 77, 83-84 (10th Cir. 1973).
See also Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982) (finding the “business of insurance” to include practices that have “the effect of transferring or spreading a policyholder’s risk,” practices that are “an integral part of the policy relationship between the insurer and the insured” and practices that are “limited to entities within the insurance industry.”)
1. FTC approves Otto Bock HealthCare North America, Inc.’s application to divest assets in prosthetic knee merger.
On Dec. 1, 2020, the FTC announced its approval of an application by prosthetics manufacturer Otto Bock HealthCare North America Inc. to divest certain assets it acquired when it consummated its acquisition of FIH Group Holdings LLC (Freedom Innovations), including all microprocessor prosthetic knee (MPK) products and technology.
Otto Bock completed its acquisition of Freedom Innovations in September 2017, and FTC filed an administrative complaint in December of that year. In November 2019, upholding an administrative law judge’s decision, the FTC unanimously found that the merger was anticompetitive, and it issued the final order requiring Otto Bock to divest the Freedom Innovations business, with limited exceptions. The Commission vote to approve the application was 5-0.
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While the future seems uncertain to many in healthcare, there are tell-tale signs of how past opportunities and failures are becoming part of a cycle that will lead us to the future.
In the early 1970s, we saw a new type of healthcare organization emerge called the Health Maintenance Organization. These demonstration projects were encouraged by the government to provoke competition and improve use of resources. Embraced by many communities as a comprehensive solution to both price and quality, HMOs grew rapidly in many markets, attracting the ire of insurance companies who lost large groups of insured and drawing the anger of many physicians who saw charts move from their office to the aligned HMO physician offices. Consumers were drawn to the simplicity of few deductibles, guaranteed access, and comprehensive coverage. Employers were drawn by lower prices but also fewer calls from workers overpayment or access.
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The year 2020 was an eventful one in the world of healthcare antitrust. The year began with the announcement of the precedent-setting settlement of the California Attorney General’s action against Sutter Health and ended with the settlement of multi-district antitrust litigation against the Blue Cross Blue Shield Association (and its member Blues). Along the way, Congress passed legislation repealing the antitrust protections that health insurers had enjoyed for 75 years under the McCarran Ferguson Act, the Federal Trade Commission lost its first hospital merger challenge in many years, and the Department of Justice Antitrust Division made good on its threats to bring criminal antitrust actions in healthcare. After such an eventful year, what is 2021 likely to bring in the way of further developments? Look for these issues to dominate the healthcare antitrust headlines in 2021: