Iowa Supreme Court Affirms Ruling for Health Insurer in Antitrust Dispute

By James M. Burns

In late February, the Iowa Supreme Court affirmed a lower court ruling in Mueller v. Wellmark, ending a seven year battle over whether the health insurer’s agreement with employers operating “self-funded” insurance plans to provide the same rate concessions obtained from providers by Wellmark to these plans constituted a per se antitrust violation. Finding that “these arrangements are not the simple horizontal conspiracies that historically have qualified for per setreatment,” the Iowa Supreme Court rejected the plaintiffs’ contention that they were per se unlawful.

In explaining its ruling, the Iowa Supreme Court began its analysis by stating that “these arrangements are not naked price-fixing arrangements, but are more akin to joint ventures.” Specifically, the Court explained that “the self-insured [plans] are not entering into bare agreements to refrain from competing on price with Wellmark – they are buying claims administration services from Wellmark” and that “part of that service consists of Wellmark negotiated pricing.” As such, the Court held, “Wellmark is not really competing with these plans.” Moreover, the Court continued, “If the only lawful choice for a self-insured employer were the time-consuming process of negotiating individual rates with health care providers…almost all employers would avoid self-insuring.” Because this would eliminate a “possible way to render the health care market more efficient and reduce the cost of health care coverage,” the Court was unwilling to declare such an arrangement per se unlawful, stating “Why should this additional option for employers be per se unlawful?”

In addition, in a ruling that may have implications far beyond Iowa, the Iowa Supreme Court also held that the same principles applied when Wellmark obtains discounts from providers on behalf of out-of-state Blue affiliates. Stating that “similar efficiency-related observations can be made about Wellmark’s reciprocal arrangements with out-of-state BCBS licensees,” the Court also refused to attach a per selabel to these agreements. As the Court explained, the challenged arrangement allows Wellmark to “utilize the other licensees’ negotiated rates in their respective states, and [those licensee’s] can use Wellmark’s negotiated rates in Iowa,” a relationship that “permits Wellmark to offer a fifty-state product that meets the needs of its customers.” For this reason, the Iowa Supreme Court held, per se condemnation of the practice was not appropriate. Given that the BCBS licensee relationship is currently the subject of significant litigation elsewhere (most notably in In re Blue Cross BlueShield Antitrust Litigation, MDL 2406), the Iowa Supreme Court’s analysis in Mueller v Wellmark is likely to be the subject of significant discussion in the coming months, and constitutes a significant victory not only for Wellmark, but all of the Blues.