STATE REVIEW OF COMPETITION ISSUES IN THE HEALTH INSURANCE
INDUSTRY AND THE FAILED MERGER ATTEMPT OF HIGHMARK AND
INDEPENDENCE BLUE CROSS
Health Insurance Transactions: Insights from the Front Line
American Bar Association Section of Antitrust Law,
Health Care and Pharmaceuticals Committee
November 9, 2010
Jennifer A. Thomson
Deputy Attorney General
Antitrust Section
Office of Attorney General
14th Floor, Strawberry Square
Harrisburg, PA 17120
The views expressed in this paper are the author’s own and not those of Pennsylvania
Attorney General Tom Corbett, the National Association of Attorneys General or any
other Attorney General or Pennsylvania State Agency.
A proposed merger between Highmark, Inc. and Independence Blue Cross, two
dominant Pennsylvania health insurers, failed when the Pennsylvania Insurance
Department determined this merger would adversely affect competition in the
Commonwealth. In reaching this decision, then Pennsylvania Insurance Commissioner
Joel Ario relied on a hybrid of state statutory authority combined with traditional antitrust
principles.1 This unique approach could inform and alter state reviews of health insurer
mergers and other competitive conduct going forward. Following the merger review,
Commissioner Ario expressed concerns about the state of health insurer competition in
Pennsylvania and shortly thereafter, launched an examination of Blue Cross Blue Shield
competitive practices in Pennsylvania. Highmark challenged the Pennsylvania Insurance
Department’s authority to conduct this review but ultimately agreed to a modified review
focused on examining the market to aid implementation of Health Care Reform.2
Health insurers seeking to merge can expect to simultaneously face reviews from
numerous government bodies, including the United States Department of Justice
(“USDOJ”), the State Attorney General and the State Insurance Department.3 While
these agencies may coordinate their reviews for efficiency, the ultimate outcome of each
review may be entirely independent. For example, USDOJ chose not to take action
following its review of the proposed merger between Highmark, Inc. (“Highmark”) and
Independence Blue Cross (“IBC”).4 The Pennsylvania Insurance Department came to a
different conclusion and refused to approve the merger.5 In some cases, the Federal
Agency and State Agency may both conclude an insurance merger is problematic, as was
the case in Michigan and Nevada when USDOJ and the State Attorney General raised
concerns about health insurer mergers they determined would reduce competition.6 In
1
The Pennsylvania Insurance Department retained two economic groups to analyze the merger, LECG, Inc.
and the Blackstone Group. The Insurance Commissioner and the Pennsylvania Insurance Department
relied heavily on their analysis in coming to a conclusion.
2
Highmark, Inc. v. Commonwealth of Pennsylvania, Insurance Department and Pennsylvania Insurance
Commissioner Joel S. Ario, Civil Action No: 194 M.D. 2010. (Pa. Commw. Ct.); Press Release, “Insurance
Department Examination to Focus on Health Insurance Competition,” July 17, 2009, available at
http://www.portal.state.pa.us/portal/server.pt?open=512&objID=17319&PageID=502655&mode=2&conte
ntid=http://pubcontent.state.pa.us/publishedcontent/publish/cop_hhs/insurance/news_and_media/news___
media/articles/july_17__2009.html
3
The Pennsylvania Senate Banking and Insurance Committee, the Pennsylvania House of Representatives
and the United States Senate Committee on the Judiciary all conducted hearings about this merger. 40 P.S.
991.1403 (a) (2008) (authorizing committee review by the Banking and Insurance Committee of the Senate
and the Insurance Committee of the House of Representatives). The Pennsylvania Senate Banking and
Insurance Committee had significant concerns, which it filed in a non-binding recommendation with the
Pennsylvania Insurance Department. The Pennsylvania House of Representatives failed to reach a
consensus but a majority of members sent a letter to the Pennsylvania Insurance Department expressing
concerns. Senator Arlen Specter noted during the United States Committee on the Judiciary Hearings that
it appeared to him that the Parties could increase premiums to consumers and decrease reimbursements to
providers.
4
USDOJ has reviewed more than 400 insurance mergers in the past decade and has sued on fewer than five
occasions. David Balto, Testimony before the United States Senate Committee on the Judiciary,
(July 31, 2008).
5
The investigation and conclusions of the Pennsylvania Office of Attorney General are not public.
6
The State of Nevada by its Attorney General Catherine Cortez Masto v. United Health Group
Incorporated and Sierra Health Services, Inc., Civil Action No.:2:08-v-00233 (D. Nev. 2008), summary
available at http://ag.state.nv.us/org/bcp/lawsuits/health.htm; Press Release, Blue Cross Blue Shield of Mid-
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other cases, the State Attorney General may opt to take action when the federal agency
does not or vice versa. 7
A traditional review of a health insurer merger by federal antitrust enforcers and a
State Attorney General usually follows a Clayton Act analysis.8 To determine whether a
merger is anticompetitive, USDOJ and the Federal Trade Commission have published
Horizontal Merger Guidelines.9 The National Association of Attorneys General has also
established guidelines. Under both sets of guidelines, mergers are analyzed under a fivestep process: 1) define the market and the level of concentration in that market before
and after the merger; 2) determine the potential adverse competitive effects of the
merger; 3) determine the likelihood of any timely new entry; 4) determine whether the
merger would create any efficiencies; and 5) determine whether any of the parties to the
merger is a failing firm.
In addition to the Clayton Act, antitrust enforcers may look to see whether the
Sherman Act or a state statute also applies. A review may uncover additional troubling
conduct that does not fit squarely into a Clayton Act analysis. While USDOJ typically
reviews health insurer transactions, in other healthcare industry mergers and mergers
generally, the Federal Trade Commission may bring an action to block or undo a merger
under the F.T.C. Act. A state antitrust enforcer may also have a state statute that conveys
slightly different authority than what it has under federal laws. For example, the
Pennsylvania Attorney General reviews all mergers that may have an impact in
Pennsylvania and can bring an antitrust suit as parens patriae on behalf of natural
persons and in his proprietary capacity on behalf of departments, bureaus and agencies of
the Commonwealth’s government as an injured purchaser, reimburser and assignee
pursuant to his powers under the Commonwealth Attorneys Act10 This review may be
done by several divisions or sections of a state Attorney General’s office concurrently,
such as the Antitrust Section and Charitable Trusts and Organizations Section if a
nonprofit entity is involved. Other state agencies may also have power to review a health
insurer merger. In Pennsylvania, the Insurance Department has authority under the
Insurance Companies Holding Act (“IHCA”) to review health insurer transactions.11 The
Michigan Abandon Merger Plans (March 8, 2010), available at
http://www.justice.gov/adr/public/press_releases/2010/256259.htm; Press Release, Blue Cross Abandons
Merger with PHP Following Cox Questioning (March 8, 2010), available at
http://www.michigan.gov/ag10,1607,7-164-3473934811-232872--,00.html.
7
Commonwealth of Pennsylvania v. Catholic Health East, et al., Civil Action No. :2:07 C.V. 007088
(W.D. Pa. 2007), Hanover Hospital Decides Not to Affiliate with Wellspan Health, Gettysburg Times,
September 1, 2004.
8
15 U.S.C. § 18; U.S. v. Falstaff Brewing Corp., 410 U.S. 526 (1973) (the Clayton Act forbids mergers in
any line of commerce where the effect may be substantially to lessen competition or tend to create a
monopoly).
9
Department of Justice and Federal Trade Commission Horizontal Merger Guidelines §§ 1.0 – 1.5
(April 12, 1992); The Department of Justice and the Federal Trade Commission issued new Horizontal
Merger Guidelines on August 19, 2010. It is not clear how these may affect the analysis of a health insurer
merger. The new guidelines are available at http://ftc.gov/os/2010/08/100819hmc.pdf.
10
71 P.S. § 732-204(c); In re: Lorazepam & Clorazepate Antitrust Litigation, 205 F.R.D. 369, 386 (D.D.C.
2002).
11
40 P.S 991.1401 et seq. (2008).
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IHCA does not abrogate the Pennsylvania Attorney General’s power to review health
insurer mergers.12
The IHCA became effective on July 9, 2008, and enabled the Pennsylvania
Insurance Department to review the proposed merger between Highmark and IBC.
Highmark and IBC are two of the thirty-nine licensees of the Blue Cross/Blue Shield
Association (“BCBSA”), and two of the four BCBSA licensees who are authorized to
conduct business in Pennsylvania by the Pennsylvania Insurance Department. The other
two “Blues” in Pennsylvania are Capital Blue Cross and Blue Cross of Northeastern
Pennsylvania. Highmark holds a statewide license from BCBSA to use the Blue Shield
trademark and a license in Western Pennsylvania only to use the Blue Cross trademark.
The other three Blues hold the trademark licenses for the Northeast (Blue Cross of
Northeastern Pennsylvania), the Central Region (Capital Blue Cross) and the Southeast
(IBC). Pennsylvania is unusual in that it is one of the few states that has “Blue-on-Blue”
competition. The BCBSA trademark restrictions generally prevent a “Cross” from
competing with a “Cross” and a “Shield” from competing with a “Shield” but do not
prohibit a “Cross” from competing with a “Shield.” Highmark and Capital Blue Cross at
one time had a joint operating agreement, which was not renewed in 2001. As a result,
both companies decided to engage in direct competition in a 21- county area in Central
Pennsylvania. Similarly, IBC also had a joint operating agreement with Highmark that
expired in 2006.
Mergers between Blue plans have historically survived antitrust scrutiny.13 In
1986, there were 134 independent Blue Cross and Blue Shield plans in the United States.
Today, there are fewer than 40 as a result of plan mergers.14 Highmark is currently
attempting to affiliate with Blue Cross Blue Shield of Delaware, further consolidating the
Blues.15 Other than Kaiser Permanente’s presence in California, the merged entity would
have had more direct premiums in its top state than any other insurance company.16 The
merged entity would have provided health insurance for seven out of every ten
Pennsylvanians.
12
The provisions of this Act shall not limit the jurisdiction and authority of the Office of Attorney General,
including, but not limited to, the jurisdiction and authority granted pursuant to the Act of October 15, 1980
(P.S. 950, No. 164), known as the “Commonwealth Attorneys Act.” 40 P.S. § 368 (2008).
13
In 2004, USDOJ concluded that a proposed merger between WellPoint Health Networks, Inc. and
Anthem, two of the largest insurance companies in the United States, would not result in the exercise of
monopsony power. The proposed merger would make the combined entity the largest in the country. The
two companies were Blue licensees and, accordingly, were assigned specific geographic territories and did
not compete against each other under the Blue trademarks. See Department of Justice Antitrust Division
Statement on the Closing of Its Investigation of Anthem, Inc.’s Acquisition of WellPoint Health Networks,
Inc., at http://www.usdoj.gov/atr/public/press_releases/2004/202738.htm.
14
Robert W. McCann, Field of Dreams: Dominant Health Plans and the Search for a ‘Level Playing Field’,
HEALTH LAW HANDBOOK, Thomson West (2007) at 31, available at
http://www.drinkerbiddle.com/publications/Detail.aspx?pub=1418&servicesearch=0.
15
Press Release, Blue Cross Blue Shield of Delaware announces affiliation agreement with Highmark, Inc.,
Aug. 20, 2010, available at https://www.highmark.com/hmk2/about/newsroom/2010/pr082010.shtml.
16
The Blackstone Group, Report on the Proposed Consolidation of Highmark, Inc. and Independence Blue
Cross, September 2, 2008.
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The existence of the joint operating agreement between Highmark and IBC,
which contained a ten-year, non-compete clause, along with the demonstrated benefits of
competition in the Central region, were critical factors in the Insurance Commissioner’s
decision not to allow the merger to proceed. In reaching this decision, he relied heavily
upon federal antitrust theories.17 While the IHCA does set certain default provisions, it
allows for the application of federal antitrust law should these defaults not apply. The
IHCA does not affect the authority of the Pennsylvania Attorney General in his review.18
The Pennsylvania Insurance Department retained two economists, LECG, Inc. (“LECG”)
and the Blackstone Group (“Blackstone”).19 Their reports contained substantial analysis
under the IHCA and the antitrust laws and formed the basis for the Insurance
Department’s decision.
A typical merger investigation by an antitrust enforcer involves conducting an
economic analysis, reviewing documents and interviewing persons who may have
relevant information, such as competitors, hospitals, physicians and employers.
Similarly, LECG’s data gathering process included document review, interviews with
interested persons and performing “a large number of standard economic analyses
relevant to determining the potential impact of the proposed consolidation on
competition, including analyses of market definition, entry, market power, competitive
effects and potential competition.”20
As with a review under the Clayton Act, a review under the IHCA starts with
defining the relevant markets. The relevant default product market under the IHCA is,
“In the absence of sufficient information to the contrary, the relevant product market is
assumed to be the direct written insurance premium for a line of business, such line being
used in the annual statement required to be filed by insurers doing business in the
Commonwealth.”21 The relevant default geographic market under the IHCA is the entire
Commonwealth, on the basis this is the area for which the insurer’s license is granted by
The LECG report states: “While federal antitrust law – as expressed in both statutes and related case law
– also concerns itself with an analysis of competitive effects similar to those of the [I]HCA, we understand
that neither the federal statutes nor the related case law is binding on the PID with respect to the issues the
PID may consider. The references to federal antitrust principles in this Report are not intended to suggest
that such law or principles have direct applicability or govern the analysis. Rather, such law and principles
are presented to assist the PID as it interprets and applies the [I]HCA to this consolidation.” LECG, Inc.
Economic Analysis of the Competitive Impacts from the Proposed Consolidation of Highmark and IBC,
September 10, 2008 (hereafter “LECG Report”).
18
Pennsylvania does not have a state antitrust statute; therefore, merger reviews by the Pennsylvania
Attorney General proceed under the federal antitrust laws and state common law. His authority is pursuant
to the Commonwealth Attorney’s Act, 71 P.S. § 732-204 (c); 40 P.S. § 368 (2008).
19
The final reports of these economists were made public, a final Insurance Department report was not. All
reports and documents are available at
http://www.portal.state.pa.us/portal/server.pt/community/industry_activity/9276/highmark_ibc_form_a_pa
ge/620395. These reports contained substantial analysis under the IHCA and the antitrust laws and formed
the basis for the Insurance Department’s decision.
20
LECG Report at 18-19.
21
40 P.S. § 991.1403(d)(2)(iii)(B) (2008).
17
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the Commonwealth.22 However, just because an entity may be licensed on a statewide
basis does not mean that this is the geographic market for antitrust purposes.23
In its review of the Highmark/IBC merger, the Pennsylvania Insurance
Department considered these default markets, found the IHCA defaults may not be
supported by sufficient information for this merger review, and went on to conduct a
more traditional antitrust analysis under the Merger Guidelines and relevant case law.24
LECG notes the criteria for raising concerns over a merger appear to differ between the
Merger Guidelines and the [I]HCA.25 For example, the market share benchmarks for
raising competitive concerns are substantially different. These differences may lead to
different policy conclusions. However, they found the economic principles of market
definition embodied in the Merger Guidelines can assist the economic analysis of the
proposed merger under the [I]HCA.26 LECG determined that the relevant product
markets were Commercial, Medicare and Medicaid.27 It found that the relevant
geographic markets corresponded to Blue defined regions.28 The parties suggested
alternatives, also defined using antitrust analysis rather than the IHCA, such as a
geographic market based on where the health insurance product is sold.29
The Pennsylvania Insurance Department evaluated current competition and
potential competition. Following its rejection of the prima facie markets defined under
the IHCA, LECG conducted a post-prima facie analysis of current competition and
potential competition. Its analysis of competition goes beyond the application of the
prima facie test to determine if the indicated results of the prima facie test have been
rebutted by consideration of other relevant factors.30 LECG performed its analysis to
determine if the proposed consolidation is likely to substantially increase market power
for the merged firm. It noted that market power is the ability of an incumbent firm to
control market prices or exclude competition, which is the definition of market power
under the antitrust laws.
LECG found that there was a lack of direct competition, except in the Medicaid
fee for service markets.31 It then looked carefully at potential competition and found that
Highmark could compete in Southeastern Pennsylvania using its Blue Shield brand, as it
had been doing for years in Central Pennsylvania.32 LECG relied on the federal antitrust
22
Id.
U.S. v. Marine Bancorporation, Inc., 418 U.S. 602 (1974).
24
LECG Report at 26 – 27 (citing U.S. Department of Justice and the Federal Trade Commission, 1992
Horizontal Merger Guidelines [with April 8, 1997, Revisions to Section 4 on Efficiencies] available at
http://www.ftc.gov/bc/docs/horizmer.htm).
25
USDOJ usually takes the position in its investigations that the relevant product market is all managed
care products. See http://www.usdoj.gov/atr/public/health_care/204694/chapter6.htm at
p. 4.
26
Brown Shoe Co. v. United States, 370 U.S. 325 (1962).
27
LECG Report at 5.
28
Id.
29
Id. at 6.
30
Id. at 7.
31
Id. at 8.
32
Id. at 11.
23
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statutes and antitrust scholars for its analysis of how the merger would affect potential
competition.33 In fact, LECG noted that Highmark was in a particularly good position to
successfully compete in Southeastern Pennsylvania as compared to other insurers. The
two advantages it had, that were not available to other potential entrants, were the Blue
Shield brand and a physician provider network already in place. While Highmark stated
it had no plans to enter, LECG found several reasons it would enter. Primarily, it had
entered Central Pennsylvania and competed aggressively with Capital Blue Cross. Next,
LECG noted Highmark’s ten-year, non-compete agreement with IBC expired in 2006;
therefore, it faced no contract barriers. The BCBSA trademark rules also were not a
barrier to Highmark’s entry. Highmark holds a statewide Blue Shield license, and its
CEO had made public statements that it intended to provide statewide coverage. Under
certain pro-forma calculations, LECG found entry would be profitable under certain
circumstances. LECG also found “some evidence” that IBC perceived Highmark as a
potential entrant.34 LECG asserts that its potential competition analysis under the IHCA
is broader than it may have been under federal antitrust analysis.35
The Pennsylvania Insurance Department also looked at business and contracting
practices that may cause competition concerns. LECG studied allegations that the
merged entity would be in a stronger position to eliminate competitors through
exclusionary behavior.36 It discussed predatory pricing and most-favored nation’s
clauses. LECG’s focus was on the impact of the filing on the competitive situation in
Pennsylvania. It was important for them to understand how this proposed consolidation
would exacerbate these practices. It ultimately concluded that it remained unclear how
the consolidation would facilitate these practices but could not be ruled out.37
Efficiencies and public benefits to the Commonwealth from the proposed
transaction were also evaluated for the Pennsylvania Insurance Department. Its other
economist, Blackstone, projected efficiencies of several hundred million dollars. It also
found there were some public benefits to the merger, but that there were several factors
that could lead the Pennsylvania Insurance Department to discount these public
benefits.38 LECG found in its analysis that benefits from increased Blue-on-Blue
competition in Philadelphia would likely produce benefits for several years.39
LECG evaluated entry barriers, relying upon the Merger Guidelines,40 and found
historically, there was a failure of entry in Western Pennsylvania and Southeastern
Pennsylvania, both areas where the Blues remain dominant.41 These regions are
33
Id. at 69, citing John Kwoka, Eliminating Potential Competition, Issues in Competition Law and Policy,
Volume II, ed. Wayne Dale Collins (Chicago: ABA Section of Antitrust Law, 2008), p. 1438.
34
Id. at 13.
35
Id.
36
Id.
37
Id. at 14-15.
38
Id. at 15.
39
Id. at 81.
40
Id. at 63, citing Department of Justice and the Federal Trade Commission Horizontal Merger Guidelines
§ 3 (April 12, 1992).
41
Id. at 63-65.
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characterized by exit or retrenchment by competitors. Any successful new entrants were
generally health insurers affiliated with a large provider system, like UPMC in Pittsburgh
with its UPMC Health Plan42 LECG determined that, to the extent the merger would
reduce competition, it was unlikely other insurance companies would step in and replace
competition.
Although LECG and the Pennsylvania Insurance Department looked to the
federal antitrust laws for guidance, both were cautious and stated that federal antitrust
laws were not controlling as the Pennsylvania Insurance Department was not applying a
federal statute. They expressed concerns that the Parties’ expert relied almost exclusively
on the federal antitrust laws, stating, “[W]e understand that federal antitrust law is not
directly applicable to the issues that the Department must consider. While federal
antitrust law may provide helpful context, the Department is not applying a federal statute
so federal principles are not dispositive. Applicant’s expert, Dr. Barry Harris, has
grounded his analyses almost exclusively in federal antitrust law principles, and in many
areas, Dr. Harris has not addressed the specific language found in the [I]HCA. In several
areas the language of the [I]HCA, appears to express a more particularized concern for,
and sensitivity to, the potential for diminished competition in the insurance industry in
the [C]ommonwealth than federal law.”43
While LECG’s analysis follows the tenets of federal antitrust law, it is unclear
whether application of those laws by antitrust enforcers would have come to the same
result. Challenges to health insurer mergers are rare, and when they occur, the focus has
historically been on the impact on direct competition rather than potential competition.
The Pennsylvania Insurance Department’s conclusions following its review of the
Highmark and IBC merger demonstrate that even if a health insurer merger is not
challenged following a traditional antitrust review by USDOJ, it still may not be
approved if another government agency determines it will reduce competition in the
relevant markets. Variations in applicable laws44 and relevant standards may produce a
different outcome. While agencies, such as the Pennsylvania Insurance Department, may
look to the federal antitrust laws for guidance, they made it clear in this instance, that
they are not bound by the limitations of traditional antitrust analysis and any defenses
available under antitrust law.
Insurers seeking to merge also need to be cognizant that if antitrust enforcers find
that the merger will reduce competition and decide to take action, the form of that action
or any remedy may differ between federal and state agencies. Both USDOJ and the State
of Nevada determined the 2008 merger between United Health Group Incorporated and
Sierra Health Services, Inc., would be problematic under the antitrust laws and both
42
Id. at 65.
LECG supra n. 35 at 29.
44
Anticompetitive conduct may violate Pennsylvania’s common law Restraint of Trade. Centennial School
Dist. v. Independence Blue Cross, 1994 WL62016 (E.D. PA. 1994) (Memorandum Opinion) (because
plaintiff stated a cause of action under The Sherman Act, a claim for restraint of trade could also proceed).
43
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negotiated consent decrees to remedy the harm to competition.45 USDOJ’s Consent
Decree required divestiture.46 Nevada’s Consent Decree required divestiture and
prohibited certain conduct to prevent competitive harm. It also required certain public
benefits, such as cooperation with the Nevada Governor’s Office for Consumer
Healthcare Advocacy and Assistance Program, creation of a Physicians Council and
charitable contributions pursuant to a binding Commitment letter to the Nevada Attorney
General.47
The Pennsylvania Attorney General issued comments in connection with the 1996
merger between Pennsylvania Blue Shield and Blue Cross of Western Pennsylvania that
created Highmark, urging the Pennsylvania Insurance Department to impose conditions
on that Blue Cross/Blue Shield merger.48 Concerns were raised on two grounds. One
involved the charitable trust aspect of the transaction. The other concern was whether
competition would be stifled by the new entity. The Pennsylvania Attorney General has
also required public benefit components in its consent decrees with hospitals.49 In
Pennsylvania, health insurer transactions may be reviewed by both the Antitrust Section
and the Charitable Trusts and Organizations Section of the Attorney General’s Office.
Therefore, like the joint concerns it raised in 1996, the Pennsylvania Attorney General
could seek a remedy for both under the same decree. A State Attorney General is also
likely to require fees and costs as part of any settlement 50
The Pennsylvania Insurance Department continued its focus on competition when
it launched an examination of the Blue Cross Blue Shield plans licensed in
Pennsylvania51 several months after the merger review ended. Commissioner Ario stated
that while it was good news for consumers that the Parties withdrew their consolidation,
it did not improve anti-competitive dynamics in Pennsylvania’s health insurance
marketplace.52 Among the issues the Pennsylvania Insurance Department planned to
explore were: 1) Whether the territorial restrictions in the Blues’ licensing agreements
are anti-competitive; 2) Whether there are other agreements among the Blues that impede
rather than promote competition; 3) Whether the Blues use their market power to an
unfair and anti-competitive advantage in areas such as provider contracting and product
Id, Proposed Stipulated Final Judgment at ¶¶ H – J.
The State of Nevada by its Attorney General Catherine Cortez Masto v. Unitedhealth Group
Incorporated and Sierra Health Services, Inc., Civil Action No. 2:08-v-00233 (D. Nev. 2008).
46
U.S. v. United Health Group Incorporated v. Sierra Health Services, Inc., Civil Action No. 1:08 C.V.
00322 (D. D.C. 2008).
47
Id, Proposed Stipulated Final Judgment at ¶¶ H – J.
48
Christopher Guadagnino, Attorney General Passes on Blues Merger, Physician’s News Digest
(Jan. 1997), available at http://www.physiciansnews.com/spotlight/197.html.
49
In re Children’s Hospital of Pittsburgh and Children’s Hospital of Pittsburgh Foundation, No. 6425 of
2001 (Allegheny Ct. Comm. Pleas 2001).
50
Commonwealth of Pennsylvania v. Catholic Health East, et al., Civil Action No. :2:07 C.V. 007088
(W.D. Pa. 2007).
51
“Insurance Department Examinations to Focus on Health Insurance Competition,” press release available
at http://www.legis.state.pa.us/cfdocs/legis/tr/transcripts/2010_0119T.pdf
52
Id.
45
45
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tying; and 4) Whether there are restrictions on data sharing and other market practices
that impede the transparency necessary to a competitive market place.53
In an effort to timely gather information to aid in implementation of health care
reform, the Pennsylvania Insurance Department modified the scope of its examinations
following a challenge by Highmark.54 Highmark claimed that controlling statutes did not
permit the Pennsylvania Insurance Department to examine these issues; in particular, the
territorial restrictions.55 The Pennsylvania Attorney General, along with the
Pennsylvania Insurance Department, disagreed, asserting the examinations were well
within the Pennsylvania Insurance Department’s authority.56 Ultimately, although
Commissioner Ario thought the Pennsylvania Insurance Department would prevail, he
agreed to modify the examinations to focus on what is necessary to set the right
conditions in the four Blue market places as related to health care reform.57
Commissioner Ario has moved on to continue his efforts to promote competition as the
first director of the Office of Insurance Exchanges in Washington, DC.58 Health
insurance companies in Pennsylvania may continue to face scrutiny for anti-competitive
conduct not only from state and federal antitrust enforcers, but the Pennsylvania
Insurance Department.
53
Id.
Highmark, Inc. v. Commonwealth of Pennsylvania, Insurance Department and Pennsylvania Insurance
Commissioner Joel S. Ario, Civil Action No: 194 M.D. 2010 (Pa. Commw. Ct.).
55
Id.
56
Id; Pennsylvania’s Unfair Insurance Practices Act also prohibits unfair methods of competition including
“Entering into any agreement to commit, or by any concerted action committing, any act or boycott,
coercion or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the
business of insurance.” 40 P.S. § 1171.5 (a)(4).
57
Testimony of Commissioner Joel S. Ario before the Commonwealth of Pennsylvania House of
Representatives Insurance Committee, July 20, 2010 at p. 77-78 of transcript, available at
http://www.legis.state.pa.us/cfdocs/legis/tr/transcripts/2010_0119T.pdf
58
Rick Stauffer, Pennsylvania Insurance Chief Takes Job in D.C., Pittsburgh Tribune Review,
(Aug. 21, 2010), available at http://www.pittsburghlive.com/x/pittsburgh.trib/news/print_695846.htm.
54
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