health insurance

🥏 Blue (Oval) vs. Blue (Cross Blue Shield Association)

Ford's lawsuit against the Blue Cross Blue Shield Assoc. is a historic account of the rise of the largest insurance players in America.

I've been in the insurtech space for six years and never knew how the Blue Cross Blue Shield Association and its members rose to such dominance. Lucky for me, I stumbled across Ford's anti-trust lawsuit against the Blue Cross Blue Sheild Association. It's a must-read historical account of how Blue plans came into health insurance dominance.

Here are the key events: 👇

1934: An administrator named E.A. von Steenwyck developed a prepaid hospital plan in St. Paul, Minnesota, using a poster featuring a nurse wearing a blue Geneva cross uniform as the symbol and the name “Blue Cross” for the plan. 

1939: The Blue Cross mark was adopted as the official emblem of American Hospital Association-approved hospital plans.

1939: Blue Shield plans closely followed the development of the Blue Cross plans and were developed in conjunction with the American Medical Association (“AMA”).

Late 1940s: The BCBS Licensees faced growing competition from both each other and third-party insurance companies.

1952: The Blue Shield plans agreed to transfer their ownership rights in their respective Blue Shield trade names and trademarks to the Blue Shield Association. 

1954: The Blue Cross plans transferred their rights in each of their respective Blue Cross trade names and trademarks to the AHA.

1972: The AHA assigned its rights in these marks to the Blue Cross Association. 

1982: The Blue Cross Association and the Blue Shield Association merged to form Blue Cross Blue Shield Association.

Here's where it gets interesting! 🍿

November 1982: After heated debate, BCBSA’s member plans agreed to two “propositions”:
(a) By the end of 1984, all existing Blue Cross plans and Blue Shield plans would consolidate at a local level to form joint plans.
(b) By the end of 1985, all BCBS Licensees within a state would further consolidate, ensuring that each state would have only one BCBS Licensee.

April 1987: The BCBS Licensees held an “Assembly of Plans” – a series of meetings held to determine how they would and would not compete against each other. During these meetings, these independent health insurers and competitors agreed to maintain Exclusive Service Areas (“ESAs”) when operating under the Blue Brand, thereby eliminating “Blue on Blue” competition.

An ESA is defined as “the geographical area(s) served by the Plan on June 10, 1972, and/or as to which the Plan has been granted a subsequent license."

1996: A “Local Best Efforts Rule” was also approved by the independent BCBS Licensees. It reads as follows: “[a]t least 80% of the annual Combined Local Net Revenue of a controlled affiliate attributable to health care plans and related services... offered within the designated Service Area must be sold, marketed, administered or underwritten under the Licensed Marks and Names.” 

1996: A “National Best Efforts Rule” was also approved by the independent BCBS Licensees. It reads as follows:“[a]t least 66 2/3% of the annual Combined National Net Revenue of the Controlled Affiliate[] attributable to health care plans and related services ... must be sold, marketed, administered or underwritten under the Licensed Marks and Names.”

The best part is the mechanism that ensures each Blue plan toes the line:

A terminated BCBS Licensee would lose the right to use the Blue Brand through which it derived the majority of its revenue and would be required to fund the establishment of a competing Blue Brand health insurer in its ESA

Talk about anti-competitive behavior. How has this behavior gone under the radar of FTC regulators for so long, and why did an anti-trust lawsuit have to be brought by consumers and not regulators?

Hopefully, we see a proliferation in "Blue Sharking" and increased competition between Blue Plans in coming years. Imagine a world where Ford, GM, Chrysler, Toyota, Honda, Kia, and Tesla got together, decided to use the same logo, and, in exchange, divided the US in territories in which they could be the only seller of cars. Does that not sound messed up to you? According to Ford, it's exactly what Blue Plans do and a key reason why health insurance is so expensive. 99% of the time, I hate to point fingers. I'd rather focus on solving the issue at hand. This is the exception. Businesses and consumers are bearing the brunt of crony capitalism, and it's time the legal system steps in to right past wrongs.

To find the entire legal brief, click 👉 here


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