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Blue Cross plans bulldozing over the competition

There's no clash of the Titans in the small-business health insurance market right now.

While some consider BCBS's aggressive acquisition of market share as proof of savvy business practices, others allege that these practices violate antitrust laws.

According to a recent report by the United States General Accounting Office (GAO), 25 of the 37 states identify a Blue Cross and Blue Shield (BCBS) plan as the largest health insurer in their small-business market. In all but one of the remaining 12 states, a BCBS plan is among the top 5. In three states — Alabama, North Dakota, and Washington — BCBS plans have cornered more than 75 percent of the small-business health insurance market.

Whether the domination of the nation's small-business market by BCBS is cause for celebration or alarm depends on who's telling the story.

Clearly, BCBS is thrilled. "The GAO report demonstrates that BCBS plans are one of the most popular choices among small employers selecting benefits for their businesses," says John Parker, a spokesman for the Blue Cross and Blue Shield Association (BCBSA), which is comprised of 43 independent BCBS companies nationwide.

Others are not so enthusiastic. "The GAO report confirms that the small-employer health insurance market is burdened with a lack of free market competition," says Joseph Rossman, vice president of insurance for the Associated Builders and Contractors, a national organization that represents more than 23,000 construction and construction-related firms.

Some consider BCBS's aggressive acquisition of market share proof of savvy business practices. Others allege these practices violate anti-trust laws by using that power to force hospitals and doctors to accept artificially low payments for their services and to charge consumers and employers excessive premiums.

Not going to take it anymore

One Pennsylvania hospital says it has had enough. The Chester County Hospital in West Chester, Pennsylvania, filed a lawsuit against Independence Blue Cross (IBC) and several of its subsidiaries, accusing the region's largest health insurer of anti-competitive business practices. According to the lawsuit, IBC's plans cover approximately 75 percent of southeastern Pennsylvania's 3.7 million residents.

Chester County Hospital President H.L. Perry Pepper says his organization has no other choice but to sue IBC. "We believe IBC has amassed an exceedingly high market share and then taken advantage of that power by coercing us, on a 'take it or leave it' basis, to accept rates which are depleting the hospital's charitable resources," he says.

According to the lawsuit, IBC's plans cover


75 percent of southeastern Pennsylvania's

3.7 million residents.

According to the lawsuit, Chester County Hospital lost $8.5 million providing services to IBC plan members in fiscal 2001. The insurer paid the hospital about $34 million that year.

IBC officials say they are "disappointed" the hospital filed the lawsuit.  IBC points out the suit was filed in the early stages of a five-year contract with IBC.  IBC suggests the hospital filed the suit in an attempt to "sweeten" the terms of that contract.

IBC also claims the lawsuit is nothing but a "smoke screen that will distract Chester County residents from asking important questions about how their community hospital is being run."

“We welcome competition”

Blue Cross and Blue Shield plans welcome competition, according to the BCBSA.

BCBSA spokesman John Parker points out the GAO study shows the median number of health insurers offering coverage in the small business market is actually 28 per state. Parker says that’s proof there’s plenty of competition.

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