(CN) - A federal class action claims Wellpoint used unlawful licenses and agreements to restrict competition in Indiana and inflate insurance premiums.
In a complaint filed in the federal court in Indianapolis, lead plaintiffs Ryan Ray and Trent Kelso claim Wellpoint, also known as Anthem Insurance, manipulated the insurance market by divvying up geographical regions with Blue Cross and Blue Shield member health plans, and used contracts that contained "Most Favored Nation" or "MFN" clauses to control health care prices.
The clauses are negotiated with individual health care providers to ensure that Wellpoint receives the best prices on services. The class alleges that the providers are forced into accepting these clauses because Wellpoint controls a majority of the market in Indiana, and would rescind business if not agreed upon.
"If a health care provider does not agree to the MFN, that provider will not remain in or become a part of WellPoint's network, which is generally an unacceptable result because WellPoint controls the vast majority of subscribers in Indiana. Faced with this prospect, providers capitulate to WellPoint's demands, including MFNs," the complaint states.
The lawsuit also accuses Wellpoint of taking part in licensing agreements to ensure other members of Blue Cross and Blue Shield do not compete with each other by doing business in the same areas.
"Through the License Agreements, which the independent Blue Cross and Blue Shield licensees created, control and enforce, each independent Blue Cross and Blue Shield licensee agrees that neither it nor its subsidiaries will compete under the licensed Blue Cross and Blue Shield trademarks and trade names outside of a designated service Area," the class says.
The agreements also allegedly restrict revenue that members like Wellpoint can generate outside of their designated areas, which according to the plaintiff's, gives little incentive to expand outside such areas, and constitute as unlawful horizontal agreements between competitors that would also violate anti-monopoly laws.
Blue Cross and Blue Shield is made up of 37 separate and independent insurance companies, and is controlled by members, of which Wellpoint is one of the largest, that can vote on new members or terminate existing ones.
Wellpoint is no stranger to lawsuits regarding its practices, as it was sued this past July in Los Angeles County Superior Court for misleading consumers on the size and benefits of its health network, and again in August for changing member's plans without proper notification.
The class, which includes all consumers who paid Wellpoint for insurance premiums dating back to 2006, seeks monetary damages under The Sherman Antitrust Act, for inflated insurance prices.
It is represented by Jonathan Little of Saeed & Little in Indianapolis.