Blue Cross faces Michigan lawsuit over alleged monopoly and pricing practices

Michigan is challenging the rules governing how Blue Cross plans compete, alleging they have helped Blue Cross Blue Shield of Michigan protect its dominant position in the state while limiting employers’ choices and putting pressure on health care providers.

Michigan Attorney General Dana Nessel filed the lawsuit Oct. 8 in the U.S. District Court for the Eastern District of Michigan, accusing the insurer of using agreements with other Blue Cross plans to restrict competition, raise health insurance costs and maintain a monopoly.

According to the complaint, Blue Cross controls 65% of Michigan’s health insurance market and 79% of its preferred provider organization, or PPO, market.

The state is seeking to stop the alleged practices and recover damages and other financial relief.

Blue Cross Blue Shield of Michigan Mutual Insurance Company is the only named defendant. The complaint identifies the Blue Cross Blue Shield Association and other member plans as nonparty co-conspirators.

The lawsuit follows a separate nationwide antitrust case involving the Blue Cross Blue Shield Association and member plans, including Blue Cross Blue Shield of Michigan.

That case resulted in a $2.67 billion settlement after subscribers alleged the plans agreed to limit competition in selling health insurance and related administrative services. The defendants denied wrongdoing, and the settlement did not establish liability.

Blue Cross disputes state’s claims

Blue Cross said it was blindsided by the lawsuit and had not yet been served, so it could not comment on the specific merits of the case. The company disputed the state’s characterization of Michigan’s insurance market.

“We fundamentally disagree with the Attorney General’s characterization of an uncompetitive insurance market in Michigan,” the company said. “Competition exists everywhere in our state’s insurance markets, with strong local and national insurers competing with us every day.”

Blue Cross also pointed to its nearly 90-year history of providing coverage in every Michigan county, saying its products and services are central to its success in the state.

Lawsuit challenges Blue Cross rules

The complaint focuses on rules established through the Blue Cross Blue Shield Association, which licenses the Blue Cross and Blue Shield names and marks to member plans.

One rule, known as the National Account Rule, generally prevents a plan from competing to provide Blue-branded services to a large employer headquartered in another plan’s territory.

The complaint also challenges rules that restrict non-Blue-branded business and require plans to generate at least 80% of certain revenue from Blue-branded services within their assigned territories.

The state alleges the rules discourage plans from competing against one another and limit employers’ choices.

Michigan’s employee health plan is one example cited in the complaint. The state self-insures the plan, meaning it pays covered medical claims, while Blue Cross administers benefits and provides access to its provider network.

The state alleges the rules prevented other Blue plans from competing to administer the employee plan, weakening Michigan’s ability to negotiate lower administrative fees, broader provider networks and better service.

The complaint also alleges Blue Cross improperly paid some claims, failed to pursue certain recoveries, charged undisclosed fees and retained rebates that should have been passed on to the state. It claims the practices increased costs for the employee plan.

State also challenges provider payments

The lawsuit separately alleges Blue Cross used its position as a major purchaser of health care services to push provider reimbursement rates below competitive levels, in some cases below the cost of care.

The state claims the payment practices have placed financial pressure on hospitals, physicians and other providers, leading some to cut services, reduce staffing or close facilities.

The complaint points to a 2026 dispute between Blue Cross and Michigan Medicine, the University of Michigan’s health system.

Michigan Medicine said Blue Cross proposed a 30% reduction in reimbursement rates, raising concerns about access to care for nearly 300,000 patients. The two sides reached a new contract agreement in May.

The filing also compares Michigan Medicine’s reimbursement rates with those of peer academic health systems.

According to figures cited in the complaint, Michigan Medicine received about 163% of Medicare rates for inpatient services, compared with an average of 206% among peer systems’ dominant insurers. For outpatient services, the figures were 212% and 310%, respectively.

Those figures compare payments with Medicare rates, not providers’ costs of delivering care. The state cites them as evidence that Michigan Medicine receives lower reimbursement than comparable institutions elsewhere.

The complaint also cites the June closure of Sturgis Hospital. The hospital identified declining reimbursement rates among its financial challenges, along with rising operating costs and reduced patient use.

The lawsuit includes two claims under the federal Sherman Act, four claims under the Michigan Antitrust Reform Act, and claims of public nuisance and unjust enrichment.

The state is asking the court to prohibit the alleged anticompetitive conduct and award available damages, restitution, disgorgement and civil penalties. The allegations have not been proven in court.

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Noah Lopez is editorial assistant for InsuranceNewsNet. Contact him at noah.lopez@innfeedback.com.