Appeals court voids $30M Blue Cross settlement

June 08--A U.S. appeals court has voided a $30-million settlement in a class action against Blue Cross Blue Shield of Michigan involving price-fixing allegations, contending that key details of the settlement were wrongly sealed and kept hidden from public view.

The U.S. 6th Circuit Court of Appeals in Cincinnati said Tuesday that members of the aggrieved class -- estimated at 3 million to 7 million people -- had no ability to examine the facts and reasoning behind the settlement and that the district court in Detroit approved the settlement without "meaningful scrutiny."

The opinion tosses out the settlement and sends the underlying class-action case back to U.S. District Court in Detroit "for an open and vigorous examination of the settlement's fairness," the opinion said.

The settlement, reached in June 2014 between Blue Cross and the class-action plaintiffs, concerned allegations that The Blues abused its dominant market position in Michigan by pressuring more than 60 hospitals into contracts that were preferential to Blue Cross and adverse to competing health insurers, while also raising health care costs overall.

The lawsuit arose from a 2010 Department of Justice complaint against Blue Cross and ultimately alleged damages of more than $13.7 billion. Blue Cross did not admit to any wrongdoing as part of the $30-million now-voided settlement.

Much of that settlement amount was to go to expenses and lawyers, with just $14.6 million going to the members. The settlement was approved by U.S. District Court Judge Denise Hood.

In its opinion issued Tuesday, the appeals court chided the district court for sealing too many legal filings and documents in the case at the behest of Blue Cross and the original plaintiffs, including plaintiffs' amended complaint, nearly 200 exhibits and an expert's report that ultimately cost $2 million out of the settlement amount.

The expert's report calculated the class-wide damages of the alleged price-fixing scheme at $118 million, Tuesday's opinion said.

An objection to the settlement was brought by various members of the class-action group. They argued the settlement was too small and that too much of it would go to lawyers.

In addition, a group of 26 self-insured businesses with health plans administered by Blue Cross sought to unseal the records in the case.

"Class members who sought to object to the proposed settlement thus had no ability to examine the bases of what they were objecting to," the appeals court said. "As a practical matter, therefore, both the general public and the class were able to access only fragmentary information about the conduct giving rise to this litigation, and next to nothing about the bases of the settlement itself."

Blue Cross spokeswoman Helen Stojic said the insurance company is "reviewing the court's decision and are hopeful we can bring this to resolution once again."

An attorney for the self-insured businesses, Bryan Walters of Varnum in Grand Rapids, said they are pleased with the decision to unseal the records.

"We continue to have very serious concerns about the fairness of the proposed settlement," Walters said in a statement. "We look forward to the opportunity to review the record on behalf of over 25 businesses we represent who objected to the settlement."

An attorney for the original plaintiffs in the class-action case could not be reached for comment late Tuesday.

Contact JC Reindl: 313-222-6631 or [email protected]. Follow him on Twitter @JCReindl.

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