In re Blue Cross Blue Shield Antitrust Litig.

Decision Date23 February 2017
Docket NumberMDL No.: 2406,Master File No.: 2:13–CV–20000–RDP
Citation238 F.Supp.3d 1313
Parties IN RE: BLUE CROSS BLUE SHIELD ANTITRUST LITIGATION This document relates to all cases.
CourtU.S. District Court — Northern District of Alabama


This matter is before the court on the following cross motions for partial summary judgment: (1) Defendants' Amended and Restated Motion Based on the Filed Rate Doctrine for Summary Judgment on the Alabama Subscribers' Damages Claims (Doc. # 733); and (2) Alabama Subscriber Plaintiffs' Cross–Motion for Partial Summary Judgment on the Filed–Rate Doctrine (Doc. # 770). The motions have been fully briefed. (Docs. # 734, 805, 835, 838, 839, 903, and 904).

I. Introduction

The Filed Rate Doctrine1 is judicially created and finds its origins in principles of federal preemption. See Am. Tel. & Tel. Co. v. Cent. Office Tel., Inc. , 524 U.S. 214, 222, 118 S.Ct. 1956, 141 L.Ed.2d 222 (1998) ; Louisville & Nashville R.R. Co. v. Maxwell , 237 U.S. 94, 97, 35 S.Ct. 494, 59 L.Ed. 853 (1915). In the antitrust context, it operates to bar treble damages claims that are based upon challenges to rates that have been filed with regulatory agencies. Keogh v. Chicago & Northwestern Railway Co. , 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922) ; Square D Co. v. Niagara Frontier Tariff Bureau, Inc. , 476 U.S. 409, 106 S.Ct. 1922, 90 L.Ed.2d 413 (1986) ; Taffet v. Southern Co. , 967 F.2d 1483 (11th Cir. 1992) ; Hill v. BellSouth Telecommunications, Inc. , 364 F.3d 1308 (11th Cir. 2004). Defendants contend that application of the doctrine entitles them to summary judgment on the damages claims asserted by the two named Subscriber Plaintiffs. Subscriber Plaintiffs respond that it is actually they who are entitled to judgment as a matter of law on this affirmative defense because Blue Cross and Blue Shield of Alabama ("BCBSAL") has systematically charged rates that varied from the rates they filed with the Alabama Department of Insurance ("DOI"). After careful review, and with the benefit of oral argument and supplemental briefing, the court concludes that both Motions are due to be granted in part and denied in part.

II. Relevant Undisputed Facts

Pursuant to Alabama Code § 10A–20–6.10, the Alabama DOI is tasked with reviewing certain insurance rates that are filed with it and either approving or disapproving them. (Doc. # 738–58 pp. 243–255; Doc. # 738–2 ¶ 19). The setting of BCBSAL's rates is also governed by the Alabama Department of Insurance Regulation 482–1–116 ("Regulation 116"). Ala. DOI Reg. 482–l–116. (Doc. # 738–82). BCBSAL is the only defendant in this action that has filed rates with the DOI. No other "Blue" filed rates in Alabama with the DOI. (Doc. # 738–58 pp. 125–26).

On an annual basis, BCBSAL submits rate filings for each insurance product in each of three market segments: individual policies, group policies with 2–14 eligible employees, and group policies with 15–50 eligible employees. Regulation 116 does not require the filing of rates for group policies which cover more than 50 eligible employees. Ala. DOI Reg. 482–l–116. (Doc. # 738–82). The purpose of DOI filings is to set forth the rating factors used to determine "reasonable" rates. (Doc. # 738–58 pp. 87, 88–89, 90–91; Doc. # 773–10 pp. 63, 64–66).2 BCBSAL has employed rating classifications for its group insurance products as follows: (a) for groups of 2–14, BCBSAL has applied a "community-rating" methodology, and adjusts base rates using benefit plan and group-size adjustment factors (see Doc. # 738–2 ¶¶ 14–18; Doc. # 738–68; Doc. # 773–5); (b) for groups of 15–50, BCBSAL has applied a "demographic-rating" methodology, and adjusts base rates using demographic adjustment factors (such as gender and age); and (c) for groups of 50 or more, BCBSAL has applied an "experience-rating," or "merit-rating," methodology, adjusting base rates using the claims experience of each group (see Doc. # 738–68; Doc. # 738–58 p. 282).

Regulation 116 defines a "small employer" based upon the number of "eligible employees" who work 30 or more hours per week. Ala. DOI Reg. 482–l–116–.04(18) (Doc. # 738–87). During the relevant time period, BCBSAL did not define or measure its groups based on the number of "eligible employees." (Doc. # 773–10 pp. 73–75, 77–80). Instead, BCBSAL defined its groups based on the number of "enrolled subscribers," or the number of employees who opted to purchase insurance under the employer's plan. (Id. ). That is, rather than counting all "eligible employees" pursuant to Regulation 116, BCBSAL classified groups based only on those who actually enrolled in a given plan. (Id. ). This is an important distinction because smaller size rating classifications are generally associated with higher insurance premiums. For example, in BCBSAL's 2011 small group rate filing, groups with fewer than 15 enrolled subscribers had a rate adjustment factor of 1.15, whereas groups with 15 to 50 enrolled subscribers had a rate adjustment factor of 1.00. In other words, the smallest groups paid premiums that were 15% higher than the larger groups. (Doc. # 738–68; Doc. # 775–23).

Rate filings made with the DOI are required to contain an actuarial certification that the carrier is in compliance with the governing regulations and that the rating methods are actuarially sound. See Ala. DOI Reg. 482–l–116–.05(g)(2). (Doc. # 738–87). In its Small Group rate filings with the DOI from 2008 through 2013, BCBSAL certified that "[a]ll premium rates for this [Small Group] category have been developed in compliance with the Alabama Department of Insurance Departmental Regulation No. 482–1–116." (Doc. # 738–82).

In a May 3, 2016 report regarding BCBSAL's 2013 Medical Loss Ratio, the Centers of Medicaid and Medicare Services ("CMS") found a "lack of accurate documentation supporting group size and market classification determinations," which prevented CMS from (1) assessing BCBSAL's medical loss ratios and (2) determining whether BCBSAL could face rebate liability in its small group or large group markets. (Doc. # 738–77 p. 4; Doc. # 738–58 pp. 162–63). As CMS explained: "The Company did not correctly obtain the number of employees of each group policyholder at the time of initial application or policy renewal and therefore could not correctly determine each group's size and market classification." (Doc. # 738–77 pp. 5, 10). Further, the CMS found that, "[i]n addition to not employing procedures to correctly determine the number of employees," BCBSAL "did not consistently assign policies to the correct market classification...." (Doc. # 738–77 p. 10). The CMS also found examples of group policies "incorrectly classified as small group policies" that "should have been reported in the large group market." (Id. ).

As to the DOI's evaluation of the rates filed with it, the only "test" for whether the DOI should approve a rate filing is "reasonableness," and, somewhat surprisingly, there are no written standards for determining whether a proposed rate is "reasonable." (Doc. # 738–58 pp. 61–62, 63–64; Doc. # 738–65). Although the statute provides that rates will be deemed approved if the DOI does not respond within thirty days, the record indicates that provision has never been triggered on BCBSAL's rate filings, at least since Steve Ostlund, the DOI's Life and Health Actuary, joined the DOI in 2007. (Doc. # 738–58 pp. 26, 245, 262–63; Doc. # 738–2 ¶ 22).

In connection with its review of BCBSAL's rates, the DOI often requests additional information in order "to gain an understanding so [it can] review the rates properly." (Doc. # 738–58). For example, in 2007, the Department performed a detailed examination of BCBSAL's rating assumptions, enrollment, trend factors, claims experience, and other aspects of such filings. (Doc. # 738–2 ¶ 27). On April 15, 2009, the DOI submitted "several questions and concerns regarding the small group employer and special open enrollment filings" before it approved the requested rates in those filings. (Id. ¶ 28). On April 13, 2011, the DOI inquired about BCBSAL's methodology regarding the use of trend rates and filing factors in the development of BCBSAL's Small Group premiums which were to become effective July 1, 2011. (Id. ¶ 29). And, in 2013, 2014, and 2015, the DOI continued to ask questions of BCBSAL about its rate filings. When asked, BCBSAL responded to those questions. (Doc. # 773–19 pp. 274–76; Doc. # 738–59).

Since 2007, the DOI reviewed and eventually approved each of BCBSAL's rate filings for its Individual, CPlus, and Small Group products. (Doc. # 738–58 pp. 252–538; Doc. # 738–2 ¶¶ 5, 22, 31). On a number of occasions, BCBSAL revised its proposed rates in response to DOI concerns. On those occasions, BCBSAL revised the proposed rates and re-filed them, subject to the DOI's approval process. (Doc. # 738–2 ¶ 32). In addition, at times, the DOI indicated that it would only approve a rate lower than BCBSAL originally filed or proposed. (Doc. # 738–2 ¶ 33; Doc. # 738–58 p. 252). For example, in 2006, BCBSAL requested a 7.4% increase for the Community–Rated Small Group category of business. But the DOI approved a rate increase of only 5.75%, and BCBSAL implemented that lower rate increase. (Doc. # 738–2 ¶ 34). On September 17, 2009, the DOI asked BCBSAL to consider reducing its rate increase request for its Medicare Supplement plan. Although BCBSAL originally requested a rate increase of 10.76%, the DOI ultimately approved a rate increase of only 7.5%. (Id. ¶ 35). On October 12, 2009, BCBSAL proposed a 9.6% composite premium increase for existing customers of BCBSAL's Individual Blue category of business. The DOI requested BCBSAL's underlying analysis to evaluate the reasonableness of the requested rate increase. Following that review, the DOI approved and BCBSAL implemented a composite premium increase of only 7.75%. (Id. ¶ 36.)

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