Oscar Ins. Co. of Fla. v. Blue Cross & Blue Shield of Fla., Inc.

• Decision Date: 20 September 2019
• Docket Number: Case No: 6:18-cv-1944-Orl-40EJK
• Citation: 413 F.Supp.3d 1198
• Parties: OSCAR INSURANCE COMPANY OF FLORIDA, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF FLORIDA, INC., Florida Health Care Plan Inc. and Health Options Inc., Defendants.
• Court: U.S. District Court — Middle District of Florida

413 F.Supp.3d 1198

OSCAR INSURANCE COMPANY OF FLORIDA, Plaintiff,

v.BLUE CROSS AND BLUE SHIELD OF FLORIDA, INC., Florida Health Care Plan Inc. and Health Options Inc., Defendants.

Case No: 6:18-cv-1944-Orl-40EJK

United States District Court, M.D. Florida, Orlando Division.

Signed September 20, 2019

Matthew Lisagar, Pro Hac Vice, Michael H. Menitove, Pro Hac Vice, Paul M. Eckles, Pro Hac Vice, Skadden, Arps, Slate, Meagher & Flom, LLP, New York, NY, Sarah Anne Long, Francis Morton McDonald, Jr., McDonald Toole Wiggins, PA, Orlando, FL, Steven C. Sunshine, Pro Hac Vice, Tara L. Reinhart, Pro Hac Vice, Skadden, Arps, Slate, Meagher & Flom, LLP, Washington, DC, for Plaintiff.

Christine A. Varney, Pro Hac Vice, Evan R. Chesler, Pro Hac Vice, Lauren Roberta Kennedy, Pro Hac Vice, Rebecca J. Schindel, Pro Hac Vice, Karin A. DeMasi, Cravath, Swaine & Moore, LLP, New York, NY, Jerome W. Hoffman, Holland & Knight, LLP, Tallahassee, FL, Timothy J. Conner, Holland & Knight, LLP, Jacksonville, FL, for Defendants.

ORDER

PAUL G. BYRON, UNITED STATES DISTRICT JUDGE

This cause is before the Court on the following pleadings:

1. Defendants Blue Cross and Blue Shield of Florida, Inc., Florida Health Care Plan Inc., and Health Options Inc.'s (collectively, "Florida Blue ") Motion to Dismiss (Doc. 81 (the "Motion "));

2. Plaintiff Oscar Insurance Company of Florida's ("Oscar ") Response in Opposition to Defendants' Motion to Dismiss (Doc. 86);

3. Statement of Interest of the United States of America (Doc. 89);¹

4. Defendants' Response to the Statement of Interest of the United States of America (Doc. 92); and

5. Plaintiff's Reply to Defendants' Response to the Statement of Interest of the United States of America (Doc. 95).

At the parties' request, the Court held oral argument on August 16, 2019. (Doc. 105). With briefing complete, the Motion is ripe. Upon consideration, the Motion is due to be granted and the case dismissed with prejudice.²

I. BACKGROUND³

Oscar contends Florida Blue is engaged in improper, unlawful, and anticompetitive conduct designed to stifle competition in Florida for the sale of individual health insurance plans and products via the Affordable Care Act of 2010 ("ACA "). (Doc. 75, ¶ 1). Oscar describes itself as one of the country's fastest-growing health insurance companies, utilizing technology and a customer-first approach to make health care affordable and accessible to its members. (Id. ¶ 3). Oscar accuses Florida Blue of implementing a "blatant scheme targeted at Oscar to keep it out of the state" by "denying Oscar access to insurance brokers upon whom consumers rely to advise them of their insurance options." (Id. ¶ 5). In support of this contention, Oscar notes that Florida Blue entered into exclusivity agreements with its brokers under which brokers agree to sell only Florida Blue's individual ACA plans. (Id. ). Oscar asserts that Florida Blue employs illegal coercion by "aggressively and selectively enforc[ing] this exclusivity policy against Oscar by systematically contacting brokers who had signed contracts with ... Oscar to threaten them with permanent termination." (Id. ).

Florida Blue moves to dismiss the Amended Complaint on two grounds: first, the Sherman Act Claims (Counts I–III) are barred by the McCarren-Ferguson Act, which immunizes insurers from federal suits involving the "business of insurance";⁴ and second, the Amended Complaint fails to state a claim for monopolization or attempted monopolization under § 2 of the Sherman Act and Florida law, and fails to state a claim for unreasonable restraint of trade pursuant to § 1 of the Sherman Act and Florida law. (Doc. 81, p. 3).

II. STANDARD OF REVIEW

To survive a motion to dismiss made pursuant to Rule 12(b)(6), the complaint "must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is plausible on its face when the plaintiff "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Legal conclusions and recitation of a claim's elements are properly disregarded, and courts are "not bound to accept as true a legal conclusion couched as a factual allegation." Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986). Courts must also view the complaint in the light most favorable to the plaintiff and must resolve any doubts as to the sufficiency of the complaint in the plaintiff's favor. Hunnings v. Texaco, Inc. , 29 F.3d 1480, 1483 (11th Cir. 1994) (per curiam). In sum, courts must (1) ignore conclusory allegations, bald legal assertions, and formulaic recitations of the elements of a claim; (2) accept well-pled factual allegations as true; and (3) view well-pled allegations in the light most favorable to the plaintiff. Iqbal , 556 U.S. at 67, 129 S.Ct. 1262.

III. DISCUSSION

A. The McCarran-Ferguson Act

In 1945, Congress passed the McCarran-Ferguson Act. 15 U.S.C. §§ 1011 – 1015. Congress passed the Act "to allow insurers to share information relating to risk underwriting and loss experience without exposure to federal antitrust liability and to preserve for the states the power to regulate the insurance industry." Gilchrist v. State Farm Mut. Auto. Ins. , 390 F.3d 1327, 1330 (11th Cir. 2004) (citing Union Labor Life Ins. v. Pireno , 458 U.S. 119, 133, 102 S.Ct. 3002, 73 L.Ed.2d 647 (1982) ).⁵ The Act provides, in pertinent part:

(a) State regulation

The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business.

(b) Federal regulation

No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance ....

15 U.S.C. § 1012.

The exemption from antitrust liability is not without limitation:

(b) Nothing contained in this chapter shall render the said Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation.

Id. § 1013. The Act, therefore, exempts the activities of insurance companies from antitrust liability when the following three elements are met: "(1) the challenged activity is part of the ‘business of insurance’; (2) the challenged activity is regulated by state law;⁶ and (3) the challenged activity does not constitute a boycott of unrelated transactions." Gilchrist , 390 F.3d at 1330. It is well settled that exemptions from the antitrust laws are narrowly construed. Grp. Life & Health Ins. v. Royal Drug Co. , 440 U.S. 205, 231, 99 S.Ct. 1067, 59 L.Ed.2d 261 (1979).

1. The Business of Insurance

The first requirement for determining whether an insurer's conduct falls within the scope of the McCarran-Ferguson exemption is that the activity is part of the "business of insurance."⁷ The Act does not exempt all activities undertaken by insurance companies; that is, the Act exempts the "business of insurance," not the "business of insurers." Royal Drug , 440 U.S. at 211, 99 S.Ct. 1067. In Royal Drug , the Court observed that "[t]he relationship between the insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement—these were the core of the ‘business of insurance.’ " Id. at 215–16, 99 S.Ct. 1067. Included within this definition are activities that "relate so closely to their status as reliable insurers that they too must be placed in the same class. But whatever the exact scope of the statutory term, it is clear where the focus was—it was on the relationship between the insurance company and the policyholder." Id. at 216, 99 S.Ct. 1067 (citing SEC v. Nat'l Sec., Inc. , 393 U.S. 453, 460, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969) ).⁸

The Supreme Court in Royal Drug articulated a three-prong test for determining whether an insurer's activity is within the business of insurance: first, whether the practice has "the effect of transferring or spreading a policyholder's risk"; second, whether the practice is "an integral part of the policy relationship between the insurer and the insured"; and third, whether the practice is "limited to entities within the insurance industry." Gilchrist , 390 F.3d at 1331 (quoting Pireno , 458 U.S. at 129, 102 S.Ct. 3002 ).

a. Transferring or Spreading Risk

At issue is whether Florida Blue's exclusivity agreements with its brokers constitute the business of insurance. In applying the test to a given relationship or transaction, the Court relies "on [Plaintiff's] characterization of its claim, as it is supported by the allegations in the complaint ... because we must accept the plaintiff's theory of the case in conducting the McCarran-Ferguson inquiry." Sanger Ins. Agency v. HUB Intern., Ltd. , 802 F.3d 732, 743 (5th Cir. 2015). Oscar describes Florida Blue's exclusivity agreement with its brokers, as follows:

... First and foremost, the scheme involves denying Oscar access to insurance brokers upon whom consumers rely to advise them of their insurance options ....

(Doc. 75, ¶ 5)

Brokers play a crucial role in driving policy sales in Florida, more so than in other states, where brokers play a less prominent role. In the counties comprising the Orlando metro area, even with Florida Blue's exclusionary conduct, 75 percent of Oscar's policy sales came through brokers compared to 40 percent nationally.

(Id. ¶ 35)

Brokers must be licensed by the state to sell insurance. To become licensed, brokers must complete 60 hours of insurance and ethics education coursework and pass a written examination. See Fl. Stat. Ann. §§ 626.241, 626.221, 626.8311.

(Id. ¶ 36)

According to the National

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