Case 1:21-cv-23448-KMM Document 1 Entered on FLSD Docket 09/27/2021 Page 1 of 31
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`CASE NO.: 1:21-cv-23448
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF FLORIDA
`
`JOHN HOOVER, SHARON ZEBLEY, ERICK GIBBS,
`DARIN GRIFFIN, EDWARD INGLESBY, MATT
`MOTTA, FRANK MELCHIORE, DONALD
`COSGROVE, BOB FAROHIDEH, TIANA KELLEY,
`IMAN JONES, TERRA SCOTT DANNISON, ALVIN
`MCCRAY, MICHAEL LEACH, DOUGLAS HOWIE,
`SANDRA STYLES HORVATH, VALERY RIVERA,
`CATALINA DINOVO, KEVAN WATKINS,
`WINFORD HOUSE, PETER ZITOLI, DAVE BARTH,
`DANNY BELTRAN, SUE-LING ROSARIO, EVA
`CLARK, BARBARA DICKS, MARY FLOYD, DAVID
`SEXTON, JEANNINE NOLL, TIFFANY DUKE,
`JUSTIN DUKE, BRENDAN PRICE, JAMES MOORE,
`and SARA CORCORAN,
`
`
`Plaintiffs,
`
`
`v.
`
`BLUE CROSS AND BLUE SHIELD ASS‘N, BLUE
`CROSS AND BLUE SHIELD OF FLORIDA, INC.,
`BLUE CROSS AND BLUE SHIELD OF ALABAMA,
`LOUISIANA HEALTH SERVICE & INDEMNITY CO.
`d/b/a BLUE CROSS AND BLUE SHIELD OF
`LOUISIANA, BLUE CROSS AND BLUE SHIELD OF
`MASSACHUSETTS, INC., GROUP
`HOSPITALIZATION AND MEDICAL SERVICES,
`INC. d/b/a CAREFIRST BLUECROSS BLUESHIELD,
`HMO MISSOURI, INC. d/b/a ANTHEM BLUE
`CROSS BLUE SHIELD OF MISSOURI, HORIZON
`HEALTHCARE SERVICES, INC. d/b/a HORIZON
`BLUE CROSS BLUE SHIELD OF NEW JERSEY, BLUE
`CROSS AND BLUE SHIELD OF NORTH
`CAROLINA, HEALTH CARE SERVICE CORP.
`d/b/a BLUE CROSS AND BLUE SHIELD OF
`ILLINOIS, and HIGHMARK, INC. d/b/a
`BLUESHIELD OF NORTHEASTERN NEW YORK,
`
`
`Defendants.
`_______________________________________________/
`
`
`COMPLAINT FOR SHERMAN ACT VIOLATIONS AND DEMAND FOR JURY TRIAL
`
`Plaintiffs, John Hoover, Sharon Zebley, Erick Gibbs, Darin Griffin, Edward Inglesby, Matt
`
`Motta, Frank Melchiore, Donald Cosgrove, Bob Farohideh, Tiana Kelley, Iman Jones, Terra Scott
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`

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`Case 1:21-cv-23448-KMM Document 1 Entered on FLSD Docket 09/27/2021 Page 2 of 31
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`Dannison, Alvin McCray, Michael Leach, Douglas Howie, Sandra Styles Horvath, Valery Rivera,
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`Catalina Dinovo, Kevan Watkins, Winford House, Peter Zitoli, Dave Barth, Danny Beltran, Sue-
`
`Ling Rosario, Eva Clark, Barbara Dicks, Mary Floyd, David Sexton, Jeannine Noll, Tiffany Duke,
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`Justin Duke, Brendan Price, James Moore, and Sara Corcoran (collectively, the ―Plaintiffs‖), by and
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`through counsel, sue Defendants, Blue Cross and Blue Shield Ass‘n, Blue Cross and Blue Shield of
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`Florida, Inc., Blue Cross and Blue Shield of Alabama, HMO Missouri, Inc. d/b/a Anthem Blue
`
`Cross Blue Shield of Missouri, Louisiana Health Service & Indemnity Co. d/b/a Blue Cross and
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`Blue Shield of Louisiana, Blue Cross and Blue Shield of Massachusetts, Inc., Group Hospitalization
`
`and Medical Services, Inc. d/b/a CareFirst BlueCross BlueShield, Horizon Healthcare Services, Inc.
`
`d/b/a Horizon Blue Cross Blue Shield of New Jersey, Blue Cross and Blue Shield of North
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`Carolina, Health Care Service Corp. d/b/a Blue Cross and Blue Shield of Illinois, and Highmark,
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`Inc. d/b/a BlueShield of Northeastern New York (collectively, the ―Defendants‖).
`
`BACKGROUND
`
`1.
`
`As the Supreme Court has explained ―[c]ertain agreements, such as horizontal price
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`fixing and market allocation, are thought so inherently anticompetitive that each is illegal per se
`
`without inquiry into the harm it has actually caused.‖ Copperweld Corp. v. Indep. Tube Corp., 467 U.S.
`
`752, 768 (1984). ―Output restrictions have [also] been called one of the ‗most important per se
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`categories,‘ along with naked horizontal price-fixing and market allocation.‖ In re Blue Cross Blue
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`Shield Antitrust Litig., 308 F. Supp. 3d 1241, 1272 (N.D. Ala. 2018) (quotation omitted).
`
`2.
`
`These prohibitions on per se illegal conduct are at the core of antitrust law‘s
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`protection of our free enterprise system. However, ―[i]n this case, a number of these ‗most
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`important‘ per se categories of restrictions have been aggregated [by the Defendants].‖ In re Blue
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`Cross Blue Shield Antitrust Litig., 308 F. Supp. 3d at 1273.
`
`3.
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`This is an action for damages and injunctive relief for antitrust violations brought by
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`individuals who timely opted out of the settlement reached in the pending class action against the
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`2
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`

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`Case 1:21-cv-23448-KMM Document 1 Entered on FLSD Docket 09/27/2021 Page 3 of 31
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`Defendants in In re Blue Cross and Blue Shield Antitrust Litigation, No. 2:13-cv-20000 (N.D. Ala. 2013).
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`4.
`
`In that action, the Court concluded ―that Defendants‘ aggregation of a market
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`allocation scheme together with certain other output restrictions is due to be analyzed under the per
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`se standard of review.‖ In re Blue Cross Blue Shield Antitrust Litig., 308 F. Supp. 3d at 1279. While the
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`Plaintiffs agree with that ruling, they do not approve of the settlement reached with the Defendants
`
`in the class action because it fails to adequately compensate their damages.
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`JURISDICTION AND VENUE
`
`5.
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`This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1337(a)
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`because the Plaintiffs assert claims under 15 U.S.C. §§ 15 and 26, for injuries sustained by reason of
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`the Defendants‘ violations of Federal law, 15 U.S.C. §§ 1, 2, and 3.
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`6.
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`This Court has personal jurisdiction over each Defendant pursuant to 15 U.S.C. § 22
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`and/or pursuant to Florida‘s long-arm statute, Fla. Stat. § 48.193, because the Defendants transact
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`business and/or are found within this District and/or because the Defendants participated in a
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`conspiracy in which at least one conspirator committed overt acts in Florida in furtherance of the
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`conspiracy.
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`7.
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`Venue is proper pursuant to 15 U.S.C. §§ 15, 22, and 26 because the Defendants
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`transact business in this District and pursuant to 28 U.S.C. § 1391 because a significant part of the
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`events, acts, and omissions giving rise to this action occurred in the District.
`
`PARTIES
`
`8.
`
`Defendant, Blue Cross and Blue Shield Ass‘n (the ―BCBSA‖) is an Illinois
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`corporation. The BCBSA is owner of the Blue Cross and Blue Shield trademarks and trade names
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`(the ―Blue Brand‖). The BCBSA is owned, funded, and controlled by the thirty-five (35)
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`independent health insurance companies operating under the Blue Brand in the U.S. (collectively,
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`the ―Blue Plans‖).
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`9.
`
`Defendant, Blue Cross and Blue Shield of Florida, Inc. (―BCBS-FL‖) is a Florida
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`3
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`corporation. BCBS-FL is one of the Blue Plans and the health insurance company operating under
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`the Blue Brand in Florida.
`
`10.
`
`Defendant, Blue Cross and Blue Shield of Alabama (―BCBS-AL‖) is an Alabama
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`company. BCBS-AL is one of the Blue Plans and the health insurance company operating under the
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`Blue Brand in Alabama.
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`11.
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`Defendant, HMO Missouri, Inc. d/b/a Anthem Blue Cross Blue Shield of Missouri
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`(―BCBS-MO‖) is a Missouri corporation. BCBS-MO is one of the Blue Plans and the health insurance
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`company operating under the Blue Brand in Missouri.
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`12.
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`Defendant, Louisiana Health Service & Indemnity Co. d/b/a Blue Cross and Blue
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`Shield of Louisiana (―BCBS-LA‖) is a Louisiana company. BCBS-LA is one of the Blue Plans and the
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`health insurance company operating under the Blue Brand in Louisiana.
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`13.
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`Defendant, Blue Cross and Blue Shield of Massachusetts, Inc. (―BCBS-MA‖) is a
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`Massachusetts corporation. BCBS-MA is one of the Blue Plans and the health insurance company
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`operating under the Blue Brand in Massachusetts.
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`14.
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`Defendant, Group Hospitalization and Medical Services, Inc. d/b/a CareFirst
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`BlueCross BlueShield (―BCBS-DC‖) is a Maryland corporation. BCBS-DC is one of the Blue Plans
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`and the health insurance company operating under the Blue Brand in D.C. and its suburbs.
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`15.
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`Defendant, Horizon Healthcare Services, Inc. d/b/a Horizon Blue Cross Blue Shield
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`of New Jersey (―BCBS-NJ‖) is a New Jersey corporation. BCBS-NJ is one of the Blue Plans and is the
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`health insurance company operating under the Blue Brand in New Jersey.
`
`16.
`
`Defendant, Health Care Service Corp. d/b/a Blue Cross and Blue Shield of Illinois
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`(―BCBS-IL‖) is an Illinois company. BCBS-IL is one of the Blue Plans and the health insurance
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`company operating under the Blue Brand in Illinois.
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`17.
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`Defendant, Blue Cross and Blue Shield of North Carolina (―BCBS-NC‖) is a North
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`Carolina company. BCBS-NC is one of the Blue Plans and the health insurance company operating
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`4
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`under the Blue Brand in North Carolina.
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`18.
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`Defendant, Highmark, Inc. d/b/a BlueShield of Northeastern New York (―BS-NE
`
`NY‖) is a Pennsylvania corporation. BS-NE NY is one of the Blue Plans and the health insurance
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`company operating under the Blue Brand in Northeastern New York.
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`19.
`
`Plaintiff, John Hoover is a resident of Florida who purchased and has been enrolled
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`in a BCBS-FL health insurance policy since at least 2015, possibly longer.
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`20.
`
`Plaintiff, Sharon Zebley is a resident of Florida who purchased and has been enrolled
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`in a BCBS-FL health insurance policy since at least 2008, possibly longer.
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`21.
`
`Plaintiff, Erick Gibbs is a resident of Florida who purchased and has been enrolled in
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`a BCBS-FL health insurance policy through his employers since 2018.
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`22.
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`Plaintiff, Darin Griffin is a resident of Florida who purchased and was enrolled in a
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`BCBS-FL health insurance policy from 2016 to 2019.
`
`23.
`
`Plaintiff, Edward Inglesby is a resident of Florida who purchased and has been
`
`enrolled in a BCBS-FL health insurance policy since 2009.
`
`24.
`
`Plaintiff, Matt Motta is a resident of Florida who purchased and was enrolled in a
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`BCBS-FL health insurance policy through his employers from 2009 to 2012 and 2015 to 2018.
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`25.
`
`Plaintiff, Frank Melchiore is a resident of Florida who purchased and has been
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`enrolled in a BCBS-FL health insurance policy since 2008 for himself and his wife.
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`26.
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`Plaintiff, Donald Cosgrove is a resident of Florida who purchased and has been
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`enrolled in a BCBS-FL health insurance policy through his employer since 2010 for himself and his
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`wife.
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`27.
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`Plaintiff, Bob Farohideh is a resident of Florida who purchased and has been
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`enrolled in a BCBS-FL health insurance policy for himself and his family since 2016 and who also
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`purchased and was enrolled in a BCBS-FL policy through his employer from 2010 to 2019.
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`28.
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`Plaintiff, Tiana Kelley is a resident of Florida who purchased and was enrolled in a
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`5
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`BCBS-FL health insurance policy through her employer from 2014 to 2016.
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`29.
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`Plaintiff, Iman Jones is a resident of Florida who purchased and was enrolled in a
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`BCBS-FL health insurance policy from 2008 to 2012.
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`30.
`
`Plaintiff, Terra Scott Dannison is a resident of Florida who purchased and has been
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`enrolled in a BCBS-FL health insurance policy through her employer since at least 2016, possibly
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`longer.
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`31.
`
`Plaintiff, Alvin McCray is a resident of Florida who purchased and has been enrolled
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`in a BCBS-FL health insurance policy through his employer since 2018.
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`32.
`
`Plaintiff, Michael Leach is a resident of Florida who purchased and has been enrolled
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`in a BCBS-NJ health insurance policy and later a BCBS-IL health insurance policy through his
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`employers since at least 2008, possibly longer.
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`33.
`
`Plaintiff, Douglas Howie is a resident of Florida who purchased and was enrolled in
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`a BCBS-FL health insurance policy for many years.
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`34.
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`Plaintiff, Sandra Styles Horvath is a resident of Florida who purchased and has been
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`enrolled in a BCBS-FL health insurance policy since at least 2006, possibly longer.
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`35.
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`Plaintiff, Valery Rivera is a resident of Florida who purchased has been enrolled in a
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`BS-NE NY health insurance policy and later a BCBS-FL health insurance policy through her
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`employers since 2011.
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`36.
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`Plaintiff, Catalina Dinovo is a resident of Florida who purchased and was enrolled in
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`a BCBS-FL health insurance policy from at least 2008 to 2014, possibly longer.
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`37.
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`Plaintiff, Kevan Watkins is a resident of Florida who purchased and has been
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`enrolled in a BCBS-FL health insurance policy individually or through his employer since 2011.
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`38.
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`Plaintiff, Winford House is a resident of Florida who purchased and has been
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`enrolled in a BCBS-FL health insurance policy through his employer since 1996. He also purchased
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`a BCBS-FL health insurance policy for his son who has been enrolled since 2008.
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`6
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`39.
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`Plaintiff, Peter Zitoli is a resident of Florida who purchased and has been enrolled in
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`a BCBS-FL health insurance policy through his employer since 2003.
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`40.
`
`Plaintiff, Dave Barth is a resident of Florida who purchased and was enrolled in a
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`BCBS-FL health insurance policy through his employer in 2014.
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`41.
`
`Plaintiff, Danny Beltran is a resident of Florida who purchased and has been
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`enrolled in a BCBS-FL health insurance policy through his employer since 2015.
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`42.
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`Plaintiff, Sue-ling Rosario is a resident of Florida who purchased and was enrolled in
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`a BCBS-FL health insurance policy through her employer from 2014 to 2017.
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`43.
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`Plaintiff, Eva Clark is a resident of Florida who purchased and has been enrolled in a
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`BCBS-FL health insurance policy through her employer since 2018.
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`44.
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`Plaintiff, Barbara Dicks is a resident of Florida who purchased and has been enrolled
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`in a BCBS-FL health insurance policy since 2019.
`
`45.
`
`Plaintiff, Mary Floyd is a resident of Florida who purchased and was enrolled in a
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`BCBS-FL health insurance policy from at least 2008 to 2016, possibly longer.
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`46.
`
`Plaintiff, David Sexton is a resident of Missouri who purchased and was enrolled in
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`a BCBS-MO health insurance policy from at least 2008 to 2018, possibly longer.
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`47.
`
`Plaintiff, Jeannine Noll is a resident of Missouri who purchased and was enrolled in
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`in a BCBS-MO health insurance policy individually or through her employer from at least 2008 to
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`2018, possibly longer.
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`48.
`
`Plaintiffs, Tiffany Duke and Justin Duke are residents of Louisiana who purchased
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`and were enrolled in one or more BCBS-LA health insurance policies from 2012 to 2018.
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`49.
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`Plaintiff, Brendan Price is a resident of Alabama who purchased and has been
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`enrolled in a BCBS-NC health insurance policy and later a BCBS-AL health insurance policy since
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`2013.
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`50.
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`Plaintiff, James Moore is a resident of Massachusetts who purchased and was
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`enrolled in a BCBS-MA health insurance policy through his employer for himself and his wife from
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`at least 2008 to 2019, possibly longer.
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`51.
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`Plaintiff, Sara Corcoran is a resident of the District of Columbia who purchased and
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`was enrolled in a BCBS-DC health insurance policy from 2010 to 2015.
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`INTERSTATE COMMERCE
`
`52.
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`The Blue Plans, which own and control the BCBSA, are engaged in interstate
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`commerce and in activities substantially affecting interstate commerce, and the conduct alleged
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`herein substantially affects interstate commerce.
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`53.
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`The Blue Plans provide commercial health insurance that cover residents of their
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`respective bases of operations, which together include all 50 states, D.C., and Puerto Rico. The Blue
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`Plans wield collective nationwide economic power, serving 106 million people—nearly one out of
`
`every three Americans—and their provider network includes more than 96% of hospitals and 92%
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`of medical professionals nationwide.
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`ALLEGATIONS
`
`54.
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`The Plaintiffs purchased, enrolled, and were, or in many cases still are, insured
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`under health insurance policies issued by or included in employee benefit plans administered by
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`BCBS-FL, BCBS-AL, BCBS-MO, BCBS-LA, BCBS-MA, BCBS-DC, BCBS-NC, BCBS-NJ, BCBS-IL, and
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`BS-NE NY.
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`55.
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`The Plaintiffs have paid substantial sums directly to these entities in the form of
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`inflated premiums and they have paid substantial sums to third party medical providers as result
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`of the Defendants‘ actions in the form of inflated deductibles, co-pays, and other expenses.
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`56.
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`The Defendants have engaged and are still engaging in per se illegal market division
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`and per se illegal output restrictions. The Plaintiffs seek to enjoin an ongoing conspiracy between
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`and among the BCBSA and the Blue Plans to allocate markets and impose output restrictions in
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`violation of the prohibitions of the Sherman Act.
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`8
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`57.
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`The conspiracy alleged in this Complaint hindered the development of the health
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`care markets across the nation because the Defendants acted to inhibit lower cost competitors from
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`entry into the marketplace and stifled innovation and consumer choice.
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`58.
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`In part through the artifice of the BCBSA, an entity that the Blue Plans created and
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`wholly control, the Defendants have entered into per se illegal agreements under the Sherman Act
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`that: (a) prohibit the Blue Plans from competing against each other, when using the Blue Brand, by
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`allocating exclusive territories among the Blue Plans; (b) limit the Blue Plans from competing
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`against each other, even when they are not using the Blue Brand, by mandating the percentage of
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`their business that they must do under the Blue Brand, both inside and outside each Blue Plan‘s
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`exclusive territory; and (c) restrict the right of any Blue Plan to be sold to an entity that is not a
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`member of the BCBSA, thereby preventing new entrants into the Blue Plans‘ markets.
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`59.
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`This action seeks to recover damages in the form of supra-competitive premiums
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`that the Blue Plans charged the Plaintiffs as a result of this illegal conspiracy and/or the difference
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`between what the Plaintiffs have paid the Blue Plans and the lower competitive premiums that the
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`Plaintiffs would have been charged but for this illegal conspiracy.
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`60.
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`This action seeks to recover damages in the form of supra-competitive deductibles,
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`co-pays, and other expenses that third parties charged the Plaintiffs as a result of the Defendants‘
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`illegal conspiracy and/or the difference between what the Plaintiffs have paid those third parties
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`and the lower competitive deductibles, co-pays, and other expenses that the Plaintiffs would have
`
`been charged but for this illegal conspiracy.
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`61.
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`This action also seeks to recover damages as a result of anticompetitive conduct the
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`Blue Plans have committed in their illegal efforts to establish and maintain market power
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`throughout the regions in which they operate.
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`The Blue Plans Formed the BCBSA to Serve as a Vehicle for Competitors to Collude
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`62.
`
`The Blue Plans, which arose independently, have their roots in the local community
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`based health insurance plans formed approximately eighty years ago. Historically the Blue Plans
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`were fierce competitors. During the early decades of their existence, there were no restrictions on
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`the ability of Blue Plans to compete with or offer coverage in an area already covered by another
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`Blue Plan.
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`63.
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`Eventually, to address the increasing competition among the Blue Plans, they sought
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`to ensure ―national cooperation‖ among their different entities. At that time, the Blue Plans were
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`the owners of the Blue Brand. In a coordinated effort to create a national brand, the Blue Plans
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`agreed to centralize their individual ownership of the Blue Brand.
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`64.
`
`To that end, the Blue Plans jointly created what would eventually become the
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`BCBSA. The Blue Plans then assigned their individual rights in the Blue Brand to the BCBSA. Since
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`that time, the BCBSA is the sole owner of the various trademarks and trade names that make up the
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`Blue Brand.
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`65.
`
`The BCBSA describes itself as ―a national association of 35 independent, community-
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`based and locally operated Blue Cross and Blue Shield companies.‖ In other words, the members of
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`the BCBSA are the Blue Plans, the thirty-five (35) remaining separate and autonomous health
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`insurance companies located throughout the U.S.
`
`66.
`
`The BCBSA itself is not a health insurance company nor does it provide health
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`insurance products and services. Its primary function is as owner and licensor of the Blue Brand.
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`The Blue Plans are the members of, and govern, the BCBSA. The BCBSA is entirely controlled by
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`the Blue Plans, all of whom are independent health insurance companies that license the use of the
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`Blue Brand from the BCBSA, and that, but for any agreements to the contrary, could and would
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`compete with one another.
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`67.
`
`The BCBSA has admitted that under its ―unique structure,‖ ―the Blue Cross and Blue
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`Shield companies are [its] customers, [its] Member Licensees and [its] governing Board.‖ The
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`BCBSA ―is owned and controlled by the member plans‖ to such an extent that ―by majority vote,
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`10
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`the plans could dissolve the Association and return ownership of the Blue [Brand] … to the
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`individual plans.‖ Cent. Benefits Mut. Ins. Co. v. Blue Cross and Blue Shield Ass’n, 711 F. Supp. 1423,
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`1424–25 (S.D. Ohio 1989).
`
`68.
`
`The Blue Plans collectively govern the BCBSA‘s affairs pursuant to written bylaws,
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`which they approved by vote. The Blue Plans may amend or repeal the bylaws and adopt new ones
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`by vote. Under these bylaws, the BCBSA is governed by a board of directors.
`
`69.
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`The BCBSA‘s board of directors consists of the CEOs of each of the Blue Plans and
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`the president of the BCBSA. By majority vote, the BCBSA‘s board elects the BCBSA‘s president on
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`an annual basis, who can also be removed by majority vote. For practical purposes, meetings of the
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`BCBSA‘s board of directors and its membership comprise largely of the same individuals. Thus, the
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`Blue Plans control the board of directors of the BCBSA.
`
`70.
`
`The Blue Plans control the rules and regulations that all members of the BCBSA must
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`obey. These rules and regulations include the Blue Cross License Agreement and the Blue Shield
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`License Agreement (collectively, the ―License Agreements‖), the Membership Standards Applicable
`
`to Regular Members (the ―Membership Standards‖), and the Guidelines to Administer Membership
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`Standards Applicable to Regular Members (the ―Guidelines‖).
`
`71.
`
`The Membership Standards are adopted and amended by an affirmative vote of
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`three-fourths of the Blue Plans and an affirmative vote of three-fourths of the total then current
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`weighted vote of all Blue Plans.
`
`72.
`
`The Blue Plans control the termination of existing members from the BCBSA. The
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`Blue Plans likewise control the entry of new members into the BCBSA. The Blue Plans police the
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`compliance of all members of the BCBSA with the rules and regulations of the BCBSA. The Blue
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`Plans likewise control and administer the disciplinary process for members of the BCBSA that do
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`not abide by the BCBSA‘s rules and regulations.
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`73.
`
`―The very existence of the national health insurers against whom the Blue Plans
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`compete shows that collusion between competitors is not essential to the sale of health insurance.‖
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`In re Blue Cross Blue Shield Antitrust Litig., 308 F. Supp. 3d at 1271 n.15 (emphasis added). Rather, as
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`alleged, the BCBSA was created to serve as a vehicle for the Blue Plans‘ anticompetitive collusion.
`
`The Market Allocation Scheme
`
`74.
`
`After centralizing ownership of the Blue Brand in the BCBSA, the BCBSA then
`
`licensed the use of the Blue Brand back to the Blue Plans. This was accomplished through the
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`Licensing Agreements, under which the BCBSA ―grants licenses to independent companies [i.e., the
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`Blue Plans] to use the trademarks and names [only] in exclusive geographic areas.‖
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`75.
`
`To use the Blue Brand, each Blue Plan has entered a License Agreement with the
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`BCBSA. The License Agreements allegedly do not constitute a partnership or joint venture and they
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`―may be amended only by the affirmative vote of three-fourths of the [Blue] Plans and three-fourths
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`of the total then current weighted vote of all the [Blue] Plans.‖ Under the terms of the License
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`Agreements, each Blue Plan ―agrees . . . to comply with the Membership Standards.‖
`
`76.
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`The motivating factor for the creation of the BCBSA was to reduce or eliminate
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`competition among the Blue Plans (―Blue on Blue Competition‖). The Licensing Agreements reduce
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`or eliminate Blue on Blue Competition by restricting the use of the Blue Brand to exclusive service
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`areas (―ESAs‖), which are assigned to each Blue Plan.
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`77.
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`Each of the License Agreements includes an ESA, a delineated geographic region
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`within which a specific Blue Plan—and only that specific Blue Plan—may use the Blue Brand
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`without fear of competition from the other Blue Plans. With limited exceptions, the ESAs roughly
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`correspond to the state that each Blue Plan historically operated in. For example, the ESA for BCBS-
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`FL is the state of Florida and the ESA for BCBS-AL is the state of Alabama.
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`78.
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`Conversely, the Blue Plans have agreed that they may not use the Blue Brand outside
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`of their ESA and the License Agreements restrict them from doing so absent approval from the
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`BCBSA and agreement with the affected Blue Plans. For example, BCBS-FL cannot use the Blue
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`Brand outside of Florida and BCBS-AL cannot use the Blue Brand outside of Alabama.
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`79.
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`The Blue Plans—independent health insurance companies and competitors—agreed
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`to maintain ESAs when operating under the Blue Brand. In short, the Defendants have agreed with
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`each other to carve up the U.S. into ―service areas‖ in which only one Blue Plan can sell health
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`insurance or administer employee health benefit plans and they may do so free from competition
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`from the other Blue Plans.
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`80.
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`The Blue Plans individually and collectively benefit from the ESAs because they
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`eliminate competition from other Blue Plans within their ESA. As one Blue Plan CEO noted, ―[Blue]
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`Plans benefit from the [ESAs] because it eliminates competition from other Blue Plans‖ and that
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`without ESAs, ―there would be open warfare.‖ ESAs enable the Blue Plans to maintain ―[l]arger
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`market shares because other Blues stay out and do not fragment the market.‖
`
`81.
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`―The market allocations at issue are not necessary to market, sell, or produce health
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`insurance.‖ In re Blue Cross Blue Shield Antitrust Litig., 308 F. Supp. 3d at 1270 (emphasis added).
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`Rather, as alleged, the origin of the geographic restrictions in the License Agreements was an effort
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`to avoid competition between the various Blue Plans by eliminating Blue on Blue competition.
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`The Agreements to Restrict Output
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`82.
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`The establishment of the ESAs in the License Agreements effectively eliminated Blue
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`on Blue Competition. However, the Blue Plans were soon troubled by another development.
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`Originally, the Blue Plans were non-profit entities but in 1986 the IRS revoked their tax-exempt
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`status. Subsequently, most Blue Plans converted to for-profit entities. While a few Blue Plans
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`nominally remain non-profit, they generate substantial earnings and surpluses and in practice
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`operate as for-profit entities.
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`83.
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`Following the revocation of their tax-exempt status, many Blue Plans also formed
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`for-profit subsidiaries and affiliates, which do not operate under the Blue Brand. Initially, these non-
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`Blue Brand entities competed with the Blue Plans and there were no restrictions on their ability to
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`compete with or offer coverage in an area already covered by a Blue Plan.
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`84.
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`Eventually, the Blue Plans sought to rein in competition between them and the non-
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`Blue Brand entities owned by the Blue Plans (―Blue on Non-Blue Competition‖). To do so, ―[i]n
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`addition to allocating geographic markets through their use of ESAs, Defendants … developed
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`additional rules which place added restraints on the [Blue] Plans‘ ability to compete, and not only
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`with each other.‖ In re Blue Cross Blue Shield Antitrust Litig., 308 F. Supp. 3d at 1272 (emphasis added).
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`85.
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`In essence, the Blue Plans agreed to restrict the territories in which they would
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`operate under any brand, which was accomplished through the inclusion of two (2) ―best efforts‖
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`requirements in the Licensing Agreements, extremely limiting their ability to engage in Blue on
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`Non-Blue Competition.
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`86.
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`First, the Licensing Agreements were amended in 1994 to impose a local ―best
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`efforts‖ requirement, which requires ―[a]t least 80% of the annual Combined Local Net Revenue of
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`a [Blue Plan and any] controlled affiliate attributable to health care plans and related services …
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`offered within the designated [ESA] must be sold, marketed, administered or underwritten under
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`the Licensed Marks and Names [i.e., the Blue Brand].‖
`
`87.
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`In other words, each Blue Plan agrees that at least 80% of the annual revenue that it
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`or its subsidiaries generate from within its ESA shall be derived from services offered under the
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`Blue Brand.
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`88.
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`Second, the Licensing Agreements were further amended in 2005 to impose a
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`national ―best efforts‖ requirement, which requires ―[a]t least 66-2/3% of the annual Combined
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`National Net Revenue of the [Blue Plan and any] Controlled Affiliate[] attributable to health care
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`plans and related services … must be sold, marketed, administered or underwritten under the
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`Licensed Marks and Names [i.e. the Blue Brand].‖
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`89.
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`In other words, each Blue Plan further agrees that at least two-thirds of the annual
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`revenue generated by it or its subsidiaries from either inside or outside of its ESA shall be
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`attributable to services offered under the Blue Brand. Thus, under the national best efforts rule, any
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`revenue a Blue Plan may generate from services offered under any non-Blue Brand is limited in
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`relation to its Blue Brand revenue.
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`90.
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`―The National Best Efforts rule … operates as an output restriction on a [Blue] Plan‘s
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`non-Blue brand business.‖ In re Blue Cross Blue Shield Antitrust Litig., 308 F. Supp. 3d at 1272. ―The
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`fact that the National Best Efforts rule imposes a relative limit, rather than an absolute limit, is of no
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`moment.‖ Id. ―It constitutes a limit or a restriction on the volume (output) of a [Blue] Plan‘s non-
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`Blue business.‖ Id. The same reasoning applies to the Defendants‘ local best efforts rule.
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`91.
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`Similar to the ESAs, ―[t]he National Best Efforts restrictions on non-Blue brand
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`business clearly are not necessary for the product to be ‗available at all.‘ Health insurance is
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`regularly made available to consumers without such restraints.‖ In re Blue Cross Blue Shield Antitrust
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`Litig., 308 F. Supp. 3d at 1273 (emphasis added). The same reasoning applies to the Defendants‘
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`local best efforts rule.
`
`92.
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`These provisions directly limit the ability of each Blue Plan to generate revenue from
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`non-Blue Branded business. They also limit the ability of each Blue Plan to develop non-Blue
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`Brands that could and would compete with other Blue Plans. It further discourages and
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`disincentivizes each Blue Plan from developing any non-Blue Branded businesses.
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`93.
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`For example, the one-third cap on non-Blue Brand revenue provides a Blue Plan
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`with minimal, if any, incentive to compete outside its ESA. To do so, the Blue Plan would have to
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`buy, rent, or build a provider network under a non-Blue Brand, while ensuring that revenue
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`derived from that brand did not exceed the one-third cap.
`
`94.
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`Should a Blue Plan offer services and products under its non-Blue Brand within its
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`ESA that would further reduce the amount of non-Blue Brand revenue it is permitted to earn from
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`outside its ESA. Thus, the potential upside of making an investment in developing business outside
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`of a Blue Plan‘s ESA is severely limited, which obviously creates a disincentive from ever making
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`that investment.
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`95.
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`The combined effect of the ESAs,