## Facts

- The United States and the State of Michigan sued Blue Cross Blue Shield of Michigan (Blue Cross), alleging antitrust violations arising from “most favored nation” (MFN) provisions in hospital contracts.
- Blue Cross was alleged to be the largest commercial health insurer in Michigan, covering over three million residents and more than 60% of the commercially insured population, with enrollment far exceeding its next-largest competitor.
- Blue Cross purchased hospital services from all general acute-care hospitals in Michigan and allegedly obtained MFNs (or similar provisions) from at least 70 of 131 such hospitals, covering a substantial share of acute-care beds.
- The complaint described two categories of MFNs:
  - MFN-plus clauses requiring certain hospitals to charge other commercial insurers more than Blue Cross (sometimes by specified differentials up to 40%).
  - Equal-to MFNs requiring hospitals to charge other insurers no less than Blue Cross.
- The Government alleged Blue Cross used its market power to induce acceptance of MFNs, including paying some hospitals more if they agreed and paying less if they refused.
- The Government alleged the MFNs raised rivals’ costs, deterred entry or expansion by competing insurers, reduced price competition, and increased overall health care costs, including by raising Blue Cross’s own reimbursement rates in exchange for restrictive terms.
- Blue Cross moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.

## Issues

1. Whether the complaint plausibly alleged concerted action (a contract, combination, or conspiracy) under Sherman Act § 1 based on MFN provisions in hospital provider agreements.
2. Whether the allegations plausibly stated an unreasonable restraint of trade in relevant markets sufficient to survive a Rule 12(b)(6) motion.
3. Whether MFN and MFN-plus provisions used by a dominant insurer could plausibly violate antitrust law under rule-of-reason analysis at the pleading stage.

## Decision

- The court denied Blue Cross’s Rule 12(b)(6) motion to dismiss.
- Applying Twombly/Iqbal, the court held the complaint contained sufficient factual matter to plausibly state claims under Sherman Act § 1 and Michigan’s Antitrust Reform Act.
- The court rejected any categorical view that MFNs are inherently lawful; it treated the challenged provisions as subject to non-per se analysis and found the alleged mechanisms of harm plausibly anticompetitive given the asserted market power and breadth of coverage.
- The court held that bilateral provider agreements containing MFNs adequately alleged the concerted conduct element of § 1 at the pleading stage.
- Because Michigan’s antitrust statute was treated as parallel to federal law, the state-law claim survived for the same reasons.

## Legal Principles

- On a Rule 12(b)(6) motion, a plaintiff must plead enough factual content to make the antitrust claim plausible, not prove anticompetitive effects.
- MFN provisions are not immune from antitrust scrutiny; depending on market power and market effects, they may plausibly raise rivals’ costs, weaken price competition, and increase prices.
- Provider agreements between an insurer and hospitals may satisfy § 1’s concerted-action requirement when the alleged restraint is embedded in contractual terms.
- Where state antitrust law is construed consistently with the Sherman Act, plausibly pleaded federal antitrust allegations generally suffice to state the parallel state claim.

## Conclusion

The court held that the Government’s detailed allegations that a dominant insurer used MFN and MFN-plus hospital contract clauses to raise rivals’ costs and increase overall health care prices plausibly stated federal and state antitrust claims, and it denied the insurer’s motion to dismiss.


United States v. Blue Cross Blue Shield of Mich., 809 F. Supp. 2d 665 (E.D. Mich. 2011)