TALLAHASSEE — A federal appeals court next week will wade into a battle about whether Florida Blue, the state’s largest health insurer, violated antitrust laws by preventing agents from selling policies for a rival insurance company.
Oscar Insurance Company of Florida went to the 11th U.S. Circuit Court of Appeals after a district judge sided with Florida Blue in the dispute, which is rooted in Oscar’s entrance in 2018 into the market for individual health insurance policies in the Orlando area.
Oscar, which has been backed in the case by the U.S. Department of Justice, contends that Florida Blue engaged in “manifestly anticompetitive conduct” by threatening to cut off independent agents who also sold Oscar policies, according to a brief filed in the Atlanta-based appeals court.
“Altogether, Florida Blue’s threats have caused hundreds of brokers to avoid working with Oscar, leaving the vast majority of Florida brokers captive to Florida Blue and denying Oscar the ability to compete,” the brief, filed last December, said. “As a result, Florida consumers have had to pay more for health insurance.”
But the legal fight focuses primarily on an antitrust exemption that Congress granted to insurers in the 1945 law known as the McCarran-Ferguson Act. The law provided an exemption for what it described as the “business of insurance” — a phrase that Florida Blue says includes its use of exclusive agents to sell individual health policies.
In a brief filed in February, Florida Blue attorneys wrote that the Jacksonville-based company’s “exclusive agency agreements go to the heart of what insurers do: sell insurance policies and spread risk. Indeed, it is difficult to imagine how the exclusive agents’ activities could be anything other than the ‘business of insurance:’ By Oscar’s own admission, the agents expand the pool of insureds by bringing new consumers into the market, help sell the right policies to the right individuals and prevent siphoning of Florida Blue customers to other insurers.”
A panel of the 11th U.S. Circuit Court of Appeals is scheduled to hear arguments Nov. 20, after U.S. District Judge Paul Byron last year agreed with Florida Blue — formally known as Blue Cross and Blue Shield of Florida — and dismissed the case.
The U.S. Department of Justice in January filed a brief supporting Oscar’s position and is slated to participate in the oral arguments. Oscar and the Department of Justice contend that Florida Blue and the district judge have interpreted the antitrust exemption in the McCarran-Ferguson Act too broadly.
Oscar argued in its December 2019 brief that the exemption was designed to allow insurers to share information related to risk underwriting and loss experience.
“The exclusivity terms that Florida Blue selectively enforced against brokers to keep Oscar out of the Orlando market bear no relation to the transfer and spreading of risk that defines the ‘business of insurance’ or the cooperative rate making Congress sought to immunize from antitrust scrutiny,” Oscar’s attorneys, who include former U.S. Solicitor General Seth Waxman, wrote in the brief. “And Florida Blue’s threats, backed by its market dominance, are classic acts of coercion.”
The individual policies at issue are sold under terms of the federal Affordable Care Act, with Florida Blue the dominant player in the state. Florida Blue said in the February brief that many other insurers exited the individual market after passage of the Affordable Care Act but that it sells policies in every county and relies on a network of exclusive agents statewide.
“Florida Blue’s exclusivity policy does not force its agents to engage in activities unrelated to insurance, but instead (as Oscar admits) provides incentives so that the agents focus their entrepreneurial skills on selling Florida Blue’s insurance, and no one else’s. Such activity falls squarely within the ‘business of insurance.’ Indeed, it is hard to imagine an activity more central to ‘the relationship between the insurance company and the policyholder’ than the means by which an insurer sells policies and forms its relationship with insureds,” Florida Blue attorneys wrote, partially quoting a ruling from another appellate court.