Connecticut Attorney General's Office

Press Release

Attorney General To Anthem: Stop Holding CT Hospitals Captive and Blocking Health Plan For Uninsured

December 21, 2009

Attorney General Richard Blumenthal called on the president of Anthem Blue Cross and Blue Shield (Anthem) to abandon contractual clauses that are restraining and straitjacketing Connecticut hospitals and doctors and severely constraining the state's Charter Oak Health Plan for the uninsured.

Blumenthal is conducting an ongoing antitrust investigation into Anthem's use of "Most Favored Nation" (MFN) clauses in its contracts with hospitals and other health care providers.

These clauses require hospitals to provide Anthem with discounts at least as favorable as any provided to competitors -- a practice that undermines competition and now threatens widespread hospital enrollment in Charter Oak, depriving thousands of Connecticut uninsured citizens of ready access to health care.

In a letter today, Blumenthal called on Anthem President David R. Fusco to immediately exclude Charter Oak from its MFN clauses and permit all hospitals in Anthem's provider network to participate in Charter Oak without having to extend Anthem the same terms applied to Charter Oak.

"Anthem is straitjacketing and restraining Connecticut hospitals -- potentially constraining competition and hindering Charter Oak in enrolling hospitals statewide," Blumenthal said. "By insisting on every favorable term given to Charter Oak, Anthem is effectively pressuring hospitals to reject Charter Oak. My investigation continues, but I call on Anthem to break its death grip on hospitals and encourage them to join in this critical health insurance program. It should disavow the contract clause -- known as Most Favored Nation -- that may cause hospitals to delay or refuse to participate in Charter Oak.

"This step will have little effect on Anthem's profits, but a significant positive impact on access to affordable health care in our state."

In the summer of 2008, the State of Connecticut offered Charter Oak, a state subsidized plan that was created to provide health insurance to uninsured adult Connecticut residents ages 19 through 64 years of age.

Charter Oak is administered by the Connecticut Department of Social Services. As part of its plan to provide coverage to the uninsured, the state contracted with three private health insurers - - Aetna Better Health, AmeriChoice by Unitedhealthcare, and Community Health Network of Connecticut -- to coordinate benefits in a managed care program and establish provider networks for health professionals and hospitals.

Under Charter Oak, hospitals that agreed to participate were required to accept discounted rates for services and treatment provided to Charter Oak members that were much steeper than the rates hospitals generally accepted for their commercial business. Lower payment rates than those paid by commercial insurers are the norm in publicly-subsidized health coverage programs. Currently, only 17 of the 32 hospitals in Connecticut have executed agreements to participate with Charter Oak insurers, with no hospitals in Windham and Middlesex counties participating.

Blumenthal said many, if not most of these non-participating hospitals, have delayed or refused to participate out of concern that Anthem may seek to enforce its MFN rights for any hospital that participates in Charter Oak.

The rate of reimbursement to hospitals under Charter Oak is considerably less than the rates hospitals charge Anthem for its commercial plan members. If a hospital did participate in Charter Oak, and if Anthem applied the MFN clause to Charter Oak, the hospital would be exposed to considerable financial penalty as it would have to offer Anthem the same rates or discounts it agreed to with Charter Oak.

Since Anthem is invariably a hospital's largest commercial payer, the loss of revenue to that hospital if that were to occur would be a significant financial detriment to the hospital and a deterrent to participating in Charter Oak.

Blumenthal said, "The breadth and quality of a health plan's hospital network is one of the most critical factors in its ultimate success as a viable option, making this issue of paramount importance.

"Severe economic distress is compounding the number of Connecticut citizens who are uninsured or in danger of losing their health insurance. Charter Oak is a unique program specifically conceived to address this fundamental problem.

"Even if Congress passes federal health care reform, programs like Charter Oak will make a significant difference in enabling access to hospital care."

Currently, nearly 13,000 Connecticut residents are enrolled in Charter Oak health coverage.

View entire letter to Fusco - (PDF-243KB)