Blue Cross Blue Shield of Michigan's subsidiary, Blue Care Networks of Michigan, abandoned plans to purchase Physicians Health Plan of Mid-Michigan after the U.S. Department of Justice said it would file an antitrust lawsuit to block the acquisition.
Had the acquisition gone forward, it would have given Michigan Blue Cross control of nearly 90 percent of the commercial health insurance market in the Lansing, Mich., region.
The Justice Department said such an outcome would have resulted in higher prices, fewer choices and a reduction in the quality of commercial health insurance plans available to Lansing-area residents and employers.
Christine Varney, assistant Attorney General in charge of the Department of Justice's Antitrust Division, said the acquisition also would have given Michigan Blue Cross the ability to control physician reimbursement rates in a manner that could harm the quality of healthcare delivered to consumers.
"The merger would have likely led to higher prices, lower levels of service and decreased quality of healthcare for consumers," Varney said. She said the deal's abandonment would "preserve competition among health insurance companies in Lansing."
Michigan Blue Cross and PHP are the two largest providers of commercial health insurance in the Lansing area. Michigan Blue Cross has almost a 70 percent market share in Lansing and PHP is its largest competitor, with approximately a 20 percent market share in the region.
Michigan Blue Cross is the largest health insurer in the state, with reported revenues of approximately $21 billion in 2008. PHP reported revenues of approximately $250 million the same year. Sparrow Health Systems, Inc., the largest hospital system in Lansing, owns PHP.
Varney said competition between the two companies has led them to offer lower prices, better service and more innovative products to employers and their employees.