New York-based insurtech startup Oscar Health has been locked in a legal fight with insurer Florida Blue over the latter company’s exclusive broker policy, which Oscar says shuts out competition, reduces customer choice and impedes innovation.
Now, the Department of Justice has weighed in on Oscar Health’s side arguing that the antitrust concerns raised by the company in court should not be thrown out.
In a Statement of Interest, the DOJ argues that the McCarran–Ferguson Act – which exempts insurance companies from most federal regulation – is not enough to negate Oscar’s Sherman Act claims against Florida Blue because the exclusive broker policy “is far removed from the transfer of risk and the policy relationship between insurer and insured.”
“The McCarran-Ferguson Act creates ‘only a limited exemption’ from federal
antitrust law for the business of insurance,” the DOJ statement reads.
“In arguing that their exclusivity policy comes within the exemption, the defendants (together, Florida Blue) disregard the Supreme Court’s instruction that the exemption ‘must be construed narrowly.'”
Essentially the government claims that Florida Blue’s policy was not integral to its relationship with its policyholders and therefore not subject to the McCarran–Ferguson Act antitrust exemptions.
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Oscar claims that Florida Blue’s exclusive broker policy pressured local insurance brokers from selling plans other than those of Florida Blue, meaning that cheaper and more feature-rich plans were shut out of the market.
Additionally, Oscar asserted that Florida Blue threatened to permanently terminate the relationship with any broker who sold an Oscar plan and withhold commissions from those who violated the exclusivity policy. Oscar claimed this policy led to 190 brokers contracted by the company backing out of their agreements and “substantially” lowering sales, particularly in the Orlando market.
The DOJ backed Oscar’s charge that Florida Blue’s exclusivity policy was implemented through “coercion.”
For its part, Florida Blue has emphasized brokers’ status as independent contractors with free choice of carriers and pointed to the fact that exclusive arrangements have been widely used in the insurance industry for years.
“It is not uncommon for the Department of Justice to seek to weigh in on legal issues in which it believes it may have an interest. Florida Blue is continuing to defend this lawsuit vigorously, while keeping our focus on our mission: helping the people and communities of Florida to achieve better health,” the insurer said in a statement.
Oscar had previously unsuccessfully sought a preliminary injunction to stop Florida Blue from using exclusive brokers to sell their plans until a final court decision was reached.
In February, a federal judge ruled that Florida Blue could continue to use its exclusive brokers to sell its health plans, citing Oscar’s failure to establish “irreparable harm” and “substantial likelihood of success on the merits.”
The judge wrote in his decision that when looking at the totality of the Florida and Orlando broker population, Florida Blue has exclusivity agreements with a small percentage and insurers like Centene have successfully entered the market.
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