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The Justice Department took aim at a health insurance carrier in Michigan as part of an effort to protect U.S. consumers from higher hospital bills, the Antitrust Division chief announced Monday.

Christine Varney (photo by Andrew Ramonas / Main Justice)

Assistant Attorney General Christine Varney told reporters that the DOJ has filed a lawsuit against Blue Cross Blue Shield of Michigan. The suit alleged that deals the company made with local hospitals essentially keep other health insurance carriers from entering the market.

“Anytime a dominant provider uses anti-competitive agreements, the market suffers,” Varney said. “This cannot be allowed in Michigan, and let me be clear, we will challenge similar anti-competitive behavior anywhere else in the United States. American consumers deserve affordable health care at competitive prices.”

The Assistant Attorney General said the deals, known as “most favored nation” clauses, are not necessarily illegal. But she said the clauses are “problematic” when they are used to stop competition.

“We are very concerned anytime MFN’s are used to decrease competition and increase prices,” Varney said.

Andrew Hetzel, a Blue Cross Blue Shield of Michigan vice president, defended the health insurance carrier’s use of MFN’s. He said the allegations made by the DOJ are “without merit.”

The Blue Cross Blue Shield of Michigan official said the deals help Michigan consumers receive lower hospital bills.

“Negotiated hospital discounts are a tool that Blue Cross uses to protect the affordability of health insurance for millions of Michiganders,â€� Hetzel said in a statement. “Through this lawsuit, the federal government seeks to deny millions of Michigan residents the lowest cost possible when they visit the hospital.”

Blue Cross Blue Shield of Michigan previously came under scrutiny by DOJ after the company tried to acquire the Physicians Health Plan of Mid-Michigan. The DOJ, which opposed the deal, said 90 percent of the health insurance market in Lansing, Mich., would have been under the control of Blue Cross Blue Shield of Michigan. The company said in March it would not pursue the merger.

Varney did not specifically say if the eight-month investigation into the use of MFN’s by Blue Cross Blue Shield of Michigan grew out of the review of the proposed merger. But she said the DOJ “uncovered a lot of information as we reviewed that proposed transaction.”

The suit was filed in federal court in the Eastern District of Michigan. Antitrust Division lawyers in Washington are taking the lead on the case.