Arbitration Panel Finds Blue Shield of CA Breached Contracts and Engaged in Unlawful Business Practice

Friday, October 21, 2016 Corporate News
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SACRAMENTO, Calif., Oct. 21, 2016 /PRNewswire/ -- An arbitration award filed this week in Sacramento Superior Court found

that Blue Shield of California engaged in an unlawful business practice against the not-for-profit Sutter Health network of doctors and hospitals, and breached its contracts with Sutter.


arbitration stems from a finding in San Francisco Superior Court that Blue Shield failed to obtain the agreement of one of its self-insured clients to be bound by the contract between Blue Shield and Sutter, as required by the contract.

In self-insured/self-funded plans, employers pay for doctor visits and hospitalizations for their employees. This type of plan differs from more traditional health insurance plans where employers agree to a pay a premium for each employee, and the health insurance plan pays for the medical costs the patient incurs.

"Self-funded employers should have ready access to the agreements we negotiate with health plans so they understand and agree with the contract terms that govern the health care providers in the networks their employees access," said Sutter Health spokesperson Bill Gleeson. "Sutter Health allows and encourages health plans to share the contract with their self-insured customers."

The arbitration panel, which issued its findings October 4, concluded that:

  • Blue Shield not only failed to obtain the self-insured client's agreement to be bound to the contract, but the health plan refused to provide the agreement to the client when asked.
  • "Blue Shield's actions constitute an unlawful, unfair and fraudulent business practice," which violated the California Business and Professions Code section 17200.
  • Blue Shield breached its contract with Sutter Health and breached the covenant of good faith and fair dealing by its actions which hampered transparency and resulted in harm to Sutter.

The panel also concluded that the arbitration provisions in Sutter Health's contract with Blue Shield over many years covered all disputes, including allegations of antitrust—despite Blue Shield's protestations to the contrary in 2014 and 2015.

Blue Shield was ordered to pay Sutter Health damages as a result of the breach.

"This is good news for consumers and employers," said Gleeson. "We hope this decision inspires more health plans to proactively share their provider contract terms with their self-funded employer customers, and also encourages employers to proactively understand these agreements which are so important to their employees."

About Sutter Health

Serving patients and their families in more than 100 Northern California cities and towns, Sutter Health doctors, not-for-profit hospitals and other healthcare service providers share resources and expertise to advance healthcare quality and access. The Sutter Medical Network includes many of California's top-performing, highest-quality physician organizations as measured annually by the Integrated Healthcare Association. Sutter-affiliated hospitals are regional leaders in cardiac care, women's and children's services, cancer care, orthopedics and advanced patient-safety technology. For more information about the not-for-profit Sutter Health network visit: | | |


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SOURCE Sutter Health

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