CHICAGO — A federal judge won’t let Delta Dental end a massive antitrust class action accusing the dental care insurer of forcing dentists to ink agreements that allegedly unfairly suppress their payments.
Named defendants include the Delta Dental Plan Association, affiliated national entities Delta Dental Insurance Company, DeltaCare USA and Delta USA Inc., 39 independent Delta Dental companies operating in all 50 states and Puerto Rico, as well as Dentegra Group and Renaissance Health Service Corporation, which fully or partially own several of the 39 state plans.
“Plaintiffs acknowledge that defendants’ below-market reimbursement rates could, theoretically, translate to savings in the premiums paid by their policyholders,” Bucklo wrote. “But they assert that rather than passing on any savings to consumers of dental products and services, defendants have paid lavish salaries to their executives and bloated their capital reserves.”
Bucklo rejected Delta’s argument it should be treated like credit card companies, which “operate two-sided transaction platforms” servicing both a merchant and customer simultaneously and have been allowed to use similar territorial restrictions. Rather than being transaction based, Bucklo said, dental insurance customers typically pay fixed premiums that aren’t directly linked to the actual costs of their office visits.
She further said the dispute concerning the effect of reimbursement rates on customer premiums, balanced against plaintiffs’ allegations concerning Delta executive compensation and cash reserves, can’t be resolved through a motion to dismiss.
While Delta didn’t dispute allegations that price fixing or output limitations are anticompetitive, it argued the facts laid out in the complaint don’t show how the policies are illegal.
Bucklo disagreed, writing the plaintiffs didn’t “merely incant the words ‘price fixing’ and ‘revenue restrictions’ without including substantial details to support their claims.”
The complaint, Bucklo noted, “describes how (the Delta Dental companies) obtain and share pricing information, agree collectively upon below-market reimbursement rates, then police payment of those rates to ensure uniformity in practice. These allegations give substance to the label ‘price fixing’ and are sufficient to inform defendants of the nature of plaintiffs’ claim.”
Bucklo also rejected arguments the plaintiffs didn’t demonstrate an ill effect on the entire dental insurance market, restating her position that “no judgment can be made at this stage regarding the significance of any indirect network effects, which may or may not require a two-sided market analysis.”
Although she agreed the plaintiffs’ description of the insurance market was “not a model of clarity,” Bucklo wrote it ultimately was sufficiently “consistent with their theory that defendants have combined to form a buyers’ cartel with monopsony power that makes it difficult for alternative buyers to compete, thereby depressing the market price for the sale of dental goods and services.”
Bucklo also rejected Delta’s argument it was protected under the McCarran-Ferguson Act’s limited antritrust exemptions for insurance companies. While Delta said its territorial restrictions were a matter of spreading risk, Bucklo said the divisions “have no obvious actuarial relevance” and can’t be used to avoid dismissal.
Plaintiffs are represented by a number of firms, including attorneys with Quinn Emanuel Urquhart & Sullivan LLP, of Chicago and New York; Carney Bates & Pulliam, of Little Rock, Ark.; Malkinson & Halpern P.C., of Chicago; and Kaplan Fox & Kilsheimer LLP, of New York, among others.
Delta Dental and its affiliated entities are represented by the firms of Faegre Baker Daniels LLP, of Chicago and Indianapolis; Mayer Brown LLP, of Chicago; Sidley Austin LLP, of Chicago; and Blackwell Burke P.A., of Minneapolis.