A federal appeals court has reinstated an antitrust suit against the Blue Cross Blue Shield Association over claims that the group's insurance providers conspired to decline coverage for a medical device company's cardiac monitor.

A unanimous three-judge panel of the U.S. Court of Appeals for the Third Circuit determined in LifeWatch Services v. Highmark that LifeWatch Services had presented enough factual basis to proceed on claims against five insurance plan administrators, including WellPoint, Horizon Blue Cross Blue Shield of New Jersey and Highmark Inc., each of which uses the Blue Cross Blue Shield trademarks.

The precedential decision reversed a ruling by the U.S. District Court for the Eastern District of Pennsylvania, which had said LifeWatch Services failed to show that there had been any agreement between the carriers, or that there had been any anti-competitive effect.

The Blue Cross Blue Shield Association had contended that each of its carriers independently determined that the LifeWatch Services' telemetry monitor was either not medically necessary or only investigative, but Judge Thomas Ambro, who wrote the Third Circuit's 32-page opinion, noted that the association's model policy for carriers recommends that its insurers deny coverage for telemetry monitors.

Ambro said the evidence provides a sufficient basis for the claims to go forward at this point.

“If a plan strays too far from the model it could face sanctions, including losing the right to use the Blue Cross name,” Ambro said, noting allegations that most other large insurance carriers, such as Aetna, say telemetry monitors are medically necessary. “The agreement and enforcement mechanism pled here provide the 'reasonably founded hope that the [discovery] process will reveal relevant evidence.'”

The decision remanded the case back to the Eastern District to determine whether the defendants are immune from antitrust suits under the McCarran-Ferguson Act, which makes insurers immune for conduct regulated at the state level.

According to Ambro, LifeWatch Services sued the association, along with five of its member insurance administrators that have a national network collectively insuring 105 million Americans and providing coverage for 96 percent of hospitals and 92 percent of doctors across the country. Ambro said the association is not an insurer itself, but owns the rights to the Blue Cross Blue Shield trademarks, and licenses its brand to 36 insurers across the country.

LifeWatch Services contended that, despite many other private insurers providing coverage, Blue Cross Blue Shield insurers have for decades declined to cover telemetry monitors, which record up to 30 days of a patient's cardiac activity and automatically send the data to an analysis center. Because of the coordinated denials, demand for the devices has been artificially lowered, LifeWatch Services contended, adding that the low demand has hindered research and innovation in the market.

Along with finding that there was sufficient evidence to show agreement between the defendants, Ambro also said LifeWatch sufficiently argued that there were anti-competitive effects.

Although the district court had agreed with the association that, because the carriers had treated each telemetry-maker the same in denying coverage, there hadn't been any adverse effects on the telemetry marketplace, Ambro said the district court should have viewed the marketplace more broadly, looking how telemetry was treated in comparison with other cardiac monitors.

“Armed with the proper market definition, the unreasonable-restrain analysis becomes straightforward,” Ambro said.

Gary Elden of Shook, Hardy & Bacon, who represented LifeWatch Services, and Daniel Laytin of Kirkland & Ellis, who represented the Blue Cross Blue Shield Association, each did not return a call seeking comment.