Michigan Sues Blue Cross, Calling It an Illegal Monopoly That Held Down Provider Pay

LANSING, MICHIGAN – Michigan Attorney General Dana Nessel sued Blue Cross Blue Shield of Michigan in federal court Oct. 8, accusing the state’s largest health insurer of running an illegal monopoly. Her office says Blue Cross used that power to drive provider pay “to near the lowest in the nation, sometimes even below the medical providers’ own costs to provide care.”

Neither the 116-page complaint nor Nessel’s announcement mentions applied behavior analysis (ABA), autism, or behavioral health. The only provider association quoted in the announcement speaks for physical therapists. The complaint defines a broad market for commercially insured health care services, which could make the case relevant to ABA providers. Blue Cross covers ABA under commercial plans, subject to members’ benefits and authorization requirements.

Among the damages Michigan seeks is the gap between what Blue Cross paid providers and what it would have paid without the alleged anticompetitive conduct. The complaint asks that this provider-related recovery be awarded to the state, which is suing on behalf of residents and providers, but does not specify how the money would be distributed.

The complaint cites a 2025 American Medical Association report, based on 2024 enrollment data, that put Blue Cross at 65% of Michigan’s commercial insurance market and 79% of its preferred provider organization (PPO) market. It alleges that agreements with other Blue plans to divide territory drove up premiums and fees for administering state employee health plans. The suit seeks an injunction, damages, and civil penalties of up to $50,000 per state antitrust violation.

In an Oct. 8 statement reported by Michigan Public, Blue Cross said it had not yet been served and was “blindsided.” “We fundamentally disagree with the Attorney General’s characterization of an uncompetitive insurance market in Michigan,” the company said. “Competition exists everywhere in our state’s insurance markets, with strong local and national insurers competing with us every day.” That statement did not address the provider-pay allegations.

The Provider-Pay Claim

Blue Cross members make up the majority of commercially insured patients for most Michigan providers, the complaint says, so a provider that refuses Blue Cross’s terms “risks losing the majority of its commercially insured patients.” It also alleges that other insurers use Blue Cross’s rates as a benchmark and follow them down. One count alleges monopsonization: unlawfully using buyer power to suppress competition in the market for providers’ services.

Among the complaint’s examples is the 2026 contract dispute with Michigan Medicine, the University of Michigan’s health system. Michigan Medicine said Blue Cross proposed a 30% payment cut; Blue Cross disputed that account and said the system sought a 44% increase, which Michigan Medicine denied. The two announced a new long-term agreement May 27. The complaint also cites Sturgis Hospital in St. Joseph County, which closed June 19 after citing declining reimbursement, rising costs, and lower patient use.

In Nessel’s announcement, Brian Gilbert, president of APTA Michigan, the state chapter of the American Physical Therapy Association, said Blue Cross reimbursement cuts had hurt physical therapy providers. “Reductions totaling nearly 20% per visit over the past year have pushed many clinics to the brink, resulting in clinic closures, workforce reductions, and frozen hiring despite growing patient demand,” he said.

“When a single payer has the ability to significantly reduce reimbursement rates across a market, the effects ripple through the healthcare system, impacting wages, staffing, innovation, and ultimately the quality and availability of care.” – Brian Gilbert, President, APTA Michigan (2026)

The complaint and announcement provide no comparable figures for ABA reimbursement. Gilbert’s estimate concerns physical therapy and does not establish that ABA providers experienced the same reductions.

What Comes Next

For Michigan’s ABA providers, one question is whether later filings offer evidence about their reimbursement, through provider testimony or examples the state submits. The complaint presents allegations, not findings of wrongdoing.

The initial docket lists U.S. District Judge Matthew F. Leitman as the presiding judge. Nessel, who is term-limited, leaves office Jan. 1, 2027, and has said she hopes her successor keeps pursuing the case.

Voters choose that successor Nov. 3. Spokespeople for the major-party nominees, Democrat Eli Savit and Republican Doug Lloyd, told Michigan Public on Oct. 8 that neither candidate had reviewed all the evidence and that each would decide how to proceed after reviewing the case. The next attorney general takes office Jan. 1, 2027.

AT A GLANCE

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