Tennessee Insurance Legal News - February 2013 • Volume 2, Number 1

AUTO REPAIR TRADE ASSOCIATION REQUESTS THAT DOJ INVESTIGATE THE USE OF MOST FAVORED NATION CLAUSES BY AUTO INSURERS

by James M. Burns

Over the last several years, the use of most favored nation clauses by health insurers has been the focus of significant antitrust scrutiny, with legislation being enacted in several states that prohibits the use of such clauses in provider contracts and the DOJ Antitrust Division taking action against the use of such clauses as well. Now, it appears that the use of such clauses in other insurance contracts may be beginning to attract attention as well.

Specifically, the Automotive Service Association, a trade association of independent automotive service and repair professionals, recently sent a letter to the DOJ Antitrust Division urging the Antitrust Division to examine the use of most favored nation clauses by auto insurers. The association contends that the use of such clauses by national auto insurers, particularly when coupled with direct repair arrangements with other repair shops (typically those in an insurer's "preferred" network), impedes the ability of the association's members to compete for repair shop business from the insurers' insureds. The association further notes that, in its judgment, many of the potential concerns about the use of MFN clauses raised at the FTC/Antitrust Division's MFN clause symposium in September apply in the auto repair industry as well.

The association therefore urges the Antitrust Division to "continue to pursue the MFN clause issue," and requests that the DOJ agree to a meeting with the association's leadership to discuss how the use of most favored nation clauses allegedly impedes competition in the auto repair industry. Notably, however, most antitrust claims by independent repair shops challenging the right of an insurer to utilize a "preferred" network of repair shops, including the recent Harner v. Allstate case in the Southern District of New York, have failed, with the courts typically holding that the plaintiff could not allege antitrust injury resulting from the insurers' practices. Whether the Automobile Service Association will have any better success in advocating its views to the Antitrust Division, and if so, where it might lead, remains to be seen. Stay tuned.

TENNESSEE WILL NOT RUN HEALTHCARE EXCHANGE

by John E. Anderson, Sr.,

Tennessee Governor Bill Haslam recently announced that Tennessee will not set up a state-run insurance exchange under the Patient Protection and Affordable Care Act. Instead, he will allow the federal government to set up and run a health insurance exchange for the state of Tennessee. Governors in all 50 states were required to announce by December 14, 2012 their intent as to whether they plan to set up a state-run exchange; allow the federal government to run the exchange; or enter into an agreement with the federal government to operate a "partnership" exchange.

According to a transcript of his prepared remarks, Governor Haslam reached this decision after thoughtful consideration: "This decision comes after months of consideration and analysis. It is a business decision based on what is best for Tennesseans with the information we have now that we've been pressed hard to receive from Washington. If this were a political decision, it would have been easy, and I would have made it a long time ago."

Haslam explained, "I am not a fan of the law. The more I know, the more...