US DOJ and plaintiff state filed suit in federal court to stop Blue Cross Blue Shield of Michigan from its use of allegedly anti-competitive “Most-Favored-Nation” (MFN) clauses in reimbursement contracts with approximately half of Michigan’s hospitals. The lawsuit alleged that MFN status gives Blue Cross an unlawful advantage over other insurers by requiring hospitals to charge the other insurers more than they charge Blue Cross, driving up prices for consumers and damaging competition in the healthcare market place – all to benefit Blue Cross’ market share. Blue Cross allegedly ramped up its practice of requiring MFN clauses in 2007, threatening to slash payments to 45 small, rural hospitals by up to 16% if the hospitals refused. Blue Cross also allegedly secured MFN clauses with at least 23 larger hospitals by offering to increase the amount Blue Cross paid hospitals, as long as all other insurers paid more, putting other insurers at a competitive disadvantage while raising prices for everyone. For these larger hospitals, the MFN that Blue Cross secured was an even costlier type of MFN called an “MFN-plus.” These clauses require hospitals to give Blue Cross better prices than other insurers, while adding on a specific percentage increase – in some instances resulting in other insurers paying as much as 39% more than Blue Cross. These practices alleged stifle competition, lead to higher costs, and prevent new entry into the market. The complaint alleged violations of both state and federal antitrust law and seeks an injunction to end all variations of MFN clauses. After the state legislature enacted a statute prohibiting health insurers from using most-favored-nation clauses in contracts with health care providers, USDOJ and Michigan dismissed the case.