Court Opinion

ID: 4249370
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:17:35.096818+00
Date Added: 2024-06-11T07:48:11.436459
License: Public Domain

IN THE SUPREME COURT OF IOWA
                               No. 13–1872

                         Filed February 27, 2015

                         Amended June 5, 2015

STEVEN A. MUELLER, BRADLEY J. BROWN, MARK A. KRUSE,
KEVIN D. MILLER, and LARRY E. PHIPPS, on Behalf of Themselves
and Those Like Situated,

      Appellants,

vs.

WELLMARK, INC. d/b/a WELLMARK BLUE CROSS AND BLUE
SHIELD OF IOWA, an Iowa Corporation, and WELLMARK HEALTH
PLAN OF IOWA, INC., an Iowa Corporation,

      Appellees.

      Appeal from the Iowa District Court for Polk County, Robert A.

Hutchison, Judge.

      Plaintiff chiropractors appeal from a summary judgment entered

by the district court in favor of defendant health insurers on per se

antitrust claims under the Iowa Competition Law. AFFIRMED.

      Glenn L. Norris of Hawkins & Norris, P.C., Des Moines; Harley C.

Erbe of Erbe Law Firm, Des Moines; Steven P. Wandro, Michael R. Keller,

and Shayla L. McCormally of Wandro & Associates, P.C., Des Moines, for

appellants.

      Hayward L. Draper and Ryan G. Koopmans of Nyemaster Goode,

P.C., Des Moines, for appellees.
                                       2

MANSFIELD, Justice.

      Wellmark, Inc. is an Iowa-based health insurer that belongs to the

national Blue Cross and Blue Shield (BCBS) network.             Wellmark has

contracted with health care providers in Iowa to provide services at

certain reimbursement rates.      By agreement, Wellmark makes those

rates available both to self-insured Iowa plans that it administers and to

out-of-state BCBS affiliates when those entities provide coverage for

services provided in Iowa.

      This   appeal   presents   the       question   whether   the   foregoing

agreements between Wellmark and self-insuring employers and between

Wellmark and out-of-state BCBS affiliates amount to per se violations of

Iowa antitrust law. We conclude they do not. These arrangements are

not the simple horizontal conspiracies that historically have qualified for

per se treatment.      Accordingly, and recognizing that the plaintiffs

stipulated they were proceeding only under a per se theory and not

under the rule of reason, we affirm the district court’s grant of summary

judgment to Wellmark.

      I. Background Facts and Proceedings.

      This case comes before us for the second time.            See Mueller v.

Wellmark, Inc., 818 N.W.2d 244 (Iowa 2012).

      Approximately seven years ago, a number of Iowa chiropractors

sued Wellmark, the largest health insurer in Iowa, in the Polk County

District Court. The suit challenged Wellmark’s reimbursement rates and

practices for chiropractic services and asked for class action certification.

One count of the plaintiffs’ petition sought relief under a variety of Iowa

insurance statutes. Mueller, 818 N.W.2d at 249 (noting plaintiffs sought

relief based upon allegations Wellmark engaged in discriminatory

practices in violation of Iowa Code sections 509.3(6), 514.7, 514.23(2),
                                     3

514B.1(5)(c), 514F.2 (2007)).     Another count pled that Wellmark had

entered into a contract, combination, or conspiracy in violation of section

553.4 of the Iowa Competition Law, the counterpart to section 1 of the

Federal Sherman Antitrust Act. Id.; see also 15 U.S.C. § 1 (2006). A

third count alleged that Wellmark had abused monopoly power in

violation of section 553.5 of the Iowa Competition Law, the counterpart

to section 2 of the Sherman Act. Mueller, 818 N.W.2d at 249; see also 15

U.S.C. § 2.

      On Wellmark’s motion, the district court dismissed the claims

based on the insurance statutes. Mueller, 818 N.W.2d at 250. It found

no private cause of action was available under those laws.        Id.   The

district court later granted summary judgment to Wellmark on the

antitrust claims.   Id. at 252.   This ruling was primarily based on the

“state action” exemption in the Iowa Competition Law. Id.; see also Iowa

Code § 553.6(4) (providing that the Iowa Competition Law “shall not be

construed to prohibit . . . activities or arrangements expressly approved

or regulated by any regulatory body or officer acting under authority of

this state”). Plaintiffs appealed. Mueller, 818 N.W.2d at 253.

      On appeal, we affirmed the dismissal of the claims under Iowa

insurance law. As we explained,

      [O]ur legislature chose to provide the Iowa Insurance
      Commissioner with exclusive powers to regulate health
      insurance practices under these statutes. For these reasons,
      we hold Iowa Code sections 509.3(6), 514.7, 514.23(2),
      514B.1(5)(c), and 514F.2, enacted as part of H.F. 2219, do
      not create a private cause of action.

Id. at 258.

      However, we found that the state action exemption did not insulate

Wellmark’s reimbursement rates from antitrust review. We noted,
                                     4
            These regulations [cited by Wellmark] are not directed
      to the regulation of rate differentials for particular services.
      Their purpose, rather, is to insure that health insurers do
      not abuse their overall relationship with patients and
      providers through the use of preferred provider plans. Thus,
      if a clinic decided to sue Wellmark under the Iowa
      Competition Law alleging that Wellmark had engaged in
      prohibited section 553.5 monopolization by excluding it from
      a preferred provider arrangement, the section 553.6(4) state
      action exemption might well apply. But, it does not appear
      that the legislature has decided generally to remove the
      setting of reimbursement rates by health insurance
      companies from the operations of the marketplace or from
      claims under the Iowa Competition Law.

Id. at 262 (footnote omitted). Yet, we affirmed the dismissal of some of

the chiropractors’ antitrust claims, including the Iowa Code section

553.5 monopolization claim, on alternate grounds that had been raised

by Wellmark.    Id. at 264–66.    Still, with respect to the section 553.4

conspiracy claim, “we reverse[d] the district court’s summary judgment

granting Wellmark a blanket exemption under section 553.6(4) from

charges that it engaged in anticompetitive price-fixing or term-fixing

schemes.” Id. at 264.

      On remand, the plaintiffs stipulated that their only remaining

antitrust claims—alleging conspiracies between Wellmark and out-of-

state BCBS affiliates and between Wellmark and self-funding employers

that hired Wellmark to administer their plans—were being asserted on a

per se theory. As the plaintiffs stated,

      Plaintiffs hereby agree and stipulate that the only violation of
      Iowa Code § 553.4 alleged in the Fourth Amended and
      Substituted Petition for Damages is for a contract,
      combination or conspiracy between the Defendants and
      (1) out-of-state Blues and (2) in-state self-funded employers
      through administration contracts, to price fix by
      establishment of a maximum price for services of Iowa
      chiropractors in Wellmark’s provider network or through the
      use of a restrictive or capitated payment system in
      Wellmark’s HMO; and those alleged price fixing conspiracies
      are alleged to violate Iowa Code § 553.4 based on Plaintiffs’
      contention that they constitute per se violations of the Iowa
                                      5
      Competition Act. Plaintiffs’ allegations exclude a contention
      that a rule of reason analysis is applicable to the violation of
      Iowa Code § 553.4 alleged in the Fourth Amended and
      Substituted Petition.

      Thereafter, Wellmark moved for summary judgment again, this

time on the ground that neither of these alleged conspiracies was subject

to per se treatment.    As Wellmark put it, “Sharing a provider network
does not amount to naked price fixing and is not subject to the per se

rule.” Wellmark urged that plaintiffs’ claims were potentially viable, if at

all, only under the rule of reason.

      The summary judgment record revealed that employers wanting to

provide group health insurance to their employees can contract with

Wellmark in one of two ways. Either way, Wellmark makes its provider

network available at established reimbursement rates and handles

claims administration. However, if the employer self-insures, then the

employer is financially responsible for claims. On the other hand, when

Wellmark acts as an insurer in addition to a claims administrator, then

the employer pays premiums to Wellmark, and Wellmark must bear the

financial risk of the resulting claims.

      The record also disclosed that Wellmark, which is the BCBS

licensee in Iowa and South Dakota, has a BlueCard® program with

BCBS licensees in other states. Under this arrangement, those out-of-

state licensees have access to Wellmark’s provider network in Iowa at the

rates negotiated by Wellmark whenever they have to pay Iowa claims.

Likewise, Wellmark has access to the other licensees’ negotiated provider

networks in their respective states at their rates whenever Wellmark has

to pay claims in those states. See Steward Health Care Sys., LLC v. Blue

Cross & Blue Shield of R.I., 997 F. Supp. 2d 142, 150 n.3 (D.R.I. 2014)
                                    6

(describing the BlueCard® program); Solomon v. Blue Cross & Blue Shield

Ass’n, 574 F. Supp. 2d 1288, 1289 (S.D. Fla. 2008) (same).

      The plaintiffs maintained that Wellmark had engaged in per se

price-fixing when it entered into agreements with self-insuring Iowa

employers to make its network and claims administration available to

them. Similarly, the plaintiffs urged that Wellmark had engaged in per

se price-fixing when it participated in the national BlueCard® program

under which BCBS entities agreed to make their in-state networks

available to each other when their respective customers needed out-of-

state services.

      After hearing the parties’ arguments, the district court rejected

plaintiffs’ per se theories and entered summary judgment for Wellmark.

This appeal followed.

      II. Standard of Review.

      This court reviews grants of summary judgment for correction of

errors at law. Mueller, 818 N.W.2d at 253. Whether the per se rule or

the rule of reason applies to a given practice is a question of law. See

California ex rel. Harris v. Safeway, Inc., 651 F.3d 1118, 1124 (9th Cir.

2011) (citing XI Phillip Areeda & Herbert Hovenkamp, Antitrust Law ¶

1909b, at 279 (2d ed. 2005)); Nat’l Bancard Corp. v. VISA U.S.A., Inc., 779
F.2d 592, 596 (11th Cir. 1986).

      III. Legal Analysis.

      A. The Iowa Competition Law.           The general assembly has

directed that the Iowa Competition Law “shall be construed to

complement and be harmonized with the applied laws of the United

States which have the same or similar purpose.” Iowa Code § 553.2. As

the legislature has stated,
                                      7
        This construction shall not be made in such a way as to
        constitute a delegation of state authority to the federal
        government, but shall be made to achieve uniform
        application of the state and federal laws prohibiting
        restraints of economic activity and monopolistic practices.

Id.

        Accordingly, in the past, when interpreting the Iowa Competition

Law, we have generally adhered to federal interpretations of federal

antitrust law. See Next Generation Realty, Inc. v. Iowa Realty Co., 686
N.W.2d 206, 208 (Iowa 2004) (per curiam); Max 100 L.C. v. Iowa Realty
Co., 621 N.W.2d 178, 181–82 (Iowa 2001); Fed. Land Bank of Omaha v.

Tiffany, 529 N.W.2d 294, 296–97 (Iowa 1995); Neyens v. Roth, 326
N.W.2d 294, 297 (Iowa 1982); State v. Cedar Rapids Bd. of Realtors, 300
N.W.2d 127, 128 (Iowa 1981). In Comes v. Microsoft Corp., we declined to

follow federal precedent on whether indirect purchasers had standing to

sue under the Iowa Competition Law.          646 N.W.2d 440, 445–49 (Iowa

2002).     We did so because: (1) the language of the relevant provision

(Iowa    Code   section   553.12   (1997))   supported   indirect   purchaser

standing; (2) uniformity only requires a uniform standard of conduct

under state and federal law, not a uniform rule as to who may sue; and

(3) most federal courts allowed indirect purchasers to sue at the time the

Iowa Competition Law was enacted in 1976. See id.

        This case involves section 553.4 of the Iowa Competition Law. It

provides, “A contract, combination, or conspiracy between two or more

persons shall not restrain or monopolize trade or commerce in a relevant

market.”     Iowa Code § 553.4 (2007).         This provision of the Iowa

Competition Law is the counterpart to section 1 of the Sherman Act,

which states, “Every contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or commerce among the

several States, or with foreign nations, is declared to be illegal.”      15
                                    8

U.S.C. § 1.   The wording of the two provisions is notably similar.      If

anything, the Iowa Competition Law tilts more in the direction of an

economics-based approach to antitrust, since it condemns only those

contracts, combinations, and conspiracies that restrain trade “in a

relevant market”—a distinctly economic concept.       Iowa Code § 553.4;

see, e.g., United States v. Grinnell Corp., 384 U.S. 563, 587, 86 S. Ct.
1698, 1712, 16 L. Ed. 2d 778, 795 (1966) (Fortas, J., dissenting) (noting

that “the search for ‘the relevant market’ must be undertaken and

pursued with relentless clarity” and “is, in essence, an economic task put

to the uses of the law”); United States v. Phila. Nat’l Bank, 374 U.S. 321,

362, 83 S. Ct. 1715, 1741, 10 L. Ed. 2d 915, 944 (1963) (noting that a

prediction of anticompetitive effects “is sound only if it is based upon a

firm understanding of the structure of the relevant market [and that] the

relevant economic data are both complex and elusive”).

      B. The Per Se Rule vs. the Rule of Reason. Under the federal

antitrust laws, challenged agreements or conspiracies are presumptively

analyzed through the “rule of reason.” Texaco Inc. v. Dagher, 547 U.S. 1,

5, 126 S. Ct. 1276, 1279, 164 L. Ed. 2d 1, 7 (2006).         This requires

plaintiffs to demonstrate that a particular arrangement “is in fact

unreasonable and anticompetitive before it will be found unlawful.” Id.

“Per se liability is reserved for only those agreements that are so plainly

anticompetitive that no elaborate study of the industry is needed to

establish their illegality.” Id. (internal quotation marks omitted). “Some

types of restraints . . . have such predictable and pernicious

anticompetitive effect, and such limited potential for procompetitive

benefit, that they are deemed unlawful per se.” State Oil Co. v. Khan, 522
U.S. 3, 10, 118 S. Ct. 275, 279, 139 L. Ed. 2d 199, 206 (1997).
                                      9

      In applying the rule of reason, “the factfinder weighs all of the

circumstances of a case in deciding whether a restrictive practice should

be prohibited as imposing an unreasonable restraint on competition.”

Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 723, 108 S. Ct.
1515, 1519, 99 L. Ed. 2d 808, 816 (1988) (internal quotation marks

omitted). By contrast, when a practice falls under the per se rule, there

is no need for “case-by-case evaluation.” Id. “The per se rule, treating

categories of restraints as necessarily illegal, eliminates the need to study

the reasonableness of an individual restraint in light of the real market

forces at work . . . .” Leegin Creative Leather Prods., Inc. v. PSKS, Inc.,

551 U.S. 877, 886, 127 S. Ct. 2705, 2713, 168 L. Ed. 2d 623, 634

(2007).

      Thus, “ ‘[i]t is only after considerable experience with certain

business relationships that courts classify them as per se violations

. . . .’ ” Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 9, 99
S. Ct. 1551, 1557, 60 L. Ed. 2d 1, 10 (1979) [hereinafter BMI] (alteration

in original) (quoting United States v. Topco Assocs., Inc., 405 U.S. 596,

607–08, 92 S. Ct. 1126, 1133, 31 L. Ed. 2d 515, 525 (1972)). Price-fixing

agreements between competitors have been viewed as per se violations.

Texaco, 547 U.S. at 5, 126 S. Ct. at 1279, 164 L. Ed. 2d at 7.

      But not all agreements on price are governed by the per se rule.

When Texaco and Shell formed a joint venture known as “Equilon” to

collaborate in the refining and marketing of gasoline in the western

United States, the fact that the resulting gas was sold under the Texaco

and Shell names at a single price did not amount to per se illegal price

fixing. See id. at 5–8, 126 S. Ct. at 1279–81, 164 L. Ed. 2d at 7–9. As

the United States Supreme Court explained,
                                    10
      Texaco and Shell Oil did not compete with one another in the
      relevant market—namely, the sale of gasoline to service
      stations in the western United States—but instead
      participated in that market jointly through their investments
      in Equilon. . . . [T]hough Equilon’s pricing policy may be
      price fixing in a literal sense, it is not price fixing in the
      antitrust sense.

Id. at 5–6, 126 S. Ct. at 1279–80, 164 L. Ed. 2d at 7–8.
      Similarly, in the BMI case, the Court held that the per se rule did

not govern agreements among copyright holders to join together and

issue blanket licenses at fixed rates. BMI, 441 U.S. at 16, 99 S. Ct. at

1560, 60 L. Ed. 2d at 14. As the Court said,

      [T]his is not a question simply of determining whether two or
      more potential competitors have literally “fixed” a “price.” As
      generally used in the antitrust field, “price fixing” is a
      shorthand way of describing certain categories of business
      behavior to which the per se rule has been held applicable.
      The Court of Appeals’ literal approach does not alone
      establish that this particular practice is one of those types or
      that it is “plainly anticompetitive” and very likely without
      “redeeming virtue.” Literalness is overly simplistic and often
      overbroad. When two partners set the price of their goods or
      services they are literally “price fixing,” but they are not per
      se in violation of the Sherman Act.

Id. at 8–9, 99 S. Ct. at 1556–57, 60 L. Ed. 2d at 9–10.          The Court

emphasized that the blanket license was not a “ ‘naked restrain[t] of

trade with no purpose except stifling of competition,’ ” but instead

“accompanies the integration of sales, monitoring, and enforcement

against unauthorized copyright use.”     Id. at 20, 99 S. Ct. at 1562, 60
L. Ed. 2d at 16 (alteration in original) (quoting White Motor Co. v. United

States, 372 U.S. 253, 263, 83 S. Ct. 696, 702, 9 L. Ed. 2d 738, 746

(1963)). The Court noted that the costs of individual sales transactions

would be “prohibitive” and thus some form of blanket license was a

necessity. Id. at 20–21, 99 S. Ct. at 1562–63, 60 L. Ed. 2d at 16–17.
                                     11

      C. Monopsony vs. Monopoly.          As the plaintiffs point out, the

present case does not involve cooperation on sales but rather

collaboration on purchases—specifically, purchases of health care

services.   Thus, the concern is about potential monopsony power, not

monopoly power. See Mueller, 818 N.W.2d at 249 n.3 (noting that the

issue in the case is whether Wellmark is an alleged monopsonist rather

than an alleged monopolist).

      Still, monopsonistic conduct can create economic dislocation by

forcing supplier prices down below the competitive level, just as

monopolistic conduct can lead to dislocation by driving consumer prices

above a competitive level.     See id. (citing Herbert Hovenkamp, Federal

Antitrust Policy: The Law of Competition and Its Practice § 1.2(b), at 14

(4th ed. 2011)).   In Mandeville Island Farms, Inc. v. American Crystal

Sugar Co., the Supreme Court reversed the dismissal of a complaint

brought by sugar beet growers, alleging that three sugar refiners had

entered into an agreement to pay uniform prices for beets. 334 U.S. 219,

221, 246, 68 S. Ct. 996, 999, 1011, 92 L. Ed. 1328, 1333, 1345 (1948).

As the Court put it, this arrangement “deprived the beet growers of any

competitive opportunity for disposing of their crops by the immediate

operation of the uniform price provision.” Id. at 242, 68 S. Ct. at 1009,
92 L. Ed. at 1343; see also W. Penn Allegheny Health Sys., Inc. v. UPMC,

627 F.3d 85, 104 (3d Cir. 2010) (citing Mandeville Island Farms, 334 U.S.
219, 68 S. Ct. 996, 92 L. Ed. 1328) (noting that a conspiracy to depress

reimbursement rates to medical providers can “pose[] competitive threats

similar to those posed by conspiracies among buyers to fix prices and

other restraints that result in artificially depressed payments to

suppliers—namely,    suboptimal     output,   reduced   quality,   allocative
                                          12

inefficiencies, and (given the reductions in output) higher prices for

consumers in the long run” (citation omitted)).

       D. Is This a Per Se Case?               Having said this, we nevertheless

agree with the district court that Wellmark’s arrangements with self-

insured employers and out-of-state BCBS affiliates are governed by the

rule of reason, not the per se rule. We reach this conclusion for several

reasons.

       To begin with, these arrangements are not naked price-fixing

arrangements but are more akin to joint ventures. The self-insureds are

not entering into bare agreements to refrain from competing on price

with Wellmark—they are buying claims-administration service from

Wellmark. Part of that service consists of Wellmark’s negotiated pricing.

As in BMI, the record indicates that it would be highly impractical for the

vast majority of participants in the alleged conspiracy (i.e., the vast

majority of the self-insured employers) to engage in the numerous

individual transactions that would be needed if they could not latch on to

Wellmark’s pricing. 1 Cf. BMI, 441 U.S. at 20–21, 99 S. Ct. at 1563, 60
L. Ed. 2d at 17.

       Wellmark’s health care provider network is analogous to the
blanket license in BMI. It provides a mechanism by which an otherwise

unavailable product (self-financed health coverage) can be offered. Cf. id.

If the only lawful choice for a self-insured employer were the time-

consuming process of negotiating individual rates with health care

        1The plaintiffs have included numerous pages of Wellmark reimbursement rates

in the record. For example, for chiropractic services alone, Wellmark has approximately
forty-eight different reimbursement rates in a given year, including twenty-one different
rates for examination of X-rays. It seems implausible that a typical employer would
have enough information about the value of chiropractic services to be able to negotiate
with chiropractors on appropriate pricing for all these different procedures.
                                           13

providers, the record indicates that almost all employers would avoid

self-insuring. This would eliminate one possible way to render the health

care market more efficient and reduce the costs of health care coverage—

by allowing employers to bear the financial risk of health claims

themselves.

       Insurance involves both claims-handling and risk-spreading.                      A

large number of Iowa employers, according to the summary judgment

record, want some of the package but not all of it. That is, they do not

wish to go into the health insurance business themselves but instead

desire to purchase typical health insurance services from an outside

entity like Wellmark. At the same time, those employers apparently have

enough financial wherewithal to assume the ultimate risk that workforce

claims will exceed workforce premiums. 2               Why should this additional

option for employers be a per se violation of the antitrust laws?

       Similar     efficiency-related     observations      can    be    made     about

Wellmark’s reciprocal arrangements with out-of-state BCBS licensees.

Iowans insured by Wellmark occasionally need health care services

outside Iowa. Rather than attempt to negotiate its own rates in all fifty

states, Wellmark has a reciprocal arrangement with the BCBS affiliates
in those states. Under that arrangement, Wellmark can utilize the other

licensees’ negotiated rates in their respective states, and they can use

Wellmark’s negotiated rates in Iowa (and South Dakota, where Wellmark

also operates). This enables Wellmark to offer a fifty-state product that

meets the needs of its customers while saving Wellmark from the

       2Or  they believe they can buy a different, cheaper form of protection against that
risk, such as a stop-loss.
                                          14

expense of having to maintain a network and rate structure in states

where it has relatively few claims. 3
       In   a   somewhat      different   context,   the   Supreme     Court   has

recognized that joint buying can “achieve economies of scale . . . that

would otherwise be unavailable.” Nw. Wholesale Stationers, Inc. v. Pac.

Stationery & Printing Co., 472 U.S. 284, 286–87, 105 S. Ct. 2613, 2615,

86 L. Ed. 2d 202, 206 (1985). In Northwest Wholesale Stationers, the

Court declined to apply a per se analysis to a member’s claim that it had

been   wrongfully     expelled    from    a    nonprofit   wholesale   purchasing

cooperative, noting that “such cooperative arrangements would seem to
be ‘designed to “increase economic efficiency and render markets more,

rather than less, competitive.” ’ ”       Id. at 295, 105 S. Ct. at 2620, 86
L. Ed. 2d at 212 (quoting BMI, 441 U.S. at 20, 99 S. Ct. at 1562, 60

L. Ed. 2d at 16); see also All Care Nursing Serv., Inc. v. High Tech Staffing

Servs., Inc., 135 F.3d 740, 744, 747–49 (11th Cir. 1998) (declining to

apply a per se analysis to an arrangement whereby competing hospitals

agreed to seek bids as a group for temporary nursing services); Kartell v.

Blue Shield of Mass., Inc., 749 F.2d 922, 925 (1st Cir. 1984) (rejecting

antitrust claims and contrasting a legitimate, independent medical cost
insurer with a “ ‘sham’ organization seeking only to combine otherwise

independent buyers in order to suppress their otherwise competitive

instinct to bid up price”).

       3If the plaintiffs were right, then an Iowa bank and a Florida bank could not

reach an agreement on what they would charge each other’s customers for use of their
ATMs, for example, when a customer of the Iowa bank travels to Florida or a Florida
customer travels to Iowa. See In re ATM Fee Antitrust Litig., 554 F. Supp. 2d 1003,
1007, 1017 (N.D. Cal. 2008) (finding that an agreement among banks concerning an
ATM interchange fee should be governed by the rule of reason, not the per se rule).
                                           15

       Furthermore, neither of these types of Wellmark arrangements

truly represents a horizontal agreement between competitors. Cf. Texaco,
547 U.S. at 5, 126 S. Ct. at 1279, 164 L. Ed. 2d at 7. Wellmark does not

really compete with its self-insured clients. While a self-insured might

elect not to use Wellmark’s services, plaintiffs cite no example of a self-

insured that markets those kinds of services to anyone else in competition

with Wellmark. Nor does Wellmark compete with the out-of-state BCBS

licensees.     Its customers are in Iowa and South Dakota; the other

licensees are licensed to sell health insurance in other states. 4

       Additionally, we agree with Wellmark that a decision of the United

States District Court for the Northern District of Illinois is helpful and on

point. See N. Jackson Pharmacy, Inc. v. Caremark RX, Inc., 385 F. Supp.
2d 740 (N.D. Ill. 2005).         In North Jackson, a retail pharmacy sued a

pharmacy benefits manager that “administer[ed] prescription drug

benefit plans on behalf of employers, health insurers and other third-

party payors of prescription drug costs (‘Plan Sponsors’).” Id. at 744. As

the court stated, “By negotiating prescription drug reimbursement rates

on behalf of the 1,200 Plan Sponsors it represents, Caremark acts on

behalf of what is essentially a cooperative purchasing group.” Id. at 746.

The pharmacy alleged a per se violation of section 1 of the Sherman Act

on the theory that the plan sponsors were engaged in a horizontal

conspiracy to fix prescription drug prices. Id. at 744–46.

       The district court rejected the per se categorization. Id. at 747–51.

The arrangement in question was not a “naked restraint,” but one which

       4The   plaintiffs make a passing assertion that Wellmark and the other out-of-
state BCBS affiliates have entered into an illegal horizontal market division agreement
not to sell health insurance in each other’s territories. This theory is not alleged in the
petition nor supported by evidence in the record, and hence we will not consider it.
                                    16

was “ancillary” to a broader venture with procompetitive potential. See

id. at 747–48. The court elaborated,

      Any alleged agreement between Plan Sponsors to set the
      price paid for prescription drugs thus cannot be viewed in a
      vacuum, but must instead be looked at as a corollary of the
      cooperative arrangement between Caremark and the Plan
      Sponsors under which Caremark performs a variety of
      functions in the administration of Plan Sponsors’ drug
      benefit plans.     Those functions include not only the
      negotiation of reimbursement rates with retail pharmacies
      but also the processing of reimbursement claims,
      maintenance of patient records, design and management of
      drug formularies, negotiation of manufacturer rebates and
      maintenance of a mail order pharmacy.           According to
      Caremark, those functions contribute to increased efficiency
      and a reduction in the cost of prescription drugs delivered to
      Plan Subscribers.

            ....

             As described by the [complaint] and the parties’
      submissions on the current motion, the arrangement
      between Plan Sponsors and Caremark clearly has efficiency-
      enhancing potential.      Caremark specializes in various
      functions of benefit plan administration and is likely able to
      achieve economies of scale in the performance of those
      functions that would otherwise be unavailable to Plan
      Sponsors. And the creation of retail pharmacy networks,
      which necessarily involves the setting of reimbursement
      rates, undoubtedly contributes to the success of that larger
      endeavor.

            ....

            . . . That is of particular relevance here, where (as
      North Jackson itself alleges) PBMs [Pharmacy Benefits
      Managers] such as Caremark administer the prescription
      drug benefits of “approximately 210 million Americans; 70%
      of the U.S. population”. Any premature ruling that one of
      the primary functions performed by PBMs is per se illegal
      would have particularly far-reaching consequences for the
      delivery of affordable prescription drugs to a large portion of
      the population, a consideration that further supports
      thorough rule of reason analysis.

            What has been said to this point should not be read as
      expressing an ultimate view as to the lawfulness of the
      alleged conspiracy between Plan Sponsors. If the required
      rule of reason inquiry were to reveal that the anticompetitive
                                        17
       consequences of any such conspiracy sufficiently outweigh
       its procompetitive benefits so that the restraint is ultimately
       judged unreasonable under Section 1, this Court would not
       hesitate to rule accordingly. But because no authority even
       suggests that all cooperative purchasing agreements run
       afoul of Section 1, and because the agreement at issue here
       is part of a larger and potentially procompetitive enterprise,
       the rule of reason must be applied to North Jackson’s Claim
       I.

Id. at 748–51.

       Another and related factor arises from a concern explained by

Kartell v. Blue Shield of Massachusetts, Inc., 749 F.2d 922, 931 (1st Cir.

1984):

       [T]he subject matter of the present agreement—medical
       costs—is an area of great complexity where more than solely
       economic values are at stake. How to provide affordable,
       high quality medical care is much debated. And, many
       different solutions—ranging from stricter regulation to
       greater reliance on competing service organizations—have
       been proposed. This fact, too, warrants judicial hesitancy to
       interfere.

       The conditions that were present in North Jackson Pharmacy

prevail here as well.     The arrangements here are not bare price-fixing

agreements; indeed, unlike in North Jackson Pharmacy, there is not even

an allegation that the various self-insureds have entered into agreements

with each other.     Rather, the self-insured employers have entered into

significant relationships with Wellmark under which Wellmark provides

much more than a price list—i.e., a network of providers; rules for

eligibility,   limitations,   copays,    and   deductibles;   and    claims

administration and processing.           From the employee’s standpoint,

Wellmark appears to be providing traditional health insurance. The only

difference is that the employer and not Wellmark is the ultimate financial

backstop.
                                           18

       Also, similar to the situation in North Jackson Pharmacy, the

record here indicates that there are potential efficiencies and economies

of scale when employers rely on Wellmark to perform these functions, in

which it has experience and expertise. The vast majority of employers

could not realistically perform these duties on their own. There are also

potential efficiencies and economies of scale when out-of-state insurers

collaborate with Wellmark instead of trying to set up their own network

for a relatively small number of Iowa claims.

       Additionally, as in North Jackson Pharmacy, there are reasons for

“judicial hesitancy” in classifying the challenged practices as per se

violations of antitrust law. The plaintiffs themselves admit the practices

are widespread. A large percentage of Iowans are covered by self-insured

employer plans administered by Wellmark. The BlueCard® network is a

national program used by health insurers and clients across the country.

We should be reluctant to declare these arrangements flatly illegal,

without considering their relative procompetitive or anticompetitive

effects.

       Plaintiffs seek to distinguish North Jackson Pharmacy on the

ground     that   Wellmark     is    not   a    “mere   independent   third-party

‘administrator’ ” but a “major competitor in the market for Iowa

healthcare provider services.”         Yet we fail to see how this distinction

helps the plaintiffs’ cause.        It is true that Wellmark provides a higher

level of service than a “mere administrator.”              It is also true that

Wellmark’s health care provider network was set up at least in part for

its own purposes, not merely as a device to enable group purchasing of

health care services. But these factors, if anything, take the challenged

arrangements even further out of the realm of naked restraints. The self-
                                     19

insured employers are purchasing a bundle of preexisting services from

Wellmark that most of them could not provide themselves.

      Plaintiffs analogize this case to Arizona v. Maricopa County Medical

Society, but we think the analogy is imperfect. See 457 U.S. 332, 102
S. Ct. 2466, 73 L. Ed. 2d 48 (1982).      That case involved naked price-

fixing: The physician members of a trade association were agreeing to

abide by fee schedules. Id. at 340–41, 102 S. Ct. at 2471, 73 L. Ed. 2d at

56. There was no joint product or service being developed or sold. See

id. at 339–40, 102 S. Ct. at 2470, 73 L. Ed. 2d at 55–56.           The two

wrinkles in the case were that the agreed-upon fees were maximum

prices and the price-fixers were professionals. Id. at 348–49, 102 S. Ct.

at 2475, 73 L. Ed. 2d at 61–62. Yet the Court found that neither of these

considerations mattered and that the per se rule still applied. Id. It took

note of Arizona’s contention that so-called maximum prices can have the

effect of stabilizing and enhancing the level of actual charges. Id. at 341–

42, 102 S. Ct. at 2471–72, 73 L. Ed. 2d at 57.

      This case might be comparable to Maricopa County Medical Society

if the plaintiffs were claiming that Wellmark and other Iowa health

insurers had simply agreed they would pay the same reimbursements to

health care providers, without exchanging any meaningful services.

Under Maricopa County Medical Society, it would not be a defense that

the health insurers had agreed on minimum rather than maximum

reimbursement rates. 5    457 U.S. at 348–49, 102 S. Ct. at 2475, 73

L. Ed. 2d at 61–62. But that is not the situation here. We do not have a

naked price-fixing agreement among competitors.

      5Note  again that the ultimate concern relates to monopsony rather than
monopoly effects.
                                   20

      The plaintiffs also argue at some length that Wellmark has market

power in health insurance in Iowa.      This may be true, but it is not

relevant to a per se claim.   If plaintiffs’ per se argument were correct,

then it would be illegal for any insurer to make its insurance network

pricing available to a self-insured that used the insurer’s administrative

and claims services even if the insurer had only a miniscule market

share.

      Additionally, the plaintiffs rely on Department of Justice and

Federal Trade Commission guidance on health care. However, we believe

the line that those agencies have drawn between per se and rule of

reason conduct is consistent with the decision in this case. Consider the

following passage from the 1996 Statements of Antitrust Enforcement

Policy in Health Care:

      An agreement among purchasers that simply fixes the price
      that each purchaser will pay or offer to pay for a product or
      service is not a legitimate joint purchasing arrangement and
      is a per se antitrust violation. Legitimate joint purchasing
      arrangements provide some integration of purchasing
      functions to achieve efficiencies.

U.S. Dep’t of Justice & Fed. Trade Comm’n, Statements of Antitrust

Enforcement Policy in Health Care 67 n.17 (1996), available at

http://www.justice.gov/atr/public/guidelines/0000.pdf. The challenged

arrangements here are not simply agreements among purchasers to fix a

price, which would be subject to per se treatment. To the contrary, both

the self-insureds and the out-of-state BCBS licensees are obtaining a

block of Iowa claims-related services from Wellmark.     In other words,

there is “integration of purchasing [and other related] functions to

achieve efficiencies.” Id.

      We are not today foreclosing a rule of reason claim against

Wellmark if it were shown that the anticompetitive consequences of its
                                          21

practices exceeded their procompetitive benefits. 6 We simply uphold the

district court’s ruling that Wellmark’s arrangements with self-insured

employers and out-of-state BCBS licensees are not subject to the per se

rule. Because the plaintiffs by stipulation limited themselves to a per se

claim, we affirm the district court’s grant of summary judgment.

      IV. Conclusion.

      For the foregoing reasons, the district court’s judgment is affirmed.

      AFFIRMED.

      All justices concur except Hecht and Appel, JJ., who take no part.

      6As   the court put it in North Jackson Pharmacy,
      If the required rule of reason inquiry were to reveal that the
      anticompetitive consequences of any such conspiracy sufficiently
      outweigh its procompetitive benefits so that the restraint is ultimately
      judged unreasonable under Section 1 [of the Sherman Act], this Court
      would not hesitate to rule accordingly. But because no authority even
      suggests that all cooperative purchasing agreements run afoul of Section
      1, and because the agreement at issue here is part of a larger and
      potentially procompetitive enterprise, the rule of reason must be applied
      to North Jackson’s Claim I.
385 F. Supp. 2d at 750–51.