Business Law

Ben-E-Lect v. Anthem Blue Cross Life and Health Ins. Co. (July 2, 2020, A152080) __ Cal.App.5th __ [2020 WL 3603928]

Health Insurer violates the Cartwright Act by prohibiting wrapping of insurance plans by brokers and agents.

Ben-E-Lect, a third party insurance claim administrator, developed a “wrapping” strategy for reducing employer health insurance costs by bundling low-premium, high-deductible health insurance with self-funded accounts to pay employee healthcare expenses within the annual deductible and any co-pay requirements. Ben-E-Lect sold its wrapping services through insurance brokers and agents to the small-employer market. Between 2006 and 2014, Anthem restricted and eventually prohibited wrapping of all Anthem insurance policies, threatening to withhold commissions and terminate its relationship with any broker or agent that wrapped an Anthem policy. Ben-E-Lect sued Anthem under several legal theories for prohibiting the wrapping of its insurance policies. Following a bench trial, the trial court found that Anthem’s wrapping prohibition violated the Cartwright Act and tortiously interfered with Ben-E-Lect’s business relations, awarded treble damages of $7.33 million under the Cartwright Act, and enjoined Anthem from prohibiting wrapping of insurance products offered to the California small-employer market. Anthem appealed.

The Court of Appeal affirmed. The court held that substantial evidence supported the trial court’s determination that, analyzed under antitrust law’s rule of reason, Anthem’s wrapping prohibition amounted to a vertical boycott that had a substantial adverse effect on competition. The court rejected Anthem’s argument that it could not be liable for conspiring with its own agents because the agents could act independently on behalf of their clients, could sell non-Anthem insurance products, and had separate economic interests.  

The court also rejected Anthem’s argument that Ben-E-Lect failed to prove that Anthem had sufficient market power in the relevant geographical market to charge prices higher than the competitive level. The court explained that, in a vertical boycott case, the inquiry is whether the defendant plays enough of a role in the relevant market to significantly impair competition, not whether it could raise prices above the competitive level. Here, there was substantial evidence that Anthem could significantly influence the market for small-employer health plans; it controlled 25% of the California market and was the dominant provider to the small-employer market in numerous large geographic areas.

Substantial evidence also supported the trial court’s determinations that the anticompetitive aspects of Anthem’s conduct outweighed its procompetitive aspects, and that Anthem’s wrapping prohibition unreasonably relied on projected utilization rates based on generalized statistical guidelines rather than an analysis of Anthem’s actual experience that conflicted with the general statistical guidelines. Ben-E-Lect also presented evidence that wrapping only minimally increased utilization, and that it experienced a pattern of reduced sales over the years Anthem’s wrapping prohibition was in place. Finally, Anthem’s own expert evidence supported the damage award.

The bulletin describing the Court of Appeal’s decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, Horvitz & Levy LLP, and is republished with permission.

For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or

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