In its lawsuit against the state Department of Insurance, Highmark Inc. says the department, as part of its wide-ranging examination of the state's insurance marketplace, is "planning to release imminently documents based on the wrongful use of Highmark's confidential information."

The suit also alleges that, in the last two weeks, it has become apparent that the Insurance Department plans to "interfere" with Highmark's exclusive Blue Cross-Blue Shield service rights to Western Pennsylvania. The department, the suit contends, plans to publish reports to that effect "without any jurisdiction" under the Unfair Insurance Practices Act.

"It's illegal," Highmark CEO Dr. Kenneth Melani said in an interview Wednesday.

"During the merger [process], we produced a lot of very sensitive, confidential information," which shouldn't be passed on to third-party auditors, he said.

Last July, the Insurance Department announced it would be investigating the state's health insurance landscape; in particular, the activities of the state's four Blue Cross-Blue Shield insurers -- Highmark, Philadelphia's Independence Blue Cross, Blue Cross of Northeastern Pennsylvania and Harrisburg's Capital BlueCross -- to determine if the Blues "use their market power to unfair and anti-competitive advantage."

In so doing, the department announced that it would be hiring two independent auditors to lead the review. Those two auditors -- LECG LLC and the law firm of Hangley Aronchick Segal & Pudlin -- were the same consultants that investigated the proposed merger between Highmark and IBC.

Partly on the basis of the reports generated by the two third-party investigators, the merger was ultimately panned by the Insurance Department in 2009. The fact that the same auditors are being used again by the department "creates a stacked deck against Highmark in any examination," the lawsuit said.

"They have a bias -- he has a bias," Dr. Melani said, speaking of the auditors and Insurance Department Commissioner Joel Ario. "I have total respect for the insurance commissioner. ... This is not a personal issue. There are times you just don't agree."

The two parties, Highmark and the state, also seem to disagree on the competitiveness of the state's health insurance marketplace, and whether another Blue Cross-Blue Shield insurer should be permitted to compete in Pennsylvania.

In the lawsuit, Highmark's attorneys say that "Commissioner Ario has made public statements concerning 'Blue on Blue' competition, despite total lack of authority conferred on Commissioner Ario or the Department to regulate BCBSA's licensing of 'Blue' insurers in Pennsylvania."

Generally, the Blue Cross Blue Shield Association, not the state, confers operating trademarks and establishes business territories for its members.

A Commonwealth Court hearing has been scheduled for Monday to consider Highmark's request for a declaratory judgment that would, in effect, suspend the insurance department's ongoing examination, at least as it relates to Highmark.

Mr. Ario said the lawsuit was "unprecedented."

"We had no inkling from the company until late [Tuesday] afternoon," Mr. Ario said. "Typically, the disputes are in post-gathering of facts," as the department interprets the data and statistics that have been furnished. But Highmark is refusing to turn over much of the information that the insurance department is requesting, despite weeks of negotiations between the two parties.

Now, Highmark and the insurance department are at loggerheads, Dr. Melani said. "We were in the process of negotiating the scope of the examination," when the suit was filed.

The suit says "the request for documents, [purportedly] in support of the proposed examination, presented Highmark with an overwhelmingly expensive, burdensome [demand]," and sought documents "not even relevant to the examination," with an unrealistic deadline, considering that some of the records go back 10 or 14 years.

Highmark filed the suit independent of the three other Blues plans, which have been more cooperative than Highmark thus far (the Capital BlueCross query is nearly completed).

Mr. Ario said the investigation had gathered momentum in the last two weeks, with inquiries into two specific charges -- "their treatment of brokers and unfair pricing of insurance."

Following its Monday hearing, Highmark will be on the hot seat on Wednesday when the state Senate's banking and insurance committee hears testimony on Senate Bill 204, which would prohibit "requiring an insured to obtain ophthalmic services and products from a vision laboratory or company as a condition of obtaining the payment for the vision services."

Private ophthalmologists are concerned that Highmark and its for-profit vision subsidiaries -- Davis Vision insurance and its various retail arms, several of which are now opening in Western Pennsylvania -- are squeezing the reimbursement rates for eye doctors and "suppressing" competition and product choice. Senate Bill 209 is sponsored by Sens. John Pippy, Wayne Fontana and Don White.

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