Michigan’s governor recently signed off on Senate Bill (SB) 61 and 62, effectively striking down most favored nation (MFN) clauses by health care corporations and insurers in the state.
Though the legislation did not address property and casualty insurers, the Automotive Service Association says this is good news for automotive repairers.
MFN clauses appear in a number of agreements offered by major national insurance companies and allow insurance companies to negotiate that they get the absolute best price available on services.
The text of SB 61 says: “Beginning January 1, 2014, a health care corporation shall not use a most favored nation clause in any provider contract, including a provider contract in effect on January 1, 2014.”
Ron Pyle, ASA president and chief staff executive, responds, “Although this legislation does not include property and casualty insurers, it supports ASA’s position that MFN clauses can harm consumers.
“We are going to continue to work with the Department of Justice as well as state legislators to educate them on the negative impact they (MFN) have upon the consumer and the entire collision repair industry,” he said.
ASA officials participated in a 2012 U.S. Department of Justice and Federal Trade Commission workshop related to MFN clauses. Following the workshop, ASA sent a letter to the assistant attorney general for the Antitrust Division at the U.S. Department of Justice requesting a review of the MFN clauses used in many property and casualty direct repair agreements. This letter centered in on the “potentially harmful, anti-competitive impact of these clauses on consumers and collision repair shops,” according to an ASA release.
More specifically, the letter states, “ASA’s collision repair members have raised a significant concern regarding insurer-repairer direct repair agreements. An increasing number of our collision repair shop owners are faced with direct repair agreements offered by insurance companies, which include most favored nation or most favored customer clauses.”
The letter continues, “For the large majority of collision repairers, not participating in insurer direct repair programs is not a viable option.”