What Repealing the Insurer Anti-Trust Exemption Would Do

Yesterday, Majority Leader Harry Reid testified in support of a bill championed by Senator Leahy to repeal the anti-trust exemption health insurance companies currently enjoy. The bill has received a ton of support:

Leahy's bill would repeal the exemption established in the 1945 McCarran-Ferguson Act for any companies engaged in price fixing or bid rigging -- which are both already illegal. He has introduced similar legislation in other Congresses, including a broader repeal of the underlying law. Reid is a co-sponsor of the current bill.

In the House, where Democratic leaders are exploring the issue further, Judiciary Committee Chairman John Conyers (D-Mich.) has introduced legislation that would essentially end McCarran-Ferguson and give the federal government the right to regulate insurers at the national level.

So, what would this repeal do? In testimony on the bill yesterday, Christine Varney, the government's top anti-trust lawyer, said:

The McCarran-Ferguson Act antitrust exemption is very expansive with regard to anything that can be said to fall within "the business of insurance," including premium pricing and market allocations. As a result, "the most egregiously anticompetitive claims, such as naked agreements fixing price or reducing coverage, are virtually always found immune."

Concerns over the exemption's effects are especially relevant given the importance of health insurance reform to our nation. There is a general consensus that health insurance reform should be built on a strong commitment to competition in all health-care markets, including those for health and medical malpractice insurance. Repealing the McCarran-Ferguson Act would allow competition to have a greater role in reforming health and medical malpractice insurance markets than would otherwise be the case.

There is a ton of evidence that premium price fixing and backroom deals to preserve market share between competitors occur regularly today.

Health Care for America Now's report [pdf] on insurance industry absuses documents how Blue Cross Blue Shield in Massachusetts and a big hospital made a deal to increase payments to providers, and providers made a deal to not allow any other insurer to pay them less. Thus, Blue Cross raised their rates, leading to a period of skyrocketing premium increases in Massachusetts, the hospital got rich off their locked in payments, and other hospitals and insurers in the state had to scramble to keep up. In all, people had to pay more, and those increased premiums were passed along to the hospitals in on the deal.

This kind of price fixing and deal making is absolutely illegal in other businesses, but in the insurance industry, because of their anti-trust exemptions, they're allowed to screw customers without repercussions.

Similarly, Health Care for America Now found that 94% of insurance markets in this country are "highly concentrated," a Department of Justice term that means these markets are at risk for monopoly. For example, in Arkansas [pdf], Blue Cross Blue Shield controls 75% of the market, a level of concentration that would raise anti-trust lawsuits in any other industry.

These kinds of market concentrations were caused by years of mergers, mergers that would never have been allowed under normal anti-trust rules. And this market concentration is a huge driver of skyrocketing costs.

Ending the anti-trust exemption would be a huge start towards ending these abuses.

The insurance industry needs two things: Real competition and an end to their anti-trust exemption.

Price fixing, backroom deals, collusion, and market-concentrating mergers should once again be illegal in health insurance. And we need a public health insurance option to ensure insurance companies follow the rules set out for them.

Anything less and we'll get more of what we have now - skyrocketing prices and anti-competitive dealmaking resulting in more medical bankruptcies for Americans.

(also posted at the NOW! blog)

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