Companion bills introduced in the House and Senate Sept. 17 would partially repeal the exemption from federal antitrust laws enjoyed by health insurers and medical malpractice insurers under the McCarran-Ferguson Act.

According to their sponsors, the bills (H.R. 3596 and S. 1681) would apply to only the most egregious antitrust law violations and are intended to ensure that health insurance companies and medical malpractice insurance underwriters do not engage in price fixing, bid rigging, or market allocations to the detriment of competition and health care consumers.

Attorneys who spoke to BNA said, however, there is no evidence that the act has been an impediment to either federal or private efforts to prevent or curtail anti-competitive conduct in these sectors. While the bills' sponsors assailed high market concentration through health insurer merger activity, and while other critics have blamed what they called lax enforcement during the Bush administration, neither is affected by the McCarran-Ferguson Act or its federal exemption, they said.

Others, however, said the exemption should be repealed because it serves no valid purpose, at least with respect to these insurance sectors, and because it otherwise sends a subtle message to health and malpractice insurers that collusion and unreasonably high prices will be tolerated. Repeal would also help address a perception among health care providers and consumers that health and malpractice insurers are being permitted to play by different rules, they said.

The bills, introduced as the Health Insurance Industry Antitrust Enforcement Act, would narrow the scope of the McCarran-Ferguson Act, which was enacted in 1945 to specify that the business of insurance is a matter to be regulated by the states. Most states have insurance departments or commissioners who monitor insurance industry policies and pricing generally.

Sponsors Cite Concerns.

Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) said in a statement that reform of antitrust policy in the health care insurance arena is an appropriate consideration as Congress contemplates comprehensive health care reform legislation.

“In the markets for health insurance and medical malpractice insurance, patients and doctors are paying the price, as costs continue to increase at an alarming rate. Insurers should not object to being subject to the same antitrust laws as everyone else,” he said.

Repealing the exemption “for flagrant antitrust violations” subjects these insurers “to the same good-competition laws that apply to virtually every other company doing business in the United States,” he added.

“There is simply no justification for health insurance and medical malpractice insurance companies to be exempt from Federal laws prohibiting price fixing. Subjecting health and medical malpractice insurance providers to the antitrust laws will enable customers to feel confident that the price they are being quoted is the product of a fair marketplace,” Leahy said.

On the House side, the legislation was introduced by Rep. John Conyers Jr. (D-Mich.), chairman of the House Judiciary Committee. In a statement, Rep. Diana DeGette (D-Colo.), a member of the Energy and Commerce Committee, said the bill will help make sure the health insurance industry is competitive and provides consumers with affordable health insurance.

“Simply put, the bottom lines of the big insurance companies should not be put above the American public's ability to gain access to health care,” she said.

This is only the most recent effort to repeal the McCarran-Ferguson Act--Leahy introduced legislation in 2007, in the wake of fallout from the way property and casualty insurers responded to Hurricane Katrina, that would have provided for a broader repeal of the act.

About Perceptions?

David Balto, an antitrust attorney in Washington, called the McCarran-Ferguson Act an “outdated” law that permits substantial anti-competitive conduct in health insurance markets and frustrates enforcement efforts. “Federal Trade Commission staff have testified that the law poses obstacles to effective enforcement, so this new law would allow the FTC to act more freely to foster competition and the lower prices and higher quality that comes with it,” he said.

When asked if McCarran-Ferguson was responsible for the health insurer concentration in many markets that appears to be of concern to the bills' sponsors, Balto conceded that lax health insurer merger enforcement cannot be blamed on the statute. “Nevertheless, repeal at this time is necessary and appropriate because it sends an important message to those who have been operating under a veil of antitrust immunity and provides an opportunity for greater transparency that will, in turn, boost consumer confidence,” he said.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, countered that repeal of the McCarran-Ferguson Act would have no impact on enforcement or competition, at least in health insurance markets. “Health insurance is already one of the most highly regulated products and is subject to significant competition across the country,” he said.

“McCarran-Ferguson provides only a limited exemption under federal law, has no impact on state antitrust laws, and does not in any way address health insurance market concentration or competition issues,” he added.

Jack A. Rovner, with The Health Law Consultancy, Chicago, agreed there appeared to be a substantial disconnect between the alleged problems--excessive health insurance market concentration and high prices--and repeal of McCarran-Ferguson with respect to this industry sector. “While the law does not have much impact on the health insurance industry, it makes a good political target,” he said.

“This is more about politics than an effort to correct anti-competitive conduct by health insurers because the fact of the matter is that repeal would not make a significant difference with respect to either compliance or enforcement,” Rovner said. “McCarran-Ferguson has never been a valid defense to the price-fixing or other per se antitrust law violations targeted by the legislation, whether pursued by government or private parties,” he added.

“While repeal could have a significant impact on the balance of state and federal relations, the proposed legislation will not change a lot in the legal landscape concerning the way health and malpractice insurers are regulated,” he said.

---

The Senate bill is available at http://leahy.senate.gov/DOX/HealthInsuranceIndustryAntitrustEnforcementAct.pdf.

Copyright 2009, The Bureau of National Affairs, Inc.