The Nuts and Bolts Of The Insurance Industry’s Anti-Trust Exemption

On Wednesday, the House Judiciary Committee will mark up a bill that would repeal the part of the 1945 McCarran-Ferguson Act that grants an anti-trust exemption to the insurance industry. In recent weeks, Democrats in both houses of Congress, including both Speaker Pelosi and Majority Leader Reid, have remarked favorably on repealing this exemption and even including this piece in the overall health care legislation. Even President Obama talked about stripping the anti-trust exemption over the weekend.

Why does the industry have such an exemption? Currently, regulation on insurance is generally limited to the states. However, since the creation of the anti-trust exemption in 1945, insurers have grown to be more national through mergers and acquisitions, with subsidiaries of the main corporations offering insurance in various states. Wendell Potter, the former CIGNA executive and modern-day whistleblower, said late last week on MSNBC that AHIP (the health insurance lobby) routinely overcounts the number of discrete insurance companies by including each subsidiary as a single unit, perpetuating this myth of competition.

What would repealing the exemption do? The government’s top anti-trust lawyer, Christine Varney, explained to a Senate committee how it could end some of the harshest practices from the industry:

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.

Because of the national exchanges, interstate compacts, and even national health insurance plans included in some of the health care bills in Congress, it may be necessary to eliminate the exemption anyway, or else increase the danger of price-fixing or bid-rigging or other malign actions. Keeping it in place while selling insurance nationwide in some form, in other words, increases the potential for mischief. As Jason Rosenbaum notes, this price fixing and deal making could offer an explanation for why 94% of all insurance markets are “highly concentrated”.

I talked with John Garamendi, the Lt. Governor of California and a candidate to replace Ellen Tauscher in Congress in California’s 10th district (the election is Nov. 3 and he is heavily favored to win). Garamendi was California’s first insurance commissioner and has been the chief regulator for the largest insurance market in America. He called the option of repealing the industry’s anti-trust exemption “an important development.

http://news.firedoglake.com/2009/10/19/the-nuts-and-bolts-of-the-insurance-industrys-anti-trust-exemption/

why they originally agreed to this, but that was when insurance companies were simply bookkeepers, not for-profit leeches.

reform, but just think about the stranglehold the insurance companies have on any part of our lives. Where is the competition? We've always known the insurance companies rule the country, think about every insurance you pay for, not just health ins., and how they always try every avenue to not pay on claims.

Why hasn't this been tackled before? It's like we wait for crisis proportions before enacting stop measures. They are allowed to be so big that price fixing rules the day.

we'll never know till we try (nudge, nudge)