House Passes Bill To Repeal Antitrust Exemption For Health Insurance Companies

House Passes Bill To Repeal Antitrust Exemption For Health Insurance Companies

February 24th, 2010 by Karina

By a vote of 406-19, the House passed the Health Insurance Industry Fair Competition Act (HR 4626), introduced by Reps. Tom Perriello (D-VA) and Betsy Markey (D-CO). This bill is designed to restore competition and transparency to the health insurance market – by repealing the blanket antitrust exemption afforded to health insurance companies by the McCarran-Ferguson Act of 1945. Under this legislation, health insurers will no longer be shielded from legal accountability for price fixing, dividing up territories among themselves, sabotaging their competitors in order to gain monopoly power, and other such anti-competitive practices.

Over the last several years, the health insurance industry has become increasingly concentrated–giving consumers fewer and fewer meaningful choices in shopping for health insurance. According to a recent study by the AMA, there have been more than 400 mergers among health insurers in the past 14 years and as this map shows, many areas of our country are dominated by just one or two private insurers today:

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This bill is also necessary because, over the years, health insurers have been able to use this antitrust exemption to block court actions regarding anti-competitive behavior. In Ocean State Physicians Health Plan, Inc. v Blue Cross & Blue Shield of Rhode Island, the First Circuit Court – citing the McCarran-Ferguson antitrust exemption – overturned a jury verdict against the dominant health insurer for using its monopoly power to put financial pressure on area employers to refuse to do business with a competing HMO.

There is also evidence that removing this antitrust exemption will result in lower prices and other benefits for consumers. Time and time again, increased competition results in lower prices, increased choice, and greater innovation. A healthy and competitive health insurance market will drive prices down in the health insurance industry, just as we have seen it do in so many other industries where competition is allowed to take hold. Since California passed a law in 1988 that eliminated the state antitrust exemption for the auto insurance industry, for instance, auto premiums for consumers in California have risen by 9.8% while the rest of the country has seen auto premiums rise by over 48%.

Yesterday, the President announced his strong support for the legislation, issuing a statement of administration policy saying:

The repeal of the antitrust exemption in the McCarran-Ferguson Act as it applies to the health insurance industry would give American families and businesses, big and small, more control over their own health care choices by promoting greater insurance competition. The repeal also will outlaw existing, anti-competitive health insurance practices like price fixing, bid rigging, and market allocation that drive up costs for all Americans. Health insurance reform should be built on a strong commitment to competition in all health care markets, including health insurance. This bill will benefit the American health care consumer by ensuring that competition has a prominent role in reforming health insurance markets throughout the Nation.

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Rules Committee Chair Louise Slaughter (D-NY) opened debate on the bill:

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It's a simple idea: make health insurance companies compete for the business of Americans.

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Since 1945, health insurance companies have been allowed to collude to fix prices. The McCarran-Ferguson Act exempted them from the anti-trust regulations that normally prohibit such behavior. And in a country in which more than 80 percent of markets have only one or two insurers, insurance companies just haven't bothered to compete. Insurance is the only major industry in the United States, besides Major League Baseball, where such collusion and price-fixing is allowed.

Even the most basic understanding of economics makes it clear that without competition, markets won't efficiently solve economic problems. As a result, for sixty-five years the American people have overpaid for insurance; the Consumer Federation of America estimates the anti-trust exemption for insurance companies is costing Americans an extra $50 billion in premiums per year.

Perriello's bill is so clearly both pro-populist and pro-free market that previous versions have received accolades from Republicans--including current Louisiana Governor Bobby Jindal, a conservative Republican, who said in 2007, "The insurance industry, as the result of an antiquated law, is currently one of the only consumer industries in the nation that is exempt from anti-trust laws. This leaves every American at risk to collusion and price fixing by the insurance industry, a practice that is unfair at best, and despicable at worst."

What's this bill makes all too clear is that whether you're a free-market-loving Republican or a progressive populist Democrat, the only principled way to vote is in favor. With no loopholes, no complications and at two pages, the only reason to vote against it is to protect insurance company profits against fair competition. It's a clear us versus them for populism--on either side of the political spectrum.

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