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Insurance Anti-Trust Bill Gets a Vote Today

photo: waynewhuang via Flickr

Keeping with her vow to pass popular individual elements to improve health care while the process for the comprehensive bill works itself out, Nancy Pelosi will bring to the floor today a bill to end the health insurance industry’s anti-trust exemption, part of the McCarran-Ferguson Act of 1945. A similar version of this legislation, which included providers of medical malpractice insurance, passed the House inside their health care bill last year.

And yesterday, the bill, sponsored by Tom Perriello (D-VA) and Betsy Markey (D-CO) picked up some important support – the White House.

The Administration strongly supports House passage of H.R. 4626. 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.

The President lent support to the concept of repealing the exemption as far back as last October. But this is the first time he offered support for a specific bill.

The CBO actually scored this measure as one that would have a minimal impact, because “state laws generally already barred the activities prohibited by the federal bill.” But this would both normalize the ban on these activities for all states, and provide support from the Justice Department’s anti-trust division to crack down on them. The Congressional Research Service’s report on this, however, is a concern:

Moreover, a Congressional Research Service report last month said that repealing the exemption could open the door to a flood of lawsuits challenging various insurer practices and could harm smaller insurers that share data because they do not have large pools of information of their own. If the result is that small insurers can no longer share information, the report said, “further consolidation in the insurance industry” would be “a likely, albeit ironic, possibility.”

That’s a fairly extreme scenario, however. Christine Varney, the Assistant Attorney General of the Antitrust Division at the DoJ, testified in October that other studies minimized this as a concern, and since she’d be in charge of making the determination, I think she’d fall on the less restrictive side of the ledger. . .

The Antitrust Modernization Commission recently reviewed whether the McCarran-Ferguson Act is necessary to allow insurers to collect, aggregate, and review data on losses so that they can better set their rates to cover their likely costs. The AMC found that it was not. The AMC said that insurance companies “would bear no greater risk than companies in other industries engaged in data sharing and other collaborative undertakings.” In particular, the AMC said, “[l]ike all potentially beneficial competitor collaboration generally such data sharing would be assessed by antitrust enforcers and the courts under a rule of reason analysis that would fully consider the potential procompetitive effects of such conduct and condemn it only if, on balance, it was anticompetitive.” Significantly, the AMC added that “[t]o the extent that insurance companies engage in anticompetitive collusion then they appropriately [should] be subject to antitrust liability.”

The vote in the House will happen later today.

CommunityThe Bullpen

Insurance Anti-Trust Bill Gets A Vote Today

Keeping with her vow to pass popular individual elements to improve health care while the process for the comprehensive bill works itself out, Nancy Pelosi will bring to the floor today a bill to end the health insurance industry’s anti-trust exemption, part of the McCarran-Ferguson Act of 1945. A similar version of this legislation, which included providers of medical malpractice insurance, passed the House inside their health care bill last year.

And yesterday, the bill, sponsored by Tom Perriello (D-VA) and Betsy Markey (D-CO) picked up some important support – the White House.

The Administration strongly supports House passage of H.R. 4626. 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.

The President lent support to the concept of repealing the exemption as far back as last October. But this is the first time he offered support for a specific bill.

The CBO actually scored this measure as one that would have a minimal impact, because “state laws generally already barred the activities prohibited by the federal bill.” But this would both normalize the ban on these activities for all states, and provide support from the Justice Department’s anti-trust division to crack down on them. The Congressional Research Service’s report on this, however, is a concern:

Moreover, a Congressional Research Service report last month said that repealing the exemption could open the door to a flood of lawsuits challenging various insurer practices and could harm smaller insurers that share data because they do not have large pools of information of their own. If the result is that small insurers can no longer share information, the report said, “further consolidation in the insurance industry” would be “a likely, albeit ironic, possibility.”

That’s a fairly extreme scenario, however. Christine Varney, the Assistant Attorney General of the Antitrust Division at the DoJ, testified in October that other studies minimized this as a concern, and since she’d be in charge of making the determination, I think she’d fall on the less restrictive side of the ledger.

The Antitrust Modernization Commission recently reviewed whether the McCarran-Ferguson Act is necessary to allow insurers to collect, aggregate, and review data on losses so that they can better set their rates to cover their likely costs. The AMC found that it was not. The AMC said that insurance companies “would bear no greater risk than companies in other industries engaged in data sharing and other collaborative undertakings.” In particular, the AMC said, “[l]ike all potentially beneficial competitor collaboration generally such data sharing would be assessed by antitrust enforcers and the courts under a rule of reason analysis that would fully consider the potential procompetitive effects of such conduct and condemn it only if, on balance, it was anticompetitive.” Significantly, the AMC added that “[t]o the extent that insurance companies engage in anticompetitive collusion then they appropriately [should] be subject to antitrust liability.”

The vote in the House will happen later today.

UPDATE: Former Labor Secretary Robert Reich wrote an op-ed today urging repeal of the anti-trust exemption:

This is promising news. Forcing insurers to compete for our business would do at least as much good as the president’s proposal to give the federal government, working with the states, the power to deny or roll back excessive premiums. The fact is that half of the states already have the power to approve rates and they don’t seem to be holding insurers back much […]

Antitrust is no substitute for broader health care reform, but it’s an important prerequisite. If a handful of giant health insurers are allowed to dominate the industry, many of the other aspects of reform (establishing insurance exchanges, requiring people to have insurance, even allowing consumers to buy insurance across state lines) won’t bring down the price of insurance.

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David Dayen

David Dayen