President Barack Obama backs Congress' effort to repeal the antitrust exemption for insurance companies.

(Carlos Osorio / AP Photo)

By Frank James

Many Congressional Democrats have called for an end to the health-insurance industry's antitrust exemption and on Tuesday President Barack Obama joined them.

At Tuesday's briefing to reporters, Robert Gibbs, White House press secretary, said:

... Today, the president announced the administration's strong support for repealing the antitrust exemption currently enjoyed by health insurers. At its core, health reform is all about ensuring that American families and businesses have more choices, benefit from more competition and have greater control over their own health care. Repealing this exemption is an important part of that effort.
Today, there are no rules outlawing bid-rigging, price-fixing and other insurance-company practices that will drive up health-care costs and often drive up their own profits as well. That was transmitted to Congress, in a statement of administration policy, as the House considers that legislation over the next couple of days.

The insurance industry has enjoyed an antitrust exemption under the McCarran-Ferguson Act since 1945. And it applies not just to health insurers but other lines of insurance like property ans casualty.

The exemption was a response to a 1944 Supreme Court decision that ruled the federal government could had regulatory authority over the insurance industry.

Many experts who have looked into the matter have concluded that repealing the exemption would have little to no affect on insurance premiums or competition. That includes the Congressional Budget Office.

But there are other experts who say there would be an impact.

The Kaiser Health News website has a good explainer on all of this.

An excerpt of the KHN report:

Currently, all types of insurance have the antitrust exemption. Some lines of insurance, such as some property and casualty insurance, have historically formed organizations called rating bureaus that collect and pool claims data from different companies. This information allows insurers to more accurately predict how much they might end up paying out to customers and even set premium rates together.
But because health insurers tend to be large, and health risks tend to be fairly well-known and predictable, the health insurance industry doesn't share premium rate information about customers, said Art Lerner, who is co-chairman of the health care practice at Crowell & Moring, a Washington law firm. Lerner used to direct the FTC's health care antitrust program.
Harrington noted that some regions are dominated by one or two insurers but said that has little to do with the McCarran-Ferguson exemption and much to do with how federal and state officials have enforced mergers and acquisitions. (The Government Accountability Office updated an earlier report on insurance market competitiveness on Feb. 27, 2009).
Randy Stutz, a research fellow at the American Antitrust Institute, a nonprofit advocacy group that favors stricter antitrust enforcement, said it's difficult to know whether insurers are engaging in behavior that would violate federal antitrust laws because "collusion is inherently secretive in nature," adding, "You sort of have a Catch-22."
He said that there isn't evidence of illegal activity. Still, he said, federal antitrust laws have become more flexible since the enactment of McCarran-Ferguson, so the exemption for insurers is no longer needed for them to share historical data.
"The activities that McCarran was probably designed to protect are likely already allowed under the federal antitrust laws," he said.

categories: Health, Obama Administration

3:38 - February 23, 2010