Bill Would Apply Antitrust Laws To Insurance

With Congress still at an impasse over how to proceed with a major health overhaul, the House this week will vote on a small piece of the measure instead: a bill to repeal a decades-old insurance industry exemption from antitrust laws.

"For 65 years, the insurance industry has had a unique — well, they and Major League Baseball — but the insurance industry has had an exemption from antitrust legislation in terms of price fixing and collusion, and you name it," said House Speaker Nancy Pelosi.

The bill, to change the 1945 McCarran-Ferguson Act, is highly popular with House Democrats, although less so in the Senate. David Balto, a former policy director at the Federal Trade Commission, now a senior fellow at the liberal Center for American Progress, says repealing the antitrust exemption is a good place for Congress to begin a health overhaul.

"It's a critical first step to making these markets work effectively and the House is right on in focusing on this," says Balto.

Balto says the antitrust exemption has been a "substantial obstacle" to consumer protection and other enforcement efforts aimed at insurance companies at both the state and federal level. "In over a third of the states, including all the states with highly concentrated [insurance] markets, there were zero enforcement actions over the past five years," he says.

Backers of the legislation say they hope that more aggressive enforcement of antitrust laws against health insurance companies can reverse the trend toward consolidation — where just one or two or a handful of companies control the entire market. And that more competition can mean lower premiums.

But other analysts, including both the Congressional Budget Office and the Congressional Research Service, say they doubt that eliminating the antitrust exemption will have much of an impact on competition or premiums.

In fact, says Kevin Bingham of the American Academy of Actuaries, "quite honestly, it would lead to what I believe and what the academy believes would be reduced competition, and potentially higher rates."

Bingham says that's because what the exemption was meant for in the first place was to allow insurance companies to share data about insurance risk. That's important, because without that data, insurance companies could end up setting premiums too low. Then the insurance companies could become insolvent, and unable to pay claims.

Large insurers — the ones Democrats say are taking over the health insurance markets — probably wouldn't even be affected by the repeal, says Bingham, because they collect data themselves.

But the effect could actually be negative on smaller or start-up companies, he says, "and without that ability to look at that industry data and kind of looking at cost estimates, it might push them away from getting involved at all." And if small companies stay on the sidelines, competition could actually be reduced.

Meanwhile, House and Senate leaders and President Obama are still working to see if they can figure out how to clear a path for their bigger bill.

In New Hampshire last week, the president continued to make his case to finish the job this year, if only for the people with insurance problems whose letters he reads every night. "I will not walk away from those people, and Congress shouldn't either. We should keep working to get it done; Democrats and Republicans together. Let's get it done this year," he said.

But about the only concrete comment on the subject came from House Majority Leader Steny Hoyer, who, when reminded that he promised to announce a way forward on the health bill by the end of last week, replied, "Did I say that? Then I was in error."