Democrats Push To End Insurers' Antitrust Exemption The relationship between the Obama administration and health insurers has turned ugly since the industry rejected the health care makeover it once supported. Congressional Democrats now want to strip the industry's exemption from federal antitrust laws.
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Democrats Push To End Insurers' Antitrust Exemption

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Democrats Push To End Insurers' Antitrust Exemption

Democrats Push To End Insurers' Antitrust Exemption

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The baseball playoffs remain intensely competitive. The Yankees lost to the Angels last night, so those two teams keep fighting to see who plays Philadelphia in the World Series. That competitiveness makes the playoffs different from the baseball business, which has been exempt from federal antitrust laws for decades.

So has the industry we'll talk about next. It's the health insurance industry. Some congressional Democrats what to strip the insurance industry of its antitrust exemption. NPR's David Welna reports.

Things turned ugly earlier this month after the health insurance industry rejected the health care makeover it once supported. President Obama dedicated his most recent weekly address almost entirely to blasting those insurers. He accused them of skimming big profits off ever-escalating premiums.

President BARACK OBAMA: And they're earning these profits and bonuses while enjoying a privileged exception from our antitrust laws, a matter that Congress is rightfully reviewing.

WELNA: It was Congress, after all, that in 1945 overrode a Supreme Court ruling that the insurance industry was indeed part of interstate commerce and thus, subject to federal antitrust laws. Lawmakers that year passed the McCarran-Ferguson Act; the law has ever since shielded insurance firms from federal prosecution for price-fixing, bid-rigging, and carving out protected markets. This week, Senate Judiciary Committee Chairman Patrick Leahy declared the time had come to do away with that protection.

Senator PATRICK LEAHY (Democrat, Vermont): The antitrust laws exist to protect consumers but also to promote competition. You remove the antitrust laws, you don't protect consumers, and you don't promote competition.

WELNA: Leahy held a hearing last week on ending the antitrust exemption for health and medical malpractice insurers. Christine Varney testified for the Obama administration. She heads the Justice Department's antitrust division.

Ms. CHRISTINE VARNEY (U.S. Justice Department): 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.

WELNA: Varney's assertion was roundly rejected by University of Arkansas business professor Lawrence Powell. He testified on behalf of the medical malpractice insurance industry.

Professor LAWRENCE POWELL (University of Arkansas): The best possible outcome from repealing McCarran is continuation of the status quo. However, it would also - it is also likely that repealing McCarran would have negative consequences for consumers by decreasing competition and accuracy in insurance pricing.

WELNA: Rhode Island Democrat Sheldon Whitehouse pointed out the professor was relying on outdated information.

Senator SHELDON WHITEHOUSE (Democrat, Rhode Island): You cite, for the proposition that insurance markets are highly competitive, an article by Paul Joskow. Do I have the date of that article correct - it's 1973?

Prof. POWELL: Um - I believe so.

WELNA: Whitehouse noted that in 39 states, two health insurers control at least half the market while in nine states, one insurer controls at least three-quarters of the market.

Still, some health economists question whether breaking up big insurance companies with federal antitrust laws will help consumers. Austin Frakt is with Boston University's School of Public Health.

Mr. AUSTIN FRAKT (Boston University School of Public Health): What you may find is that it's the opposite — that you break them up and they can't bargain down prices and therefore, while they're competing at the margin, they're all competing at a higher level of premium than you had before. That's certainly possible.

WELNA: It's the states that regulate the insurance industry. Still, almost all the nation's state attorneys general want to repeal the antitrust exemption. Janet Mills is Maine's attorney general.

Ms. JANET MILLS (Attorney General, Maine): This gives us another tool in our arsenal to combat higher rates proposed and accepted by companies that have a stranglehold in the market — in states like Maine, where basically one company controls the market.

WELNA: The push to repeal the antitrust exemption has gained momentum. This week, three Republicans joined Democrats on the House Judiciary Committee to vote out such a bill. A similar measure is planned as an amendment to the Senate's health care overhaul.

David Welna, NPR News, the Capitol.

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