Time to Pass the Health Insurance Industry
Antitrust Enforcement Act

By Ralph E. Stone

December 24, 2009

What happened to the Health Insurance Industry Antitrust Enforcement Act of 2009? Did it fall through the cracks along with the public option? Because there is unlikely to be a public option in the forthcoming healthcare legislation, Congress must repeal the McCarran-Ferguson Act antitrust exemption for the health insurance industry as a first step toward bringing at least some competition in that industry, which in turn will help bring down the cost of health insurance.

The McCarran-Ferguson Act of 1945 gives states the authority to regulate the “business of insurance” without interference from federal regulation, unless federal law specifically provides otherwise. The Act provides that the Sherman Anti-Trust Act of 1890, the Clayton Anti-Trust Act of 1914, and the Federal Trade Commission Act of 1914, apply to the business of insurance only to the extent that such business is not regulated by state law. Thus, the Act exempts health insurance companies from federal antitrust regulations that apply to nearly every other industry, rules that protect consumers from anti-competitive business practices. Repeal of the Act would ensure that health insurance issuers and medical malpractice insurance issuers cannot engage in price fixing, bid rigging, monopoly practices, or market allocations to the detriment of competition and consumers.

The health insurance industry enjoy obscene profits while consumers pay more for less coverage. Profits at ten of the country’s largest publicly traded health insurance companies rose 428 percent from 2000 to 2007. One of the main reasons for such high profits is the growing lack of competition in the private health insurance industry, which has led to near monopoly conditions in many markets. In many states, for example, insurance companies are oligopolies, with one or two companies controlling 75-95 percent of the market and no price competition. While the lack of competition in the health insurance industry may well have other causes, which may or may not be cured through a repeal of the McCarran-Ferguson Act, the insurance exemption from the federal antitrust laws has not helped. Repealing the Act coupled with increased antitrust enforcement is a relatively simple first step if the ultimate goals are to rein in health care costs and provide health care to the largest number of consumers.

At one time, the chances of repealing the antitrust exemption for the insurance industry appeared favorable. On October 16, 2009, President Obama spoke at Texas A&M University stating it was time to repeal the McCarran-Ferguson Act. However, since then, the health insurance industry has worked its magic on the President and Congress thus proving once again as Mark Twain opined, “We have the best government that money can buy.”

Let’s make sure the Health Insurance Industry Antitrust Enforcement Act of 2009 does not go the way of the public option.

Ralph E. Stone

I was born in Massachusetts; graduated from Middlebury College and Suffolk Law School; served as an officer in the Vietnam war; retired from the Federal Trade Commission (consumer and antitrust law); travel extensively with my wife Judi; and since retirement involved in domestic violence prevention and consumer issues.

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