Democrats Take Aim at Antitrust Exemptions for Insurance Companies

Oct 8, 2009
In The News

Democrats Take Aim at Antitrust Exemptions for Insurance Companies

October 8, 2009

By: Alex Wayne

Leading congressional Democrats want to partially repeal a 60-year-old exemption from antitrust law enjoyed by health insurers, an effort that the industry views as another in a series of attempts by President Obama and his party to paint insurers as villains in the health care overhaul debate.

Democrats Take Aim at Antitrust Exemptions for Insurance Companies

October 8, 2009

By: Alex Wayne

Leading congressional Democrats want to partially repeal a 60-year-old exemption from antitrust law enjoyed by health insurers, an effort that the industry views as another in a series of attempts by President Obama and his party to paint insurers as villains in the health care overhaul debate.

Both the Senate and House Judiciary committees plan hearings in the next two weeks on legislation sponsored by the panels’ chairmen, Sen. Patrick J. Leahy, D?Vt., and Rep. John Conyers Jr., D-Mich., that would narrow the broad antitrust exemption insurers now enjoy (S 1681, HR 3596).

Under the bills, the federal government would be authorized to prosecute insurers for violations of antitrust law if they are found to be engaged in “price-fixing, bid-rigging or market allocations.” Democrats backing the bills say they aim to prevent behaviors that could drive up health care costs.

“What we’re really trying to do here is add another weapon to the arsenal under the health insurance legislation to bring premiums down,” said Rep. Diana DeGette, D-Colo., a cosponsor of Conyers’ bill. A House Judiciary subcommittee has scheduled a hearing on the bill for Thursday.

But insurers say they are not engaged in the kinds of behaviors the bill seeks to prevent, and DeGette and a spokeswoman for the Senate Judiciary Committee each acknowledged that they have no evidence to the contrary. “We don’t know if they do it now because they’re not subject to the regulation of the Justice Department,” DeGette said.

A spokesman for America’s Health Insurance Plans, the industry’s trade association, described the bill as frivolous. “This is a political move, and not an issue of real substance,” spokesman Robert Zirkelbach said.
Insurers as ‘Villains’

Since July, when public support for Democrats’ health overhaul began to flag, Democratic leaders have increasingly tried to focus attention on the failings of health insurers. President Obama, followed by congressional Democrats, began calling the overhaul “health insurance reform” instead of “health care reform.” And House Speaker Nancy Pelosi, D-Calif., called insurers the “villains” in the debate.

The Conyers-Leahy legislation strikes at a foundation of the insurance industry. In 1944, the Supreme Court ruled for the first time that insurers were engaged in interstate commerce and so could be regulated by the federal government. But Congress — seeking to protect states, who stood to lose revenue if the federal government assumed responsibility for regulating insurers — responded by passing a law, known as McCarran-Ferguson, that granted insurers an exemption from federal antitrust law as long as they were regulated by states.

The exemption is most valuable to property insurers, which share data on losses in different geographical areas so they can more accurately price their policies. Congress has periodically considered repealing McCarran-Ferguson, most recently after Hurricane Katrina, when insurers were criticized for attempting to avoid paying claims related to storm damage.

Zirkelbach said health insurers use the exemption mostly just to share data on fraud, in order to better combat the crime, and on brokers and agents who sell policies. In fact, as a policy matter the Leahy-Conyers bill is of such little interest to health insurers that DeGette said none of the sponsors have heard any feedback from the industry.

However, the bill would also partially repeal the antitrust exemption for insurers who write medical malpractice policies for doctors, hospitals and other health providers. That industry is more concerned.

“We agree there shouldn’t be any bid-rigging,” said Lawrence E. Smarr, president of the Physician Insurers Association of America, which represents the industry. “There should be no market allocations. We agree with the overall theme of the bill. It’s the details that aren’t specified there. The language is so overly broad as to not really state a purpose.”

Indeed, the bill is brief — just 251 words.

“From talking with staff, we understand it’s aimed at preventing insurers from sharing historical premium and loss information,” Smarr said. “We are told [it is] intended to address potential future situations where there is bid-rigging, there is price-fixing. We know of no current instances where this is happening.”

But to Democrats, all that matters is that it might be happening. “The legislation we introduced today is intended to root out unlawful activity in an industry grown complacent by decades of protection from antitrust oversight,” Conyers said in a statement Sept. 17, when he introduced the bill. His spokesman did not respond to a request for evidence of that activity.