Panel Votes to End Insurance Antitrust Exemption (Update2)

By Christopher Stern
Bloomberg News
October 18, 2009

Oct. 21 (Bloomberg) -- The U.S. House Judiciary Committee voted to repeal the insurance industry's federal antitrust exemption in a move aimed at spurring competition and controlling the cost of premiums.

The panel, in a 20-9 vote, approved legislation to ban companies from engaging in price fixing, bid rigging and market allocation. The measure may be combined with a proposed overhaul of the health-care system the House is considering.

"We can open up our health insurance markets to real competition and make an important contribution to the health reform efforts under way in both houses of Congress," said Judiciary Committee Chairman John Conyers, a Michigan Democrat.

Last week, Justice Department antitrust chief Christine Varney testified before the Senate Judiciary Committee that ending the exemption would create more competition. Insurance companies "are highly concentrated in many geographic regions," meaning there "is very little incentive to compete on price," she said.

America's Health Insurance Plans, the industry's trade group, said the impact of the antitrust exemption is exaggerated and insurers are subject to state regulation.

In an Oct. 8 letter to Conyers and Senate Judiciary Committee Chairman Patrick Leahy, the group said, "It is inaccurate to describe the exemption as permitting anticompetitive conduct and mergers."

Health-Care Overhaul

The Obama administration's pursuit of a health-care overhaul has increased interest in repealing the insurance industry's special antitrust status. In his radio address last week, President Barack Obama endorsed Congress's review of the industry's "privileged exception from our antitrust laws."

Democrats plan to add the antitrust legislation to the broader health-care legislation.

House Rules Committee Chairwoman Louise Slaughter, a New York Democrat, said in a statement today she supports making the measure "part of the reform bill that we will bring to the floor shortly."

Congress exempted the insurance industry from antitrust laws in 1945 after the Supreme Court ruled it was subject to federal regulation. The states have traditionally been the chief regulators of the industry.

Leahy, Senate Majority Leader Harry Reid of Nevada and Senator Charles Schumer of New York held a news conference today to urge passage of the Democratic plan to strip the industry of its exemption.

"The health insurance industry's antitrust exemption is an accident of American history" dating to a time when state-based companies asserted they weren't engaged in interstate commerce, Schumer said. "It's a different universe today. This exemption is antiquated."

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