Ten state attorneys general side against health insurers on antitrust issue

Jesse A. Hamilton, Washington bureau manager
Nov. 20, 2009

Ten state attorneys general have put their support behind a congressional effort to strip the federal antitrust exemption from health and medical liability insurers.

The attorneys general from Vermont, Connecticut, Massachusetts, Maine, Oregon, Arizona, Iowa, Montana, Florida and Wyoming wrote that the long-standing exemption "is a historical anomaly and accident -- serving no purpose except to exempt insurers from anti-competitive conduct prohibitions that apply to almost every other industry."

The chief attorneys from those states signed the letter explaining their arguments for removing the legal protection from those sectors of the insurance industry, which has been an issue of debate in the U.S. House and Senate. The recently passed health reform bill in the House included a provisions stripping the exemption, which has been in place since the McCarran-Ferguson Act in 1945. A similar bill -- the Health Insurance Industry Antitrust Enforcement Act -- has been introduced in the Senate by the chairman of the Judiciary Committee, Sen. Patrick Leahy, D-Vt.

The legislation in the House and Senate would ban the most egregious antitrust actions, including price-fixing, bid rigging and market allocation. But the insurance industry argues that the actions are already illegal under the rules -- including state antitrust laws -- that they work under. The industry has called this effort an act of vengeance for its resistance of Democratic health reform efforts.

Karen Ignagni, president and chief executive officer of America's Health Insurance Plans, has argued that the industry hasn't abused antitrust law. She wrote in one letter that the legislation "holds the potential for increasing legal uncertainty." She said her organization has "strong concerns that such legal uncertainly could chill or limit newly developing activities that will benefit consumers and doctors" (BestWire, Oct. 26, 2009).

The attorneys general, and the other proponents of the repeal, say it will increase competition in the marketplace. "Repeal of the McCarran-Ferguson exemption would enhance competition in health and medical malpractice insurance by giving state enforcers, as well as federal enforcers, additional tools to combat harmful anti-competitive conduct," the letter stated. "Consistent, reasoned enforcement of state and federal antitrust laws benefits market participants as well as enforcers by eliminating uncertainty."

According to their letter: "The McCarran-Ferguson exemption serves no plausible public interest."

Leahy's committee held a hearing on the topic in October. An Obama administration official suggested the original reasons for the exemption don't hold up (BestWire, Oct. 14, 2009). Leahy said he intends to introduce his bill as an amendment to the pending Senate health reform legislation.

More recently, a report from the Congressional Budget Office said the repeal would have minimal effect on the health insurance industry and on the premiums that Leahy and others hope the effort will lower (BestWire, Oct. 26, 2009).

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