Antitrust exemptions for health, liability insurers targeted

A Senate bill would mean federal law could apply in cases of price-fixing and other anticompetitive behavior, but only where state law doesn't apply.

By Emily Berry — Posted Oct. 6, 2009

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Sen. Patrick Leahy (D, Vt.) has introduced a bill that he said would help ensure the health insurance industry plays by the same rules other companies do.

The bill, introduced Sept. 17, would repeal parts of the 1945 McCarran-Ferguson Act, which leaves antitrust regulation of insurance, in most cases, to the states.

"A few industries have used their influence to obtain a special, statutory exemption from the antitrust laws, and the insurance industry is one of them," Leahy said in a statement. "In the markets for health insurance and medical malpractice insurance, patients and doctors are paying the price, as costs continue to increase at an alarming rate."

Leahy has previously introduced legislation proposing broader repeal of the McCarran-Ferguson Act.

Over time, agency and court decisions have carved out exceptions to the general rules the McCarran-Ferguson Act sets out, including oversight of mergers, which federal agencies do regulate, said Arthur Lerner, former assistant director of the Bureau of Competition at the Federal Trade Commission, and head of the agency's health care antitrust program. Lerner is now a partner at Crowell & Moring, a Washington, D.C., law firm.

If Leahy's bill passed, it would mean that if state law did not prohibit price-fixing, bid-rigging or market allocation (in which competitors divvy up territory to avoid true competition), the federal law would come into play. However, states' unfair-trade-practice laws typically do bar companies from doing all of those things, Lerner said.

Robert Zirkelbach, spokesman for trade group America's Health Insurance Plans, said the Leahy bill is unnecessary for that reason.

"Health insurance is one of the most regulated industries in America," he said.

Leahy had introduced a similar bill in February 2007. It was co-sponsored by Mississippi Republican Trent Lott, who said his interest was prompted by property and casualty insurers' actions after Hurricane Katrina. That bill, and its counterpart in the House, did not make it out of committee.

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