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Health Insurance Companies May Lose Federal Antitrust Exemption
Health Insurance Companies May Lose Federal Antitrust Exemption
First published in Antitrust News & Notes, March 2010
By Brian Robison and Allan Johnson| Read more articles from Antitrust News & Notes, March 2010 here. |
On February 24, 2010, the U.S. House of Representatives overwhelmingly passed, in a 406-19 vote, H.R. 4626 — The Health Insurance Industry Fair Competition
Act — repealing portions of the federal antitrust exemption contained in the McCarran-Ferguson Act (15 U.S.C. §§ 1012 et seq.).1 The bill, sponsored by Rep. Tom Perriello (D-VA) and Rep. Betsy Markey (D-CO), seeks “[t]o restore the application of federal antitrust laws to the business of health insurance to protect competition and consumers,” amending the McCarran-Ferguson Act to remove “the business of health insurance” from the antitrust exemption contained therein, thus making health insurers subject to federal antitrust laws.2
H.R. 4626 is actually the second piece of legislation to pass in the House during this session that repeals a portion of the McCarran-Ferguson Act. House Speaker Nancy Pelosi stated that the House would move to pass small portions of the health care reform agenda while Democratic leaders work to move forward on a comprehensive health care package.3
New Bill Differs From Omnibus Health Care Reform Bill
The omnibus health care reform legislation passed by the House in November 2009 also contains a provision repealing a portion of the insurance antitrust exemption.4 However, H.R. 4626 differs from the omnibus bill in two important ways. First, the House omnibus bill repeals the antitrust exemption for “the business of medical malpractice insurance,” while H.R. 4626 does not apply to medical malpractice insurers. In response to successful lobbying from malpractice insurers, House Democrats agreed to preserve the antitrust exemption for property and casualty insurers in H.R. 4626, including malpractice insurers, and the Property Casualty Insurers Association of America dropped its opposition to the bill.5
The second major difference between the pieces of legislation is that the omnibus bill contains a carve-out not found in H.R. 4626. This carve-out would preserve the antitrust exemption for “collecting, compiling, classifying, or disseminating historical loss data;” “determining a loss development factor applicable to historical loss data;” and “performing actuarial services.”6 Thus, under H.R. 4626, health insurance companies sharing information regarding insurance risk could be subject to federal antitrust scrutiny. For example, at least one commentator has predicted that activities related to Ingenix, the database where many insurers pool charge data on medical procedures, would no longer be covered by the McCarran antitrust exemption.7 Interestingly, this restriction could be most acutely felt by smaller and start-up insurance companies because larger insurers are better able to collect data themselves.8 The absence of this carve-out could actually lead to decreased competition if small insurance companies decide against entering the marketplace due to the inability to review industry data and accurately set premiums in response to actual insurance risk.9
Notable Arguments Regarding the Possible Antitrust Exemption Repeal
Several prominent industry and advocacy groups have expressed differing opinions about the implications of the possible repeal of the McCarran antitrust exemption. Most notably, several groups have advanced projections regarding the potential savings to consumers directly tied to passage of a McCarran repeal. The Consumer Federation of America estimates a full repeal of the McCarran-Ferguson Act would save Americans at least 10 percent of premiums or as much as $50 billion per year.10 On the other hand, the nonpartisan Congressional Budget Office has stated that repeal of the antitrust exemption could cause premiums to increase or decrease, but the magnitude of such a change “is likely to be quite small.”11
Another point of contention involves issues of federalism. Some conservatives believe that this bill serves as a precursor to increased control of the health insurance industry by the federal government.12 State antitrust laws already apply to the health insurance industry. In fact, the McCarran antitrust exemption, which applies only to federal antitrust laws, was originally intended to allow states to regulate the insurance industry without federal intervention. A prominent health insurance trade group notes that the health insurance industry is comprehensively regulated at the state level and argues that federal antitrust consequences may work to undermine the current regulatory scheme.13 However, a Senior Fellow at the Center for American Progress claims that state enforcement is insufficient, citing his study where he found that 33 states had failed to bring a single antitrust enforcement action in the past five years.14
Prospects for Bill Becoming Law
Efforts to repeal the McCarran antitrust exemption have not found the same traction in the Senate that they enjoyed in the House. The omnibus heathcare bill passed by the Senate in a party-line vote did not contain any McCarran repeal provisions.15 Sen. Patrick Leahy (D-VT) offered a McCarran repeal bill as an amendment to the Senate omnibus bill, but this proved to be a sticking point in getting enough votes to avoid a Republican filibuster.16 Sen. Ben Nelson (D-NE), a former insurance industry executive and state insurance commissioner, refused to vote for the bill if it contained a McCarran repeal provision, so it was dropped before the Senate approved the bill.
Events transpiring since the passage of the senate omnibus bill only make passage of H.R. 4626 in the Senate more unlikely. Democrats have lost their filibuster-proof majority with the election of Sen. Scott Brown (R-MA), and it is unlikely that Sen. Nelson has changed his views on the McCarran repeal in the past three months.17 However, this has not deterred a group of 22 Democratic senators, led by Sen. Leahy, from publicly urging Senate Majority Leader Harry Reid (D-NV) to schedule a vote on H.R. 4626.18
Should Congress pass a bill to repeal the antitrust exemption for the health insurance industry, it is almost certain that it would be signed into law by President Obama. Christine Varney, the U.S. Justice Department’s chief of antitrust enforcement, has endorsed the legislation, stating that revoking the exemption could alter behavior and introduce more competition into the market.19
On March 21, 2010, the House passed, by a vote of 219 to 212, H.R. 3590, the Senate version of the omnibus health care bill.20 This bill does not contain any provision repealing the McCarran antitrust exemption. President Obama signed the bill into law on March 23, 2010.21 Despite the passage of the omnibus bill, health insurers and other potentially affected parties should monitor the progress of H.R. 4626 and other related legislation as Congress continues to debate possible health care reform bills.
For more information, please contact Vinson & Elkins lawyer Allan Johnson. Visit our website to learn more about V&E's Antitrust practice. Get a .pdf of this issue of Antitrust News & Notes e-newsletter here.
1 Perry Bacon Jr., House votes to strip health insurance companies of antitrust exemption, THE WASHINGTON POST, Feb. 24, 2010 (available atwww.washingtonpost.com).
2 Health Insurance Industry Fair Competition Act, H.R. 4626, 111th Cong. (2010).
3 Laura Litvan and Lorraine Woellert, House to Revoke Antitrust Exemption for Insurers, Pelosi Says, BLOOMBERG, Feb. 4, 2010 (available atwww.bloomberg.com).
4 Affordable Health Care for America Act, H.R. 3962, 111th Cong. § 262 (2009).
5 Lorraine Woellert, House Democrats Seek to Revoke Insurers’ Antitrust Exemption, BLOOMBERG, Feb. 22, 2010 (available atwww.bloomberg.com).
6 H.R. 3962 § 262(a)(2).
7 Jenny Gold, The Antitrust Exemption For Health Insurers: Meaningful or Not?, KAISER HEALTH NEWS, Feb. 8, 2010 (available atwww.kaiserhealthnews.org).
8 Julie Rovner, Bill Would Apply Antitrust Laws to Insurance, NPR, Feb. 8, 2010 (available atwww.npr.org).
9 Id.
10 Letter from J. Robert Hunter, Director of Insurance, Consumer Federation of America and Joanna Doroshow, Executive Director, Center for Democracy and Justice to Members of U.S. House of Representatives, Feb. 23, 2010 (available at admin.consumerfed.org).
11 Congressional Budget Office Cost Estimate, H.R. 3596 Health Insurance Industry Antitrust Enforcement Act of 2009, Oct. 23, 2009 (available atwww.cbo.gov).
12 Andie Brownlow, The Antitrust Trap for Health Care Insurance, AMERICAN THINKER, Mar. 5, 2010 (available atwww.americanthinker.com).
13 Letter from Karen Ignagni, President and Chief Executive Officer, America’s Health Insurance Plans to The Honorable Tom Perriello and The Honorable Betsy Markey, U.S. House of Representatives, Feb. 18, 2010 (available atwww.americanhealthsolution.org).
14 David Balto, McCarran-Ferguson Antitrust Reform 101, CENTER FOR AMERICAN PROGRESS, Feb. 22, 2010 (available atwww.americanprogress.org).
15 Patient Protection and Affordable Care Act, H.R. 3590, 111th Cong. (2009).
16 James M. Burns, Can Antitrust Exemption Survive Health Care Reform?, LAW 360, Jan. 8, 2010 (available atwww.law360.com).
17 James M. Burns, The Latest Swipe at Insurers’ Antitrust Exemption, LAW 360, Mar. 2, 2010 (available atwww.law360.com).
18 Aruna Viswanatha, Leahy Urges Reid to Schedule Insurance Antitrust Vote, MAIN JUSTICE, Mar. 4, 2010 (available atwww.mainjustice.com).
19 Lorraine Woellert and Justin Blum, Antitrust Enforcer for U.S. Says Insurers May Lack Competition, BLOOMBERG, Feb. 27, 2010 (available atwww.bloomberg.com).
20 Sheryl Gay Stolberg, Obama Signs Health Care Overhaul Bill, With a Flourish, NEW YORK TIMES, Mar. 23, 2010 (available atwww.nytimes.com).
21Id.
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