COMMENTARY:

Time to Pass the Health Insurance Industry Antitrust Enforcement Act of 2009

Can Capitalism defeat the Mafia, or are they the same?

by Ralph E. Stone

Repeal of the McCarran-Ferguson Act of 1945 antitrust exemption for the health insurance industry is a first step toward bringing at least some competition in that industry.

What happened to the "Health Insurance Industry Antitrust Enforcement Act of 2009"? Congress must repeal the McCarran-Ferguson Act antitrust exemption for the health insurance industry as a first step toward bringing at least some competition in that industry, which in turn will help bring down the cost of health insurance.

The McCarran-Ferguson Act of 1945 gives states the exclusive authority to regulate the "business of insurance" without interference from federal regulation, unless federal law specifically provides otherwise. The Act provides that the Sherman Anti-Trust Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914, apply to the business of insurance only to the extent that such business is not regulated by state law. Thus, the Act exempts health insurance companies from federal antitrust regulations that apply to nearly every other industry, rules that protect consumers from anti-competitive business practices. Repeal of the Act would ensure that health insurance issuers and medical malpractice insurance issuers cannot engage in price fixing, bid rigging, monopoly practices, or market allocations to the detriment of competition and consumers.

Recently, the media has been reporting regularly about the Anthem Blue Cross -- a subsidiary of Wellpoint, Inc. -- plan to raise health insurance rates up to 39 percent in California. The main justification for the large rate increases, as much as 10 times greater than national health spending growth, is higher health care costs. But as U.S. Health and Human Services Secretary Kathleen Sibelius remarked, "It remains difficult to understand how a company [Anthem] that made $2.9 billion in the last quarter of 2009 alone can justify massive increases. . . ." And WellPoint, Inc. reported net income of $4.7 billion in 2009. And a recent report found that the combined profit for the five largest health care providers -- WellPoint, Inc., United-Health Group, Aetna, Humana, and Cigna -- increased 56 percent in 2009 over 2008. Increased rates mean less coverage for a higher cost or possibly no coverage for those without means.

These facts should raise antitrust concerns. While the lack of competition in the health insurance industry may well have other causes, which may or may not be cured through a repeal of the McCarran-Ferguson Act, the insurance exemption from the federal antitrust laws has not helped. Repealing the Act coupled with increased antitrust enforcement is a relatively simple first step if the ultimate goals are to rein in health care costs and provide health care to the largest number of consumers.

It is time to pass the "Health Insurance Industry Antitrust Enforcement Act of 2009."


Ralph E. Stone is a retired Federal Trade Commission attorney.



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This story was published on February 21, 2010.