Would Repealing the 1945 Antitrust Exemption for Health Insurance Companies Lower Premiums? - DEBATED


General Reference (not clearly pro or con)


[Editor's Note: On June 5, 1944, the US Supreme Court, in US v. South-Eastern Underwriters, ruled that insurance companies were engaging in interstate commerce and that insurance companies could be subject to federal antitrust laws and prosecution for sharing information with each other, a practice they had regularly engaged in to help determine risk levels and premium prices on insurance policies.

On Mar. 9, 1945, in response to the Court's decision, Congress passed the McCarran-Ferguson Act to create a limited exemption from federal antitrust laws for insurance companies to allow them to share information with each other without worry of being charged under federal antitrust laws. Under the new law, regulating insurance company practices was left to the individual states.]




The Congressional Budget Office (CBO) stated the following in its Oct. 23, 2009 report "H.R. 3596: Health Insurance Industry Antitrust Enforcement Act of 2009," available at cbo.gov:

"Companies that provide health and medical malpractice insurance are currently exempt from the federal antitrust laws insofar as they are engaging in the business of insurance...

H.R. 3596 [the Health Insurance Industry Antitrust Enforcement Act of 2009] could affect the costs of and premiums charged by private health insurance companies; whether premiums would increase or decrease as a result is difficult to determine, but in either case the magnitude of the effects is likely to be quite small. To the extent that insurers would otherwise engage in the prohibited practices and be prevented from doing so by enactment of this bill, premiums might be lower. (That effect is likely to be small because state laws already bar the activities that would be prohibited under federal law if this bill was enacted.)

To the extent that insurers would become subject to additional litigation, their costs and thus their premiums might increase. Based on information from the Justice Department, the Federal Trade Commission, the National Association of Insurance Commissioners, consumer groups, and private attorneys, CBO estimates that both of those effects would be very small, and thus that enacting the legislation would have no significant effect on the premiums that private insurers would charge for health insurance."




PRO (yes)

Paul Gosar, DDS, US Representative (R-AZ), stated the following in his article "Health," available at his website (accessed May 13, 2015):

"[W]e have an opportunity this Congress to enact serious, patient centered reform. I introduced the Competitive Health Insurance Reform Act that would repeal the McCarran Ferguson Act. The McCarran Ferguson Act was meant to counteract a 1945 Supreme Court decision, and carved out an exception to some federal antitrust laws for health insurance companies. I believe that health insurance companies must abide by the rules that other corporations in this country do. I believe that seeing this repeal through will increase competition, lower costs, and facilitate the purchase of health insurance across state lines."




Steven G. Calabresi, JD, Professor of Law at Northwestern University School of Law, stated the following in his Sep. 18, 2013 article "The Right to Buy Health Insurance Across State Lines: Crony Capitalism and the Supreme Court," published in the University of Cincinnati Law Review:

"The roots of the state health insurance monopolies and oligopolies can be directly traced to a federal law. Thanks to the McCarran–Ferguson Act, which was passed in 1945, each of the fifty states has the exclusive power to license health insurance within a state's own borders even if, in doing so, a state directly burdens interstate commerce by shutting out-of-state insurers out of the market. The McCarran–Ferguson Act purports to allow state governmental discrimination against inter-state commerce that would otherwise violate the Dormant Commerce Clause. It is this statute that has created the state health care oligopolies and monopolies and which is the cause of all our health care woes...

Congress has, in effect, turned the health insurance market into fifty separate state cartels, and it has allowed the states to cut off choices for citizens buying health insurance. The lack of competition and of choice has led to spiraling costs for health care and to lower quality health insurance."




Peter DeFazio, MA, US Representative (D-OR), stated the following on his webpage "Health Care," available at his website (accessed Nov. 18, 2013):

"The insurance industry has operated beyond the reach of America's anti-trust laws since the McCarran-Ferguson Act was passed by Congress in 1945. The insurance industry should play by the same rules as other industries in America. Insurance companies and Major League Baseball are the only two industries exempt from anti-trust laws. Insurance companies are free to collude amongst themselves to drive up prices and deny care...

Congressman DeFazio has been pushing to repeal the antitrust exemption for the insurance industry for 20 years. The Consumer Federation of America has said that this action alone would save consumers more than $40 billion in insurance premiums. Since the Senate stripped these reforms from the final health care bill Congressman DeFazio successfully fought to have it passed as its own bill. It passed the House on February 24, 2010 by a bi-partisan vote of 406 to 19 [the bill never became law]...

The Affordable Care Act was upheld by the Supreme Court. I have always said the law is not perfect, and I have been vocal about needed improvements such as antitrust protections."




Louise M. Slaughter, MS, US Representative (D-NY), was quoted as stating the following in a Jan. 20, 2013 press release "Slaughter, DeFazio Revive Bill to Strip Insurance Anti-Trust Immunity," available at her website:

"Is it any surprise that the industry with the fastest-rising costs is also one that is exempt from anti-trust regulation?... The most effective way to contain the out-of-control growth of healthcare costs is to prohibit this collusion between healthcare insurance companies that artificially inflates the price of care, limits competition, and puts an enormous financial strain on American businesses and consumers."




The Consumer Federation of America stated the following in its Oct. 20, 2009 letter to US Representative John Conyers, available at its website:

"Revoking the federal anti-trust exemption for health and medical malpractice insurers is a good first step towards full repeal of the McCarran Ferguson Act for all lines of insurance, which our organizations strongly support. The Consumer Federation of America estimates that if the McCarran Ferguson Act was fully repealed, Americans would save at least 10 percent of premiums or as much as $50 billion a year."




Robert B. Reich, JD, Professor of Public Policy at the University of California at Berkeley, stated the following in his Feb. 23, 2010 op-ed "Bust the Health Care Trusts," available at nytimes.com:

"Astonishingly, the health insurance industry is exempt from federal antitrust laws, which is why a handful of insurers have become so dominant in their markets that their customers simply have nowhere else to go...

More than 90 percent of insurance markets in more than 300 metropolitan areas are 'highly concentrated,' as defined by the Federal Trade Commission...

Antitrust is no substitute for broader health care reform, but it's an important prerequisite. If a handful of giant health insurers are allowed to dominate the industry, many of the other aspects of reform (establishing insurance exchanges, requiring people to have insurance, even allowing consumers to buy insurance across state lines) won't bring down the price of insurance."




CON (no)

The Insurance Information Insitute stated the following in its article "Antitrust Law and Insurance," available at iii.org (accessed May 13, 2015)

"Legislation seeking to amend what is a very limited federal antitrust exemption for the insurance industry under the McCarran-Ferguson Act would likely reduce competition in the industry, resulting in less choice and higher costs for insurance buyers. Here's why...

The limited antitrust exemption under McCarran-Ferguson allows insurers to pool historic loss information so that they are better able to project future losses and charge an actuarially based price for their products. It also allows for joint development of policy forms.

The act does not exempt insurers from state antitrust laws, which explicitly prohibit insurers (and all businesses), from conspiring to fix prices or otherwise restrict competition. The McCarran-Ferguson Act in no way results in any kind of restraint on competition.

Under the act, insurers remain subject to rate and form regulation in every state...

The net effect of the limited exemption under McCarran-Ferguson is actually to increase competition by giving small insurers, who otherwise would have too little data to develop actuarially credible (i.e. statistically reliable) rates, the tools to compete with larger insurers who have much more data on which to base rates."




Christopher M. Pope, PhD, former Graduate Fellow in the Center for Health Policy Studies at the Heritage Foundation, stated the following in his Aug. 1, 2014 article "How the Affordable Care Act Fuels Health Care Market Consolidation," available at heritage.org:

"When the Obama Administration lobbied for passage of the ACA, it launched a concerted campaign to blame the insurance industry for the ills of American health care. Senate Majority Leader Harry Reid (D–NV) blamed the exemption of insurers from federal antitrust laws for premium increases, for the underpayment of doctors, and somehow, even for driving up Medicare costs. Yet, private insurers are largely uninvolved in Medicare Parts A and B, the traditional parts of the program that are fueling its rapid cost growth, while the federal 'exemption' only exists to empower states to regulate their own insurers and to enforce their own antitrust laws."




Scott E. Harrington, PhD, Professor of Health Care Management at the University of Pennsylvania, stated the following in his Nov. 6, 2009 article "Competition and Health Insurance," available at forbes.com:

"[P]opulist rhetoric might exert additional pressure on [health] insurers to fall (back) into line behind the Democratic reform agenda. But there is no evidence that their antitrust exemption has contributed to higher health insurance costs, premiums or profits...

Repealing the antitrust exemption for health insurers would not significantly increase competition, and it would not make health-insurance coverage either less expensive or more available. There is no evidence that the exemption has increased health insurers' prices or profits or contributed to higher market concentration."




Michael G. Cowie, JD, Partner at Dechert LLP, stated the following in his Dec. 2009 article "Health Insurance and Federal Antitrust Law: An Analysis of Recent Congressional Action," available at the American Bar Association website:

"The proponents of altering competition law should carry the burden of explaining how existing law has failed consumers, leading to low quality or high prices. However, the proponents of the Health Insurance Industry Antitrust Enforcement Act of 2009 and similar bills have not provided any empirical evidence showing that existing law has led to any anticompetitive outcomes despite over sixty years of experience with the McCarran-Ferguson Act. While there may be many effective methods of reforming health care in our country, this proposed change in antitrust policy should not be undertaken given the absence of sound empirical support."




David A. Hyman, MD, JD, H. Ross and Helen Workman Chair in Law and Professor of Medicine at the University of Illinois, stated the following in his Feb. 26, 2010 article "Is Repealing McCarran-Ferguson Health Reform?," available at volokh.com:

"With states already regulating insurer conduct and mergers, and the feds able to challenge mergers, adding federal antitrust exposure for 'the business of insurance' doesn't seem likely to result in much change – and what change there will be may not be for the better...

To be clear, the exemption doesn't make much sense, as a matter of antitrust law. Both the ABA and the Antitrust Modernization Commission have recommended repeal. I teach insurance law, and spent three years at the FTC, so I'm on both sides simultaneously – and I come down on the side of repeal. But there just isn't much evidence that doing so will increase competition in the market for health insurance, or reduce health insurance premiums."




The Los Angeles Times stated the following in its Feb. 8, 2010 editorial "Back to the Drawing Board," available at latimes.com:

"Lawmakers are expected to pass a bill this week [Feb. 2010] that would repeal the federal antitrust exemption that insurance companies have enjoyed since 1945 -- a move that makes for little more than a good sound bite...

Removing the exemption won't do much to boost competition or spark a price war among insurers, however... The unfortunate reality in healthcare reform is that there is no quick fix to reducing premiums or even bringing their growth into line with inflation. The ever-increasing cost of insurance reflects the incessant growth in healthcare spending. And the solution is to reduce the supply of money for healthcare, lower the demand for medical services, or do both."