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Health Insurance Industry Fair Competition Act

On February 24th, the House passed the Health Insurance Industry Fair Competition Act (HR 4626), to restore competition and transparency to the health insurance market. The bill amends the McCarran-Ferguson Act by repealing the blanket antitrust exemption afforded to health insurance companies. Under the bill, health insurers will no longer be shielded from legal accountability for price fixing, dividing up territories among themselves, sabotaging their competitors in order to gain monopoly power, and other such anti-competitive practices. Read the bill>> 

Some opponents of the bill argue that state insurance commissioners can effectively police health insurers' antitrust violations under state law. But experience contradicts this. A recent study found that state insurance commissioners have not brought any actions against health insurers for anticompetitive conduct during at least the last five years.

Removing health insurance's antitrust exemption will also give antitrust enforcers such as the U.S. Department of Justice and the Federal Trade Commission the authority to investigate any evidence of possible collusion within the health insurance industry - a move that puts an end to the 65-year-old prohibition on the federal government's ability to protect honest competition against bad actors in the health insurance industry.

Removing this antitrust exemption not only enables appropriate enforcement; it will also give all health insurance companies healthy competitive incentives that will promote better affordability, improved quality, increased innovation, and greater consumer choice - as the antitrust laws have done throughout the rest of the economy for over a century.

Removing this antitrust exemption has been a bipartisan legislative priority for law enforcement groups and consumer groups such as the Consumer Federation of America for more than two decades. Two separate bipartisan antitrust commissions, one in the 1970s and another during the Bush Administration, have also called for removing the exemption.

Why this legislation is needed: 

  • This bill is necessary; despite opponents' claims, state insurance commissioners are not policing anticompetitive conduct by health insurance companies. Opponents of the bill argue that the bill is completely unnecessary because health insurers are already being effectively regulated at the state level. However, it is simply not true, as a general matter, that state insurance commissioners are authorized, equipped, and active in combating anticompetitive conduct by health insurance companies. A recent examination by David Balto, an antitrust expert with antitrust enforcement experience at both the U.S. Justice Department and the Federal Trade Commission, found that state insurance commissioners have not brought any actions against health insurers for anticompetitive conduct during at least the last five years. The vast majority of state insurance commissions lack the resources to address insurers' anticompetitive and consumer protection violations. State insurance laws are simply not a substitute for federal antitrust laws. State actions are laudable but state enforcement is episodic and can only repair a problem involving a single company in a single state.
  • This bill is also necessary because, over the years, health insurers have been able to use this antitrust exemption to block court actions regarding anti-competitive behavior. For example, in Ocean State Physicians Health Plan, Inc. v Blue Cross & Blue Shield of Rhode Island, the First Circuit Court - citing the McCarran-Ferguson antitrust exemption - overturned a jury verdict against the dominant health insurer for using its monopoly power to put financial pressure on area employers to refuse to do business with a competing HMO.
  • This bill is also necessary because of the growing concentration of the health insurance industry. All the evidence highlights how the health insurance industry has become increasingly concentrated over the last several years - giving consumers fewer and fewer meaningful choices in shopping for health insurance. For example, the top two health insurers now control 89% of the health insurance market in Iowa; 85% in Iowa; 77%  in Georgia; 73% in North Carolina; and 68% in Texas. According to a recent study by the AMA, there have been more than 400 mergers among health insurers in the past 14 years. As a result, in 94% of the metropolitan areas in the U.S., the health insurance markets are now “highly concentrated,” according to long-established antitrust standards, and so lack meaningful competition.
  • Two separate bipartisan antitrust commissions, one in the 1970s and another during the Bush Administration, have called for removing this antitrust exemption. As far back as 1979, a presidentially-appointed, bipartisan National Commission for the Review of Antitrust Laws and Procedures - made up of antitrust experts - issued a report that called for enactment of legislation to repeal this exemption. Similarly, under the Bush Administration, the bipartisan Antitrust Modernization Commission, in its report issued in 2007, also recommended that this antitrust exemption be eliminated. The Bush Administration's commission stated that this antitrust exemption has “outlived any utility it may have had and should be repealed.
  • Removing this antitrust exemption is supported by key law enforcement groups, including the National Association of Attorneys General. In 2007, the National Association of Attorneys General - representing both Democratic and Republican State Attorneys General -overwhelmingly adopted a resolution calling for repealing this exemption. As the resolution pointed out, “the National Association of Attorneys General consistently has opposed legislation that weakens antitrust standards for specific industries because there is no evidence that such exemptions promote competition or serve the public interest.” Also, in a recent letter to Congress, nine State Attorneys General pointed out, “Since 1977, and most recently in 2007, antitrust experts and enforcers have concluded that repealing the McCarran-Ferguson exemption would result in enhancing competition while allowing standard industry practices necessary for the proper functioning of these markets, such as sharing loss and other insured risk information.”
  • Removing this antitrust exemption is also supported by leading consumer groups. Numerous consumer groups - including the Consumers Union, Consumer Federation of America, U.S. PIRG, Center for Justice and Democracy, and Public Citizen - strongly support removing this antitrust exemption. In a joint letter to Congress, consumer groups pointed out that, under this legislation, health insurance companies “would be required to play by the same rules of competition as virtually all other commercial enterprises operating in America's economy.
  • There is evidence that removing this antitrust exemption will result in lower prices and other benefits for consumers. Experience has shown time and time again the benefits of increased competition in the form of lower prices, increased choice, and greater innovation. A healthy and competitive health insurance market will drive prices down in the health insurance industry, just as we have seen it do in so many other industries where competition is allowed to take hold. Here's one example. Since California passed a law in 1988 that eliminated the state antitrust exemption for the auto insurance industry, auto premiums for consumers in California have risen by only 9.8% while the rest of the country has seen auto premiums rise by over 48 percent.  Also one can look at the telephone and airline industries when healthy competition was added to those markets. 
  • The bill makes absolutely no change in the state-based system for regulating insurance. The part of the McCarran-Ferguson Act that reaffirms state regulatory and taxing authority is unchanged under the bill. Only the blanket antitrust exemption is removed, and only for health insurance.
  • Finally, the bill does not interfere with legitimate gathering of statistical information by insurers used in assessing risks. Despite claims by the bill's opponents, the bill does not interfere with the legitimate collective gathering and distribution of statistical information that the insurance industry uses in assessing risks for policies. This kind of information sharing has long been established in antitrust law as legitimate - as distinct from the collusive sharing of future pricing plans in order to fix prices at inflated levels to gouge consumers.