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Yesterday, Majority Leader Harry Reid testified in support of a bill championed by Senator Leahy to repeal the anti-trust exemption health insurance companies currently enjoy. The bill has received a ton of support:
Sen. Chuck Schumer (D-N.Y.) on Wednesday called for an amendment to the health care reform bill that would remove the long-standing antitrust exemption for insurers, echoing a push by other Democrats to crack down on the industry.
“The health insurance’s antitrust exemption is one of the worst accidents of American history,” Schumer said. “It deserves a lot of the blame for the huge rise in premiums that has made health insurance so unaffordable. It is time to end this special status and bring true competition to the health insurance industry.”
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Senate Majority Leader Harry Reid (D-Nev.) added his support to repealing the exemption at the Leahy hearing. “It’s something that should have been done a long time ago,” Reid said.
As for insurance companies, “There isn’t anything we could do to satisfy them in this health care bill. Nothing,” Reid said. “They are so anti-competitive. Why? Because they make more money than any other business in America today. . . .What a sweet deal they have.”
The exemption, known as McCarran-Ferguson, cedes regulatory control of the industry, on the business side, to individual states. But repealing the antitrust exemption would give the federal government more authority to oversee the business side of health insurance companies — something states now have the sole authority to monitor.
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Leahy’s bill would repeal the exemption established in the 1945 McCarran-Ferguson Act for any companies engaged in price fixing or bid rigging — which are both already illegal. He has introduced similar legislation in other Congresses, including a broader repeal of the underlying law. Reid is a co-sponsor of the current bill.
In the House, where Democratic leaders are exploring the issue further, Judiciary Committee Chairman John Conyers (D-Mich.) has introduced legislation that would essentially end McCarran-Ferguson and give the federal government the right to regulate insurers at the national level.
So, what would this repeal do? In testimony on the bill yesterday, Christine Varney, the government’s top anti-trust lawyer, said:
The McCarran-Ferguson Act antitrust exemption is very expansive with regard to anything that can be said to fall within “the business of insurance,” including premium pricing and market allocations. As a result, “the most egregiously anticompetitive claims, such as naked agreements fixing price or reducing coverage, are virtually always found immune.”
Concerns over the exemption’s effects are especially relevant given the importance of health insurance reform to our nation. There is a general consensus that health insurance reform should be built on a strong commitment to competition in all health-care markets, including those for health and medical malpractice insurance. Repealing the McCarran-Ferguson Act would allow competition to have a greater role in reforming health and medical malpractice insurance markets than would otherwise be the case.
There is a ton of evidence that premium price fixing and backroom deals to preserve market share between competitors occur regularly today.
Health Care for America Now’s report [pdf] on insurance industry absuses documents how Blue Cross Blue Shield in Massachusetts and a big hospital made a deal to increase payments to providers, and providers made a deal to not allow any other insurer to pay them less. Thus, Blue Cross raised their rates, leading to a period of skyrocketing premium increases in Massachusetts, the hospital got rich off their locked in payments, and other hospitals and insurers in the state had to scramble to keep up. In all, people had to pay more, and those increased premiums were passed along to the hospitals in on the deal.
This kind of price fixing and deal making is absolutely illegal in other businesses, but in the insurance industry, because of their anti-trust exemptions, they’re allowed to screw customers without repercussions.
Similarly, Health Care for America Now found that 94% of insurance markets in this country are “highly concentrated,” a Department of Justice term that means these markets are at risk for monopoly. For example, in Arkansas [pdf], Blue Cross Blue Shield controls 75% of the market, a level of concentration that would raise anti-trust lawsuits in any other industry.
These kinds of market concentrations were caused by years of mergers, mergers that would never have been allowed under normal anti-trust rules. And this market concentration is a huge driver of skyrocketing costs.
Ending the anti-trust exemption would be a huge start towards ending these abuses.
The insurance industry needs two things: Real competition and an end to their anti-trust exemption.
Price fixing, backroom deals, collusion, and market-concentrating mergers should once again be illegal in health insurance. And we need a public health insurance option to ensure insurance companies follow the rules set out for them.
Anything less and we’ll get more of what we have now – skyrocketing prices and anti-competitive dealmaking resulting in more medical bankruptcies for Americans.
(also posted at the NOW! blog)
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11 Comments
Give it a little twist when you stick it to them, Schumy Baby.
In other news, the FTC just approved the Pfizer-Wyeth merger. What does it take for antitrust legislation to actually, you know, kick in?
regulators who believe in regulation?
don’t know, so just guessing.
I’ve said this before: the way to enforce regulations is through regulatory enforcement. Price pressure from a public plan may force reductions in private premiums but is no guarantee of good behavior.
Credibly, a private insurer facing price pressure from a public plan would be more, not less, incentivized to seek dubious rationales for denying Stacy Ritter’s kids their growth hormone treatments. The existence of the public plan wouldn’t curtail that or handle the Ritters’ appeals. That would require a powerful regulatory infrastructure, one of the seldom acknowledged ancillary costs of preserving private insurance and putting it under additional stress.
The possibility of the Ritters jumping ship to the public plan — if they even could — wouldn’t prompt better behavior by their private insurer. Its attitude would more likely be, “Good riddance, high-maintenance beneficiaries!”
This isn’t necessarily true, given the way the market is regulated in the exchange, but that does prove your point. Regulations are needed to make public option competition work.
but with adequate regulation a po isn’t needed. it’s the regulations (and enforcement!) that are the necessary and sufficient conditions for the scheme “working.”
the po does not substitute for regulation, but it could be a kind of escape/refuge in case of catastrophic illness.
Right, and I’d argue that we need that in our society.
You’re right to note that in places like Switzerland, they get by on just regulation of private companies. But our corporate culture is much different. Companies actively look for ways to avoid regulation here, and they always will. So I’d argue you always need that counterweight of the public option to give people a choice and enforce good behavior.
please, be my guest. i will not argue against an escape/refuge from private insurance company abuse.
absolutely. that’s why regulation, very heavy regulation (for example, perhaps of the swiss variety) is necessary if private insurance companies are going to be allowed to operate in the healthcare industry.
i’d like that kind of regulation. and a pony. the point being that our fed regulators, including the dem economic team run by summers, don’t actually believe in regulation. but that’s another issue.
my complaint is this statement:
the “enforce good behavior” bit is just nonsense. it is based on a false notion of competition which, contra the neoliberals, does not exist in the health insurance market because in competition in a weakly regulated health insurance market does not lead to good results. please read scarecrow and wesgpc on this. i don’t have the links handy (will look for them later if you wish), but they have gone over this ground already.
I agree. Enough with the carrots! Time for two sticks: the public option and seriously enforced regulation.
With these greedy companies, ‘competition’ gets transmogrified into collusion and consolidation. We need strong regulations that are rigorously enforced.
You’ve outlined the practices which would be made illegal again, which is great.
What would the private health insurance market look like if those business practices changes were imposed, how would that effect the patient?