Health insurers no longer will be immune from federal antitrust laws that prohibit collusion and price-rigging under a bill that President Donald Trump signed into law last week.
U.S. Sen. Steve Daines, R-Montana, was among a bipartisan group of lawmakers who backed the legislation, known as the Competitive Health Insurance Reform Act. It removes a 75-year-old exemption for health insurance carriers in federal antitrust laws that apply to nearly all other sectors of the economy. Supporters say it will deter anticompetitive practices that lead to artificially high premiums and harmful policy exclusions, saving Americans potentially billions of dollars in health-care costs.
“My bipartisan bill will now ensure greater transparency and oversight in the health insurance industry and help make health insurance more affordable for Montanans and Americans across the country,” Daines said in a statement. “I’m glad the president has signed this commonsense bill into law.”
Daines and Sen. Patrick Leahy, D-Vermont, introduced the legislation in the Senate in February 2019, but it stalled. The House passed an identical bill, sponsored by Rep. Peter DeFazio, D-Oregon, and Rep. Paul Gosar, R-Arizona, on a voice vote last September. The Senate passed that bill by unanimous consent in December, and Trump signed it last Wednesday. The bill was largely overshadowed by a massive spending package passed last month that included, among other things, $900 billion in COVID-19 relief programs.
The new law follows roughly two decades of efforts to amend the McCarran-Ferguson Act of 1945, which carved out the antitrust exemption for insurance carriers regulated at the state level.
In a 2019 letter to the House Judiciary Committee, representatives of three consumer advocacy groups – Consumer Reports, Consumer Action and the Consumer Federation of America – argued that exemption was a misguided policy from the beginning.
“Congress created this antitrust exemption almost by accident, in the midst of the Second World War – when attentions were directed elsewhere – in the wake of a Supreme Court decision clarifying that the antitrust laws did apply to insurance,” the consumer groups wrote. “It started out to be a temporary three-year breathing spell, to allow insurers to familiarize themselves with the antitrust laws and adjust their practices to the accepted rules of competition. Instead, a few poorly understood words added in conference committee turned the temporary delay into an unintended exemption from those rules.”
Only one other for-profit industry, major-league baseball, is exempt from federal antitrust laws, thanks to a 1922 Supreme Court decision. The push to remove the exemption for health insurers was backed by numerous hospital and physician organizations.
In a statement, Dr. Jane Gillette, a former president of the Montana Dental Association, called the signing of the bill “a landmark achievement for patient advocates and Montanans” and said it “prevents collusion between health insurers, but most importantly drives transparency, competition and value.”
DEFAZIO FIRST introduced legislation to close the exemption as part of the Affordable Care Act in 2009, but it was killed in the Senate. Gosar reintroduced it in 2017, and the House passed it on a 416-7 vote, but again it stalled in the Senate.
“Right now, insurance companies can and do get together and collude,” DeFazio said in a speech on the House floor in September. “Before COVID, they’d go to some fancy resorts, they’d get together and say, ‘How about you stay out of North Dakota; we’ll stay out of South Dakota. You stay out of Oregon; we’ll stay out of Washington. Let’s divide up the pie here. You decide where you’re selling; we’ll decide where we’re selling. Oh, and by the way, here’s the things we don’t want to cover. Here’s the people we want to redline and exclude.’ That’s all legal.”
DeFazio said the health insurance industry had raked in multibillion-dollar gains during the pandemic by “jacking up” copays and deductibles and “excluding all sorts of treatments from coverage.” Meanwhile, the pandemic and the accompanying economic recession have caused millions of Americans to lose employer-sponsored health insurance.
Insurance companies, as well as state officials who regulate them, lobbied against the bill, saying antitrust enforcement should be left to the states. The real problem, they contended, is not insurers but the underlying costs of health care.
“The McCarran-Ferguson Act recognized that all health care is local, and that states should be able to govern their own health insurance markets,” Matt Eyles, president and CEO of America’s Health Insurance Plans, said in a statement. “Removal of this exemption adds tremendous administrative costs while delivering absolutely no value for patients and consumers. It will unnecessarily add layers of bureaucracy, destabilize markets, create conflicting federal and state oversight requirements, and lead to costly litigation.
The National Association of Insurance Commissioners disputed that the McCarran-Ferguson exemption was an “error” or an “oversight.” Rather, the association said in a letter to the Judiciary Committee, it was a narrow exemption that allowed insurers to share data about their financial losses through third-party advisory groups.
“This statistical information, in turn, allows small- and medium-sized insurers to compete, as those insurers do not generate sufficient business volume or claims data to predict the future loss costs of policies,” the association said. “Loss costs published by advisory organizations are vital to effective policy pricing; without published loss costs, many insurers would be forced to limit policy offerings or even leave the business to the much larger insurers.”
The association also argued state regulators already keep insurance companies in line.
Health insurers have not been entirely immune from federal antitrust laws. In a news release last week, the U.S. Department of Justice said it has “enforced the antitrust laws against health insurers involved in transactions valued at over $160 billion” over the past five years. But the McCarran-Ferguson exemption has been a source of headaches for federal prosecutors.
“This exemption has sometimes been interpreted by courts to allow a range of harmful anticompetitive conduct in health insurance markets,” the DOJ said. The new law, it said, “will end distracting arguments about when health insurers qualify for the McCarran-Ferguson exemption, and it will enable the Antitrust Division to spend resources more efficiently to achieve results that make a difference for American consumers.”