Copyright 2010 Gale Group, Inc.All Rights ReservedASAPCopyright 2010 The Washington Times LLC The Washington Times (Washington, DC)
February 9, 2010
SECTION: Pg. B03 ISSN: 0732-8494
LENGTH: 1071 words
HEADLINE: Killing health care competition with antitrust; Even scaled down reform could be counterproductive; COMMENTARY
Byline: Gregory Conko and Kevin Hilferty, SPECIAL TO THE WASHINGTON TIMES
Comprehensive health reform now seems dead. But at a press conference last week, House Speaker Nancy Pelosi said that Democrats would pursue easier-to-pass incremental legislation during the coming weeks and put off comprehensive reform for later. A Pelosi aide indicated that one of the first priorities might be to repeal a 60-year-old law that exempts health and medical-malpractice insurers from federal antitrust laws.
Democrats have long blamed the McCarran-Ferguson Act of 1945 for aiding insurance industry consolidation and coordinated pricing. So, last year, Rep. Sheldon Whitehouse, Rhode Island Democrat, and Sen. Patrick J. Leahy, Vermont Democrat, introduced a bill that would repealthe limited antitrust exemption. The measure was incorporated into the House health care bill, but was dropped at the last minute from the Senate version. Democrats seem intent on reviving it now in order to punish the insurance industry for opposing the comprehensive legislation.
Mr. Leahy and Mr. Whitehouse claim the exemption has served the financial interests of the insurance industry at the expense of consumers for far too long. And Sen. Charles E. Schumer, New York Democrat, insisted that Congress repeal the exemption to punish insurers for trying to sucker-punch health care reform.
There is no evidence that McCarran-Ferguson has resulted in higherpremiums or profits, however. So, not only is federal intervention unnecessary for ensuring fair competition, it could actually hurt consumers by eliminating practices that help small insurers compete and drive down costs.
The law gives states the primary role in regulating the business of insurance, and exempts insurers from most federal regulation, including antitrust laws, as long as the states have laws governing the same conduct.
But where critics see only dominant market power and higher premiums, a closer look reveals a careful balancing by the states that helps promote competition and keep costs in check. As the Congressional Budget Office concluded in October, repealing the exemption would havelittle or no effect on insurance premiums because state laws alreadybar the activities that would be prohibited under federal law if this bill was enacted.
It is true that a handful of states have highly concentrated markets. In Hawaii, Rhode Island and Alaska, 95 percent or more of the small-group health insurance</strong> market is served by just two insurers. But the McCarran-Ferguson Act only shields activities that are integrallyrelated to providing insurance and unique to the insurance industry,and consolidation isn't one of them.
Practices that are not inherent to underwriting insurance, such asfirm mergers, bundling and tying arrangements, agreements to allocate geographic market shares, and many other allegedly anti-competitiveactivities are, even under current law, subject to federal antitrustenforcement and actively policed by the Federal Trade Commission. So, additional federal intervention would have no effect on insurance industry consolidation.
What would be newly subject to federal enforcement is a variety ofongoing collaborative practices among health and medical-malpracticeinsurers that are now permitted by the states because they have pro-competitive effects.
At the state level, insurers actively share loss-experience data and related information through rating bureaus, so that each firm has a large enough pool of information to accurately price risks and set aside reserves. In some states, industry-run rating bureaus aggregatethis underwriting data and calculate target or advisory rates under the supervision of state regulatory authorities. Many states also permit insurers to create joint underwriting associations that help insurers pool difficult-to-manage risks and share in the associated profits or losses.