The U.S. House has passed a bill that includes provisions to repeal for health insurers the limited exemption from federal antitrust law granted to the “business of insurance” under the McCarran-Ferguson Act of 1945.
The bill, H.R. 5, sponsored by Rep. Phil Gingrey, R-Ga., has as its primary target repeal of the Independent Payment Advisory Board created by the Patient Protection and Affordable Care Act. But under an amendment sponsored by Rep. Paul Gosar, R-Ariz., the bill also would apply, for the first time, the Sherman Antitrust Act and oversight by the Federal Trade Commission to health insurance.
The amendment was crafted to exempt P&C and life insurance from its purview. It relies on the definitions of health insurance set out in PPACA and the I.R.S. Code, and separately includes specific exemptions that it not apply to life and annuity products, “excepted benefits” that may be offered separately or in concert with life and annuity products, and any P&C insurance, “including but not limited to, automobile, medical malpractice or workers’ compensation insurance.”
Earlier versions of the amendment included both health insurance and medical malpractice insurance. Language repealing McCarran-Ferguson for those two lines of business were included in early versions of the legislation that would ultimately become PPACA.
H.R. 5 passed by 223-181 mostly party line vote. Seven Democrats voted for the measure, while ten Republicans voted against.
Following the bill’s passage, Melissa Shelk, vice president for federal affairs at the American Insurance Association, said that even though its members were exempted from the final bill, it would have preferred to see McCarran left intact, adding that “any attempts to broadly repeal McCarran-Ferguson are misguided and could have unintended consequences that, ironically, could stifle market competition while promoting regulatory uncertainty and increased litigation.”
“In the decades since McCarran’s adoption, insurers have been able, through state oversight of advisory organizations, to share loss cost data to predict future losses and to develop common policy forms, which has fostered competition in a manner that greatly benefits consumers,” Shelk said in a statement.
In truth, the repeal probably won’t amount to much (presuming it even receives a vote in the Senate, which is unlikely, given the partisan bill to which it is attached.) McCarran-Ferguson shields insurance from federal antitrust scrutiny (state antitrust laws still apply) only where the business activities are regulated under state law and do not constitute “boycott, coercion or intimidation.” In practice, the primary purpose of the exemption is to provide a statutory safe harbor for common insurance industry practices such as pooling claims data through rating bureaus and establishing standardized policy forms.
Health insurers do share some data and some carriers in some markets make use of standardized forms, but that segment of the industry in general does not rely on the rating bureaus to anywhere near the extent that P&C markets do. And to whatever extent that insurers – even P&C insurers – do share data, it is in a pro-competitive manner that courts would almost certainly find is permissible under so-called “rule of reason” analysis.
But in order to get to that outcome, insurers first would have to spend an awful lot of time and money defending lawsuits that challenge practices which have always served consumers well. So if the idea behind repealing McCarran is to ensure full employment for struggling plaintiffs’ attorneys, then yes, it likely would accomplish exactly that.