House Amendment Imperils Payer Anti-Trust Exemption

The House of Representatives has passed HR 1418, the “Competitive Health Insurance Reform Act,” reintroducing questions about whether healthcare payers should be allowed to fall under an anti-trust exemption that may enable price gouging.

The bill would repeal a 75-year-old law that exempts health insurers from certain anti-competitive regulations. This exemption allows payers to coordinate on healthcare costs in order to increase payer profits at the expense of consumers’ wallets, the bill sponsors charged.

“As long as this exemption is still on the books, health insurance companies legally can, and do, collude to drive up prices, limit competition, conspire to underpay doctors and hospitals, and overcharge consumers,” Peter DeFazio (D-OR), one of the bill’s sponsors, said in a press release. “My legislation will protect consumers and make sure the health insurance industry plays by the same rules as virtually every other industry in America.”

In 1944, the Supreme Court determined that health payers’ activities fell under interstate commerce and were subject to the Commerce Clause and Sherman Act, explained a press release from Representative Paul Gosar (R-AZ), co-sponsor of the Competitive Health Insurance Reform Act.

However, the following year Congress passed the McCarran-Ferguson Act of 1945 which formed a special-interest loophole that protected payers from antitrust regulation. According to Gosar, Congress originally designed the law to support new payers by allowing them to share and compare premium data with established payers.

Payers have been rapidly consolidating, even during the coronavirus pandemic. Some mergers and acquisitions have been struck down due to anti-trust allegations, such as the attempted Anthem-Cigna merger.

However, successful industry consolidations have allowed payers to abuse the McCarran-Ferguson Act’s loophole, Gosar and other proponents of the Competitive Health Insurance Reform Act argued.

“The healthcare market should be patient-centric and should provide a variety of affordable and quality options, all fostered by competition,” said Gosar.

“There is no reason in law, policy, or logic for the insurance industry to have special exemptions that are different from all other businesses in the U.S. The government should not be picking winners or losers, and the insurance industry should also have to comply with federal antitrust laws.”

The new Act would simply amend the McCarran-Ferguson Act to counteract the loophole.

“Nothing contained in this Act shall modify, impair, or supersede the operation of any of the antitrust laws with respect to the business of health insurance (including the business of dental insurance and limited-scope dental benefits),” the Competitive Health Insurance Reform Act states.

Gosar expressed confidence that the president would sign the bill and indicated that he would be coordinating efforts with senators to ensure that this legislation continues on to the executive branch.

Payers, on the other hand, have been vocal in their defense of the McCarran-Ferguson Act as it currently stands. Their primary argument in favor of the 1945 Act is that it maintains state jurisdiction over health insurance.

It has long been debated whether health insurance is an interstate product or not. As recently as March 2019, CMS requested public comments on whether health insurance should be permitted to be a cross-border product in an effort to lower premiums.

“Legislative proposals that would repeal or amend antitrust-related portions of the McCarran-Ferguson Act would undermine states’ authority and harm Americans. Repeal of McCarran-Ferguson in general, or the antitrust exemption in particular, would do nothing to increase competition in health insurance markets; is not necessary to allow sales across state lines; and would harm millions of Americans by reducing competition, choice, and innovation,” an AHIP spokesperson explained in an emailed statement to HealthPayerIntelligence.

“Following the passage of the McCarran-Ferguson Act, state insurance regulators, working through the NAIC, began work to create the legal framework needed to strengthen state regulation and to limit any future intervention by the federal government. Through their coordinated national effort, state regulators were able to impose stronger price regulations than what the industry would have otherwise had accepted,” the National Association of Insurance Commissioners has argued.

However, the bill could stagnate in the Senate like its predecessors.

This same bill has passed in the House before by a bipartisan vote of 416 to seven in March 2017, Gosar’s press release reminded.

Prior to Gosar’s 2017 Competitive Health Insurance Reform Act, several bills have made it to a vote in either the House or the Senate in an attempt to repeal the McCarran-Ferguson Act, but none have made it through both houses of Congress.

“There are many ways to improve affordability and competition in health insurance coverage markets. Repealing McCarran-Ferguson is not among them,” the AHIP spokesperson added.