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Repeal of Insurance Antitrust Exemption Threatens Competition

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Repeal of Insurance Antitrust Exemption Threatens Competition

Repeal of Insurance Antitrust Exemption Threatens Competition

Patients Brace for Higher Prices, Raw Deal

Washington, D.C., October 21, 2009—The House Judiciary Committee voted on Wednesday to strip health insurers of their longstanding exemption from federal antitrust laws as part of the current Democratic health care reform effort.  Health policy expert Gregory Conko warned that removing antitrust exemptions, which date back to the 1940s, will actually drive up prices and harm consumers.

“Federal enforcement isn’t necessary to ensuring fair competition in the health insurance industry, but could actually drive smaller companies to the brink of insolvency,” said Conko.  “Congress seems ready to inflict considerable damage on the health insurance industry for no better reason than its opposition to Democratic reform proposals.”

The McCarran-Ferguson Act of 1945 exempts insurers from federal antitrust laws as long as the states police anticompetitive conduct.  The exemption permits insurers to share the actuarial data on which firms base their premiums. Critics suggest this conduct facilitates pricing collusion, but state laws expressly permit the practice because it helps small insurers gain access to a sufficiently large pool of actuarial data.

“This information sharing practice is pro-competitive. Without it, small competitors would be flying blind, and the result would be less robust competition and higher prices for consumers,” said Conko.  “Even though some states have highly concentrated health insurance markets, economic research clearly shows there’s no monopolistic pricing because the bigger firms can help drive down physician and hospital costs.”

    Read more commentary on the House vote on OpenMarket.org.