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Stripping Insurers’ Antitrust Exemption is a Congressional Misdiagnosis, New Report Shows

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Stripping Insurers’ Antitrust Exemption is a Congressional Misdiagnosis, New Report Shows

Stripping Insurers’ Antitrust Exemption is a Congressional Misdiagnosis, New Report Shows

McCarran-Ferguson Repeal Won’t Help Consumers, May Hurt Competition

Washington, D.C., December 8, 2009—Congressional proposals to eliminate the 64-year-old exemption from federal antitrust laws for health insurers would do nothing to promote competition and could disproportionately help the biggest insurance firms at the expense of smaller competitors.  That’s the finding of a new study published today by the Competitive Enterprise Institute.

“Federalizing antitrust enforcement over the insurance industry would jeopardize state-sanctioned practices that help small insurers compete,” said CEI Senior Fellow Gregory Conko, a co-author of the study, Congressional Misdiagnosis: Why Repealing McCarran-Ferguson Will Harm Competition in Health Insurance Markets. Under the McCarran-Ferguson Act of 1945, state insurance regulators police against anticompetitive behavior but permit certain cooperative practices—such as data sharing and joint rate setting—that promote small insurer solvency.

Repeal proponents, such as President Obama and Senators Patrick Leahy (D-Vt.) and Charles Schumer (D- N.Y.), argue that the federal antitrust exemption has permitted excessive consolidation in the health insurance industry.  The CEI study shows, however, that insurance firm mergers are already subject to federal antitrust oversight, so the repeal would do nothing to prevent additional industry consolidation.

“Ironically, repealing the federal antitrust exemption could result in further consolidation by jeopardizing programs that help level the playing field for the smallest insurers,” said Conko.

The health care reform legislation passed by the House of Representatives in November includes one version of the repeal proposal, but a similar measure was removed from the Senate health care bill late last month in order to secure the vote of moderate Democratic Sen. Ben Nelson (D-Col.).

“Federal antitrust rules now restrict pro-competitive coordinated behavior among doctors and other individuals and firms in the health care sector,” said study co-author and CEI policy analyst Kevin Hilferty. “McCarran-Ferguson’s antitrust exemption shouldn’t be repealed, it should be expanded.  Encouraging true competition in the health industry will require reducing burdensome regulations, not adding to them.”

> View the CEI OnPoint Congressional Misdiagnosis: Why Repealing McCarran-Ferguson Will Harm Competition in Health Insurance Markets