Many liberals rejoiced to hear the news of the Senate’s passing of Reid’s health reform bill last week. Many more progressives, however, began to speak out against the bill. Unfortunately, their main concerns are not that the legislation harms the market and restricts individual choice, but that it doesn’t do enough of those things.
One of the main problems that progressives cite with the bill is that it leaves out the repeal of the longstanding antitrust exemption for insurers. Some feel that this exemption from antitrust enforcement is allowing an unfair advantage to the insurance industry at the expense of consumers. While early versions of legislation included the repeal of McCarran-Ferguson, Senator Ben Nelson, a former insurance commissioner, argued successfully for its removal from the current bill.
Nelson realized that insurers are only exempt from federal antitrust oversight to the extent that state governments regulate them, so they still must comply with state antitrust laws. The only significant difference in the exemption is that state regulators have historically permitted certain cooperative practices that are generally forbidden under federal antitrust laws, but which help small insurers compete with their larger counterparts and promote insurer solvency. Both primarily help consumers, not the insurance industry.
Still, there have been claims that more oversight and enforcement are needed to “[dismantle] the health insurance monopolies.” These concerns might be overblown as Gregory Conko and I explain in our recent study:
Most mergers in any industry receive only cursory review. But, from 1993 to 2008, the DOJ conducted in-depth investigations of 34 health plan mergers28 and concluded that most of them would not raise serious competitiveness problems, and that many would increase efficiencies that could lead to lower premiums. Indeed, as Boston University health economist Austin Frakt and attorney Ian Crosby have noted, larger insurers with greater market shares appear to be better able to offset the substantial market power held by health care providers. According to Frakt and Crosby, economic research “supports the notion that recent increased market power of insurers does not lead toward monopolistic pricing, but rather it provides a counter-balance to the power held by hospitals and provider groups.”
Ensuring healthy competition in the health care market is an important step toward making health care affordable for all Americans. Repealing the McCarran-Ferguson Act, however, is more likely to reduce competition in the health insurance industry than enhance it. Improving competitiveness in the insurance market will require removing burdensome regulation and oversight, not adding to it.