Last Sunday the Washington Post ran an op-ed by Senators Patrick Leahy and Sheldon Whitehouse on healthcare reform. The senators wisely state in their piece that making health insurance more affordable will require more competition in the marketplace. Unfortunately, their proposal to revoke the federal antitrust exemption from insurers will do nothing to increase competition and may actually harm it.
Leahy and Whitehouse claim “[t]he exemption, enacted nearly 65 years ago, has served the financial interests of the insurance industry at the expense of consumers for far too long.” This, however, is far from the truth.
As Gregory Conko and I point out in our recent study, health insurers are only exempt from federal antitrust oversight to the extent that there exist state enforcers. In other words, if an insurer wasn’t controlled by state antitrust laws then federal regulators would be able to step in. The main difference between state and federal antitrust regulators is that the states have found it beneficial to allow certain cooperative practices that are not allowed under federal law. These cooperative practices, like joint- rate setting boards and actuarial information sharing allow insurers to reduce premiums for consumers, help smaller insurers compete, and promote insurer solvency. So the primary benefits of the exemption go to consumers rather than just insurers.
The Senators’ goal of creating a fair and competitive healthcare market is an admirable one. However, the means with which they want to attempt to achieve that end will not succeed. Truly increasing competitiveness in the healthcare industry will require reductions in burdensome regulation, not adding to them.