House Approves Removing Insurers' Antitrust Exemption

The U.S. House of Representatives today stripped health insurance companies of antitrust exemptions by a 406-19 vote.

The bill received the support of all Democrats who voted and from 153 Republicans. Nineteen Republicans voted against the bill.

The Health Insurance Industry Fair Competition Act (HR 4626), sponsored by Democratic Representatives Tom Perriello of Virginia and Betsy Markey of Colorado, removes the health insurance industry's antitrust protections under the McCarran-Ferguson Act of 1945.

Markey and Perriello said in a joint media release that passage of the bill means that health insurers would no longer be protected from liability for price fixing, dividing up market territories, or bid rigging.

In the last 14 years, the cosponsors said, there have been 400 mergers among healthcare insurers so that 95% of health insurance markets are "highly concentrated," which means consumers have little or no choice between insurers. This non-competitive market has led to health insurance premiums having more than doubled in the past decade.

Related legislation in the Senate, S 1681, sponsored by Judiciary Committee Chairman Patrick Leahy, D-VT, remains in his committee, where it is expected to face more-concerted resistance from Republicans.

Health insurers criticized the legislation passed by the House Wednesday as misdirected and unnecessary.

"In attempting to solve a problem that doesn't exist, this legislation is the triumph of soundbites over substance," said Karen Ignani, president and CEO of America's Health Insurance Plans in a prepared statement. She added that the National Association of Insurance Commissioners determined anti-competitive practices already are not permitted under the McCarran-Ferguson Act and are not tolerated under state law.

Ignani said the House action had nothing to do with healthcare reform. "Real reform means containing costs to ensure that healthcare is affordable for working families and small businesses," she said. "It's time to clear the political hurdles that stand in the way of real cost containment."

Ignani added that the Congressional Budget Office has said that "passage of this legislation will do nothing to reduce healthcare costs."

"We don't think it's necessary, it's not going to do anything," Brett Lieberman, spokesman for the Blue Cross Blue Shield Association, referring to the House vote. "Health insurers are very regulated, with many state and federal regulations. This isn't going to do anything about the underlying factors that are driving costs—medical expenses and people losing jobs."

HR 4626 has the "strong support" of President Obama, White House Press Secretary Robert Gibbs said this week. "At its core, health reform is all about ensuring that American families and businesses have more choices, benefit from more competition, and have greater control over their own healthcare. Repealing this exemption is an important part of that effort," Gibbs said. "Today, there are no rules outlawing bid rigging, price fixing, and other insurance company practices that will drive up healthcare costs, and often drive up their own profits as well."

On Wednesday, President Obama applauded the House for passing the Health Insurance Industry Fair Competition Act "on a strong bipartisan vote."

"This bill will help ensure that insurers abide by common-sense rules that prevent bid-rigging, price-fixing, and other practices that drive up healthcare costs for the American people."

"Repealing the antitrust exemption for health insurers is an improant step toward achieving reform that gives families and business owners greater control over their healthcare," Obama said. "I look forward to meeting with congressional leaders [today] to continue this critical discussion."

However, a Congressional Budget Office review last fall of a similar bill found that state insurance regulators and state laws "already prohibit issuers of health insurance and medical malpractice insurance from engaging in practices, such as price fixing, bid rigging, and market allocations." HR 4626 does not strip medical malpractice insurers of their antitrust exemption.

In addition, the Congressional Research Service said in a report last month that removing antitrust exemptions from health insurers might actually exacerbate the very problem it hopes to resolve because it prohibits smaller health insurers from setting their rates based on shared data collected by larger competitors.

"Should additional data be unavailable to small insurers in some way, further consolidation in the insurance industry as small insurers merge in order to gain the competitive advantage of additional information is a likely, albeit, ironic, possibility," the CRS report said.

The House's vote came on the same day that the American Medical Association issued a report that found competition in the health insurance industry is disappearing.

The White House has also called for the creation of a federal Health Insurance Rate Authority, a seven-member oversight board comprised of economists, physicians, and consumer and insurance industry representatives who will have the power to review and block premiums rate hikes that they deem are excessive.