Health Insurance, Competition & the McCarran-Ferguson Act
A post by Jordan Cohen on June 17 raised a very important point: “what [do] we currently know about the role of competition in the health insurance market [?]” As Mr. Cohen makes the connection between cost and competition and another relating to slowing the rate of growth of health care expenses generally, his caveat raises an important concern that the information supporting conclusions in this regard may be less than optimum. One factor to consider is that competition, or the lack thereof, in the insurance industry is subject to the distortions of a wide, if not dizzying, array of often conflicting state regulation.
The McCarran-Ferguson Act (”the Act”) exempts the “business of insurance” from federal antitrust law. Which is to say that federal antitrust law applies only to the extent that “the business of insurance” is not regulated by state law. The Act goes so far as to permit price fixing — joint ratemaking — if permissible under state law. Hovenkamp Antitrust Hornbook, at 732. In one case, Mackey v. Nationwide Insurance Co., 724 F.2d 419 (4th Cir. 1984) (Superseded by Regulation as Stated in Home Quest Mort. LLC V. American Family Mut. Ins. Co., 340 F. Supp.2d 1177 (D.Kan. Oct. 12 2004), the Act even protected the practice of redlining on the reasoning that it “related to the particular types of risks [the] company [was] willing to insure against.” State of Maryland v. Blue Cross and Blue Shield Assn., 620 F. Supp. 907, 916 (D.C. Cir. 1985) (referring to Mackey).
While the lack of competition in the health insurance industry may well have other causes, which may or may not be cured through a public plan, the Act, with its exemption from federal antitrust law has not helped. Private competition may have more to offer than currently realized in the McCarran-Ferguson environment. Repealing the Act coupled with increased antitrust enforcement would seem a relatively affordable first step if competition, with the ultimate goal of benefiting the consumers/patients, is the goal.
I believe the repeal of McCarran-Ferguson will happen and that Professor Greaney is correct that increased antitrust enforcement and better antitrust laws in the health care industry generally should be forthcoming– but I am somewhat more optimistic than he that this will happen sooner rather than later. While in the Senate, then Senator Obama “introduced legislation to repeal the McCarran-Ferguson Act for medical malpractice insurance.” Furthermore, his picks of Christine Varney as assistant attorney general for the Antitrust Division and Jonathan Leibowitz as chairman of the FTC are said to have members of the insurance industry concerned about greater antitrust enforcement as well as the elimination of the McCarran-Ferguson exemption. I would suggest that AIG’s self-destruction at taxpayer expense does not bode well for the Act either.
If a “public option” is off the table, as Sunday’s pundits suggest, how about “levelling the playing field” by eliminating the anti-trust exemption?
For my county’s self-insurance program, I am having a difficult time in determining the “discounts” being provided by various PPO’s because of the “confidentiality” requirements of the PPO’s which are “unable to tell me” the costs of various proceedures expressed as a percentage of Medicare. In some cases, these bills have been charged at rates exceeding 700% of Medicare.
Greater transparency and more competition would appear to be worth the effort.
The truth is; This country is so far in debt that we can not afford the type of reform proposed by the Dems. They are stealing money from SS and raising taxes on the middle class in effort to insure just a small portion of the population.
The tax increased will start immediately, the benefits (if any) will start 5 years later.
This is just another Socialist scam to get Government controlling our health care.
When my insurance premiums are increaced by 50%, I wil be forced into substandard care when I can no longer affort the high premikiums. Ins Co’s will eventually go bankrupt.
My wife is a physician and we strongly advocate repeal of the anti-trust laws. Doctors are not allowed to do any kind of collective bargaining, but the big insurance companies are allowed to fix prices, one way or another. For example, 80% of the insurance options in our area are subsidiaries of the same big company. So, they pretty much dictate to the doctors what they can charge, and often refuse to pay for even the cost of essentials such as immunizations. This year, our practice had to stop giving the flu shot themselves because they were going to lose another $30,000, as they did the year before. We had to allow another company to come in and use our facilities free of charge so our patients would be taken care of. The patients had to pay out of their own pockets, and so learned something about the way their insurance companies were dumping costs onto doctors.
To show just how unfair the situation is, if doctors simply ask one another what an insurance company pays for a well visit, they are in danger of being charged with illegal “collective bargaining,” when all they are really trying to do is to learn enough about the range of reimbursement to stay in business or to avoid another pay cut. In what other business are we told what we can charge no matter what the service costs us to provide it?
The insurance companies have a virtual monopoly. We need a public option and we need to repeal the anti-trust laws. They’ve had it all their way for a long time. When even our most educated citizens feel like slaves on some corporate plantation, it is time for major reform in America.
It is interesting to note that most major insurance companies support a Federal Charter for Insurance as does the author. The claim that consumers will be better protected by a new federal insuarance Czar in Washington is dubious at best. How responsive will a federal agency be compared to financial and market conduct examiners in every state. The reason why large insurers support federal regulation of insurance is because they expect less regulation, not more. In the current financial crisis it was the federally regulated financial institutions that failes us while insurers stayed solvent. The AIG unit responsible for the government bail out on credit default swaps in not and insurance company and was regulate by the federal OTC, not state based insurance regulation.