Exemption Allowing Insurance Restraint of Trade Eyed by Congress

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Published 10/21/2009 - 10:24 a.m. CDT

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The Associated Press reports in an article found here that "Top Senate Democrats intend to try to strip the health insurance industry of its exemption from federal antitrust laws, according to congressional officials, the latest evidence of a deepening struggle over President Barack Obama's effort to overhaul the health care industry. If enacted, the switch would mean greater federal regulation for an industry that recently has stepped up its criticism of portions of a health care bill moving toward the Senate floor."

"Congressional officials said Senate Majority Leader Harry Reid of Nevada and Senator Patrick Leahy of Vermont, chairman of the Senate Judiciary Committee, arranged to make the announcement Wednesday, joined by Senator Chuck Schumer of New York."

Antitrust laws prohibit agreements by two or more that "restrain trade in interstate commerce." To prevent labor unions from antitrust liability, a "labor exemption" was created under the Clayton Act of 1914. A judicially-derived expansion of the labor exemption that protects union activity from antitrust scrutiny has been the crux of nearly all antitrust actions in professional sports (with the exception of baseball, which had an blanket exemption from antitrust laws until late in 1998). It has been ruled that the exemption applied throughout the negotiation process, even after a labor contract expired. This interpretation of the non-statutory exemption was upheld by the U.S. Supreme Court in 1997.^{[WikiAnswers]}

"In a statement, the major industry trade group, America's Health Insurance Plans, said the industry already was one of the most regulated in the country. The focus on the industry's antitrust exemption, it said, was 'a political ploy designed to distract attention away from the real issue of rising health care costs.'"

While the health insurance industry currently enjoys the ability to "restrain trade in interstate commerce", if congress gets their way, the insurance industry may soon have to operate as do all other businesses.

A very good summary of this exemption may be found in this article which points out that while currently the politics of Washington is aiming at the notion that the insurance industry needs competition the problem is that the insurance industry has federal IMMUNITY from competition.

"The federal government has not been able to attack the insurance companies through federal anti-trust laws for over 60 years. Under the McCarran-Ferguson Act passed in 1945, insurance companies (and Major League Baseball!) are specifically excluded from federal anti-trust laws as long as the state regulates in that area, and federal anti-trust laws will apply ONLY in cases of boycott, coercion, and intimidation."

"Under the McCarran-Ferguson Act, Big Insurance is allowed to collect and SHARE data with each other about claims. With this information, Big Insurance can fix prices, set coverage requirements, outline conditions for coverage denials (like pre-existing conditions), and many, many more. That’s right, folks! Big Insurance can plot together...!"

"Back in 2007 in the wake of Hurricanes Katrina and Rita, a bipartisan group went after Big Insurance for the way that it was screwing over homeowners who lost everything in those terrifying storms. Sen. Patrick Leahy (D-VT) introduced the Insurance Industry Competition Act, along with the judiciary panel’s ranking member, Senator Arlen Specter (then R-PA), Senate Majority Leader Harry Reid, (D-NV), and Senate Republican Whip Trent Lott, (R-MS)....This bill intended to repeal the McCarran-Ferguson Act. These legislators noted the blatant collusion among Big Insurance and the drought of competition in the insurance industry."

"Big Insurance went nuts... citing all the usual doom and gloom scenarios without providing any foundation for the apocalyptic tales....[and] claimed that taking away their immunity would stifle competition!! ...However, the same bill has been reintroduced this year again by Rep. Peter DeFazio (D-OR). No significant movement has taken place on this bill."

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