Recently, the House of Representatives voted to pass H.R. 372, also known as the Competitive Health Insurance Reform Act of 2017, which would close the longstanding antitrust immunity granted to health insurance companies. The bill would amend the McCarran-Ferguson Act of 1945, which exempted the “business of insurance” from federal regulations, including some federal antitrust laws. Under McCarran-Ferguson, the business on insurance was left to be regulated by the states as they saw fit. This meant that insurers are still subject to any state antitrust laws, as well as the federal antitrust laws covering certain Sherman Act violations.
The exemption from federal antitrust regulation under McCarran-Ferguson allows insurers to pool historic loss data, which includes information on claims paid and reserves held for claims reported. It also allows insurance companies to meet and develop standard policies. Realistically, there have been a number of antitrust cases filed against health insurers and thus, the exemption has not provided complete protection.
The proposed change to remove the exemption would be limited be the “business of health insurance”, including dental insurance. The McCarran-Ferguson exemption would still apply to other insurance businesses, such as life and property insurance. The idea behind H.R. 372 is that without the exemption, health insurance companies would have to compete in the free market; thus increasing competition and decreasing cost. The change would apply to both for-profit and non-profit entities in the business of health insurance. Detractors have said H.R. 372 would have little to no actual impact on health insurance. For example, subjecting health insurers to federal antitrust regulation would not incentivize insurers to increase their offerings across state lines.
This is not the first time Congress has considered amending the McCarran-Ferguson Act, specifically to end the exemption for health insurance companies. The House had passed similar legislation eliminating McCarran-Ferguson in its entirety in 2010, but the bill was not passed by the Senate. Over the past several years the elimination of McCarran-Ferguson has been introduced in the House in one form or another in bills such as the American Health Care Reform Act of 2015 and the Health Insurance Industry Antitrust Enforcement Act of 2012.
H.R. 372 is the first of these recent bills to be passed by the House. While the most notable difference between H.R. 372 and prior bills is that is not a complete repeal of McCarran-Ferguson, it is also narrower than other attempts, some of which included eliminating the exemption for additional insurance businesses, such as medical malpractice. Although there has been debate over how much practical effect a repeal of McCarran-Ferguson would have on the health insurance market, H.R. 372 received strong support on both sides of the aisle and now heads to the Senate.
If you have any questions related to the above, please call Mr. Jacobovitz, who is co-head of AGG’s Antitrust Group and the current vice chair of the A.B.A. Antitrust Section’s Federal Civil Enforcement Committee.