Removing Antitrust Exemption Will Have Little Impact on Health Insurers

With affordability being the biggest obstacle to health care reform, some federal lawmakers have shifted the discussion towards insurer antitrust protections they say keeps markets closed and premiums high.

The House Judiciary Committee last week voted on a bill to repeal parts of the 1945 McCarran-Ferguson Act which gives health insurers limited protections from federal antitrust laws into price fixing and other business practices. A day later, Democrat House Speaker Nancy Pelosi said she plans to include a provision in the health care reform bill to repeal McCarran-Ferguson.

Critics say the move is an attempt by Democrats to silence the insurance industry for criticizing proposed reform legislation that forbids insurers to deny coverage for pre-existing conditions but does not require all Americans to have health insurance.

Congress passed the McCarran-Ferguson Act in 1945 shortly after the Supreme Court ruled that insurance companies that conduct substantial business across state lines are engaging in interstate commerce and subject to federal regulation. It was enacted to ensure that states would have the authority to regulate how insurance companies do business within their borders.

Brad Ellis, director at Fitch Ratings’ Insurance Group, said the Judiciary committee’s proposal, if passed, won’t impact how insurers operate. But it would increase the cost of health care because insurers will pass the expense onto consumers.  Ellis added that insurers haven’t benefitted much from the statute from a regulatory perspective.

“Some say state regulations are more onerous and expensive than federal regulation for insurance carriers,” Ellis said. He cited state laws that mandate insurers establish their HMO plans as operating entities.

Insurers and consumers, however, might benefit if insurers are allowed to sell policies across state lines, Ellis said.

“It could reduce some of the expense associated with HMOs, where you have to satisfy specific statutes to set up an HMO,” he said. There also could be savings associated with maintaining and accessing medical records because insurers keep detailed claims on members as long as they are with the company, Ellis said.

Hospitals, meanwhile, may have more negotiating power with insurers if more carriers are in the market, said Fitch Ratings Corporate Finance Director Lauren Coste, who covers For-Profit Health Care Facilities.  But Coste said the hospitals’ bad debt expense won’t subside without health care reform that includes Medicaid expansion, subsidiaries for the poor, and coverage mandates on individuals, she said.

Susan Voss, vice president of the National Association of Insurance Commissioners (NAIC) NAIC said the organization hasn’t taken a position on the issue of states selling across state lines. But she said states should be given an opportunity to work together to find solutions that meet the needs of their residents, particularly neighboring states that have common health care providers. And there needs to be more discussion about how consumers will be protected if insurers are allowed to sell across state lines, she said. “Who helps consumers when they have a problem?  The state where they purchased (coverage) or the state where they get it?”

Ed Haislmaier, an expert on health care policy and markets with the Heritage Foundation, said states can work together now to allow licensed insurers to sell across state lines, though a federal law could make it easier.  But he said that isn’t the cure-all for more competition and affordable health care.

“At the end of the day, it comes down not to insurers, but the claims they are paying. It’s what the hospital and doctors do and what they charge,” he said.

Haislmaier thinks a state run health exchange similar to what Massachusetts and Utah offer, where the state invites insurers to sell policies through an exchange, is a better solution.

“Make it buyer driven rather than seller driven.  Line the insurers up and let (consumers) pick,” he said.