Antitrust exemptions are few and far between, and for good reason. The antitrust laws are the bedrock of our free market system. Where an exemption exists competitors can set the terms of competition – set prices, allocate markets and deter competition. Competitors get to behave in ways that hurt consumers, drive up prices, and erode quality.
Appropriately, antitrust exemptions are few and limited. Indeed, a good part of the growth in formerly regulated industries came about because of the elimination of antitrust exemptions. An unfortunate senior citizen in the ranks of antitrust exemptions is the McCarran-Ferguson antitrust exemption for the insurance industry. Passed in 1945, the exemption is an outdated provision that was constructed with hundreds of small companies in mind who could not share any information because of the draconian application of the antitrust laws.. (Fortunately the antitrust laws have been reinterpreted over the past several decades to permit that type of information sharing).Today, five health insurance companies dominate the national market, with many locales subject to monopolies or near-monopolies. These companies already compile and process massive amounts of data just pertaining to themselves.
In other words, the exemption is unnecessary and at this point, does more harm than good.
First of all, you don’t have to be an expert in healthcare policy or antitrust to know that health insurance markets are not “healthy.” The cases brought by the Justice Department against the Anthem-Cigna and Aetna-Humana mergers demonstrated that these markets are highly concentrated and that concentration leads to higher and higher premiums. The cases demonstrated that entry barriers are high and past mergers have led to higher premiums. Profits are up, quality and customer satisfaction is down, and consumers continue to struggle with high premiums and even higher deductibles.
Health insurance is a complex business, with little transparency and choice for consumers. In a market where the product can be difficult to understand, business practices can be opaque, but the stakes are high, regulation should be smartly crafted to protect consumers. McCarran-Ferguson serves as an impediment to enforcers who are trying to do just that.
And it’s not just a question of protecting consumers from anticompetitive practices. McCarran-Ferguson prevents the nation’s leading consumer protection cop, the Federal Trade Commission, from protecting consumers from deceptive and unfair practices. This enables insurers to engage in a wide variety of unfair and deceptive practices. Thankfully, some of the nation’s most populous states (California, Florida, and New York) have robust consumer protections in this market. But consumer protection that is so essential to peoples’ lives, financial stability, and overall health should be uniformly guaranteed.
There have been a number of attempts over the years to repeal McCarran-Ferguson, but none have yet been successful. (In 2011 it passed the House by 406-19 but died in the Senate). Fortunately, Congressman Gosar of Arizona introduced legislation known as The Competitive Health Insurance Reform Act to remove this unnecessary impediment to the free market. In any reform effort, restoring competition is essential. Eliminating McCarran Ferguson will help return free market forces and sound consumer protection enforcement to these market.
Congressman Gosar correctly identifies competition as the force that made the U.S. economy the strongest in the world. Pro-competitive reforms must be a main focus of health insurance regulation; The Competitive Health Insurance Reform Act does just that. Consumers cannot and should not be asked to endure a lapse wherein Obamacare is repealed and the health insurance markets can rely on their antitrust exemption to get away with anticompetitive behavior. It’s time to repeal McCarran-Ferguson for good.