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Add comment October 15th, 2009

More info on Democrats’ anti-trust charges against health insurance companies

One of the personal conclusions I came to in my study of health care leading up to our “Take 2 Aspirin” health care forum is that a for-profit model simply doesn’t work in health insurance. (I want to make the clear distinction between for-profit and nonprofit here. Nonprofit insurers are a horse of a different color.) The true customer of a publicly traded company is the shareholder and the interest of shareholders and the company’s insured patients are largely directly opposite.

This plot has just thickened.

In yesterday’s incarnation of the titanic health care struggle, Democrats and health insurance companies were at it again, after their first round battle over whether the reforms will raise insurance prices, as the insurers have charged in a report they commissioned. Yesterday Democrats began talking about eliminating the anti-trust protections enjoyed by insurers. Under the 1945 McCarran-Ferguson Act, insurance companies are exempt from federal anti-trust regulation. The law doesn’t mandate state regulation, but allows it. Here’s a quickie primer on the Supreme Court case that ultimately decided that insurance didn’t qualify as interstate commerce to be regulated by anti-trust laws:

The South-Eastern Underwriters Association controlled 90 percent of the market for fire and other insurance lines in six southern states and set rates at non-competitive levels. Furthermore, it used intimidation, boycotts and other coercive tactics to maintain its monopoly. The question before the Court was whether or not insurance was a form of “interstate commerce” which could be regulated under the Commerce Clause of the United States Constitution and the Sherman Anti-Trust Act.

Here’s what the feuding parties said yesterday:

According to the Dems (Chuck Shumer – D NY): “The health insurance’s antitrust exemption is one of the worst accidents of American history,” Schumer said. “It deserves a lot of the blame for the huge rise in premiums that has made health insurance so unaffordable. It is time to end this special status and bring true competition to the health insurance industry.”

According to the insurers: “McCarran-Ferguson has nothing to do with competition in the health insurance market. The focus on this issue is a political ploy designed to distract attention away from the real issue of rising health care costs.”

Here is a fascinating argument that the monopoly insurers enjoy is much bigger than just health care costs, but was fundamentally involved in our fiscal meltdown, particularly AIG:

…insurance is essentially unregulated and, when [insurance] companies were allowed by the Gramm-Leach-Bliley Act of 1999 to expand into banking, the lack of transparency inevitably led to the subprime mortgage crisis of 2007 and will ultimately result in more financial services and insurance company bankruptcies. Repealing McCarran-Ferguson is an essential first step to fiscal regeneration in this country…

Please jump in if you have any further insight into this issue. Seems like a big one to me? It gives rise in my mind to a number of questions I currently have no answer to:

• Would this problem be solved by the Republican’s recommendation that we allow insurers to compete nationally? (Note that Dems said this would just make it so all the insurance companies would base in the states with the least regulation.)
• If we’re trying to control health insurance costs, eliminating anti-trust exemption seems like low-hanging fruit. So why in the world hadn’t this come up before? Had the administration made a deal with the devil (for purposes of argument, the for profit insurers) that was broken when the insurers released their report suggesting steep cost increases under the current legislation?
• With long-standing federal anti-trust laws in our country, why the heck would insurance be exempt? Am I missing something?

Add comment October 15th, 2009