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Democrats Vow to End Health Insurers' Domination of Markets

By Jane Norman, CQ HealthBeat Associate Editor

October 14, 2009 – Democrats' war with the health insurance industry escalated in the Senate Judiciary Committee on Wednesday, as senators harshly criticized insurers' domination of markets and vowed to modify federal antitrust exemptions extended to the industry since 1945.

Senators seemed particularly infuriated by an aggressive strategy launched this week by America's Health Insurance Plans (AHIP), the trade group for the health insurance industry. It included a television advertising campaign that focuses on reductions in Medicare Advantage spending in the health care overhaul and a study that argues the bill approved by the Senate Finance Committee will raise Americans' health care premiums over time.

Senate Majority Leader Harry Reid, D-Nev., in an unusual appearance testifying at a committee hearing, said the insurance industry is determined to halt the overhaul via a "barrage" of advertising. "They really are desirous of continuing the monopoly they have," Reid said. "There isn't anything we can do to satisfy them in this health care bill."

Sen. Charles E. Schumer, D-N.Y., said that the industry "blundered so badly" in recent days that it may give lawmakers an additional opportunity to approve an overhaul bill with a public insurance option and push for an end to the antitrust exemption. Schumer said he wants to see Judiciary Chairman Patrick J. Leahy, D-Vt., work with Reid to include the antitrust provision as part of the overhaul.

The insurance industry "lacks a moral compass," said Sen. Dianne Feinstein, D-Calif.

Leahy introduced the antitrust bill (S 1681) on Sept. 17. He said that nothing in the McCarran-Ferguson Act approved in 1945 would allow health or medical malpractice insurance issuers "to engage in any form of price fixing, bid rigging or market allocations." Leahy said he scheduled the hearing before the AHIP campaign unfolded.

Leahy said the bill is a scaled-back version of legislation supported in the past by former Sen. Trent Lott, R-Miss. (1989–2007), who also served as party leader in that chamber. Leahy said the bill is directed at health insurance alone. "Insurers should not object to being subject to the same antitrust laws as everyone else," he said. "It is time for Congress to stick up for consumers, not roll over for the insurance industry."

But Orrin G. Hatch of Utah, the top Republican on the Judiciary Committee, said he has seen little evidence to repeal McCarran-Ferguson. It has allowed providers to collaborate in certain areas such as sharing information, he said, which assisted smaller firms. "A ban on collaboration in the insurance industry could result in higher prices," Hatch said.

No other Republicans attended the hearing.

Christine Varney, assistant attorney general in the antitrust division of the Justice Department, testified that prior to 1944, regulation of what's known as "the business of insurance" was seen as the exclusive province of the states.

The McCarran-Ferguson Act was intended to specifically delegate to the states the authority to continue to regulate and tax insurers, and it also created a broad antitrust exemption based on state regulation, she said.

There's been perennial interest in repeal or reform of the exemption since then, Varney said. The Justice Department generally is opposed to exemptions from antitrust laws, and she characterized the health insurance industry exemption as "very expansive with regard to anything that can be said to fall within the business of insurance, including premium pricing and market allocations."

While the department did not take a position on the Leahy bill, Varney said that Justice "generally supports the idea of repealing antitrust exemptions" and supports efforts to bring more competition to the health insurance marketplace.

Democratic Sen. Russ Feingold of Wisconsin said a single insurance company covers at least half the population in 26 states. "This lack of competition has hurt both patients and doctors," Feingold said.

But an industry spokesman rejected charges that there is not enough done to rein in insurance companies. Robert Zirkelbach, a spokesman for AHIP, said in an e-mail that health insurance is one of the most regulated industries in America at both the federal and state level.

"McCarran-Ferguson has nothing to do with competition in the health insurance market," Zirkelbach said. "The focus on this issue is a political ploy designed to distract attention away from the real issue of rising health care costs."

Lawrence Powell of the University of Arkansas, speaking on behalf of the Physicians Insurers Association of America, said the exemption provided by federal law "enhances competition" and that price fixing and anti-competitive conduct already are prohibited by state law in insurance markets. Powell, the university's chair of insurance and financial services, said there's no valid evidence of anti-competitive behavior in insurance markets.

But Reid said the concern is real. He criticized the rising cost of health care and health care "monopolies" that he said are so powerful they can block competitors from entering the market. They influence business practices and exert tremendous influence over public policy, he said.

"More than 30 percent of claims made are turned down," said Reid, by the "armies" of employees who work for the insurers. "Health insurance monopolies shouldn't be making health care decisions for patients and their doctors," he said. "There's no reason the insurance companies should have exemptions from anti-trust laws."

Said Varney, "When you don't have to compete, you can get pretty big profits.

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