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House Democrats Push Bill to Eliminate Insurance Antitrust Exemption

By Alex Wayne, CQ Staff

February 5, 2010 -- Even as they try to resuscitate their comprehensive health care overhaul, House Democrats are planning to take another swipe at the insurance industry next week with legislation that would strip its exemption from federal antitrust law.

The House will take up a bill by freshmen Democrats Tom Perriello of Virginia and Betsy Markey of Colorado that would amend a 1945 law, known as the McCarran-Ferguson Act, that grants insurers an antitrust exemption and subjects them to state regulation. Under the bill, health insurers and medical liability insurers would be subject to federal antitrust law, as well as state regulation.

Congressional Democrats and the Obama administration blame much of the increase in health care costs over the last decade on insurers and say that subjecting them to federal antitrust law would increase competition in the industry and bring down insurance premiums.

"This is a chance for us to put patients ahead of profiteering," Perriello said at a Friday news conference announcing the legislation.

But bill supporters have little evidence to support claims that the antitrust exemption leads to higher costs. In fact, their statements in support of the bill sometimes suggest the opposite.

Travis Plunkett, legislative director for the Consumer Federation of America, said at the news conference that passage of the Perriello-Markey bill "will lead to higher payments [to health providers] for covered services because the insurers will no longer be able to collude."

He rejected the idea that might respond by charging consumers higher premiums.

"I think insurance companies are going to have to get more efficient," Plunkett said. "In short, the answer is competition."

Yet there are indications that requiring insurers to comply with federal antitrust law in addition to state regulations could actually decrease competition in the industry.

The Congressional Research Service (CRS) noted in a Jan. 14 report that smaller insurance companies rely on data collected from their larger competitors and shared industrywide — something that would be forbidden under the Democratic bill — in order to accurately set their rates.

"Should additional data be unavailable to small insurers in some way, further consolidation in the insurance industry as small insurers merge in order to gain the competitive advantage of additional information is a likely, albeit, ironic, possibility," CRS said.

State insurance commissioners say that they already sufficiently regulate health insurers and are opposed to the Perriello-Markey legislation and to similar proposals. The insurance industry opposes the bill as well, although health insurers have expressed little concern about losing their antitrust exemption. They say they do not cooperate with one another as much as do property and liability insurers, who make greater use of collective data on claims and losses.

Representatives of the Property Casualty Insurers Association of America (PCI), which opposes the bill, attended Friday's news conference. Many property and casualty insurers also offer medical liability insurance to health providers.

"Including medical malpractice insurance in this bill will not help one single person find health insurance coverage," said Tom Litjen, PCI's vice president for federal government relations.

For Democrats, though, the Perriello-Markey legislation is more important symbolically than it is to advance their policies. Debate on the measure will likely provide Democrats with a platform to attack the insurance industry and try to turn public opinion back in their favor.

"Never underestimate the importance of a good message bill," one House Democratic aide said. "Especially when everybody agrees that insurance companies are the bad guys."

The legislation is strongly supported by many House Democratic leaders and is likely to pass their chamber easily. Its prospects in the Senate are less rosy, however. Republicans are likely to filibuster the bill and could pick up support from some centrist Democrats.

While House Democrats included a partial repeal of McCarran-Ferguson in their health overhaul legislation (HR 3962), Senate Democrats opted to exclude a similar provision from their bill (HR 3590).

"If it's about bid rigging and price fixing, I am absolutely in favor of seeing that go," said Sen. Ben Nelson of Nebraska, whose state is home to some large insurers. "If it's about data collecting . . . we don't want it to extend off to property, casual and liability lines, where if you don't have the ability to aggregate data then small companies are not going to enter into the market."

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