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Panel Approves Partial Repeal of Antitrust Exemption for Health Insurers

By Charlene Carter, CQ Staff

October 21, 2009 -- The House Judiciary Committee approved a bill that would partially repeal a 60-year-old exemption from antitrust law for health insurers.

The panel voted, 20–9, on Wednesday to approve the bill (HR 3596), which is sponsored by Judiciary Chairman John Conyers Jr., D-Mich. Leading congressional Democrats want to roll back the exemption—an effort the industry views as another in a series of attempts by President Obama and his party to paint insurers as villains in the health care overhaul debate.

The bill would authorize the government to prosecute insurers for violations of antitrust law if they are found to be engaged in "price fixing, bid rigging or market allocations."

"No one on this committee believes that price fixing or carving up markets by health insurers or malpractice carriers is a good thing," Conyers said.

The Senate and House Judiciary committees have held hearings over the past month on the legislation. Senate Judiciary Chairman Patrick J. Leahy, D Vt., has offered a companion bill (S 1681). Such a measure eventually could be joined with broader health care overhaul legislation now being written by Democratic leaders.

Republicans Dan Lungren of California, Louie Gohmert of Texas and Tom Rooney of Florida joined the House panel's Democrats in voting for the bill Wednesday.

"By inviting federal intervention, this bill might create a dual regulatory system that only confuses the health insurance and medical malpractice industry," said ranking Republican Lamar Smith of Texas. "It's doubtful that this legislation will do anything beneficial for the customer."

The legislation's Democratic supporters say it would prevent behaviors that could drive up health care costs. But insurers say they are not engaged in the kinds of behaviors the bill seeks to prevent and have called the bill frivolous.

In a letter to Conyers and Leahy dated Oct. 8, Karen Ignani, president and CEO of the industry group America's Health Insurance Plans, argued that the antitrust exemption does not preclude regulation of the industry.

The legislation strikes at a foundation of the insurance industry. In 1944, the Supreme Court ruled for the first time that insurers were engaged in interstate commerce and so could be regulated by the federal government.

But Congress—seeking to protect states, which stood to lose revenue if the federal government assumed responsibility for regulating insurers—responded by passing a law, known as McCarran-Ferguson, that granted insurers an exemption from federal antitrust law as long as they were regulated by states.

The exemption is most valuable to property insurers, which share data on losses in different geographical areas so they can more accurately price their policies. Congress has periodically considered repealing McCarran-Ferguson, most recently after Hurricane Katrina, when insurers were criticized for attempting to avoid paying claims related to storm damage.

The panel also adopted, by voice vote, an amendment by Lungren to clarify that insurers may still collect historical loss data.

The bill also would partially repeal the antitrust exemption for insurers who write medical malpractice policies for doctors, hospitals and other health providers.

Alex Wayne contributed to this story.

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