| Senator Chuck Schumer (D, NY) and Patrick Leahey | | | | South-Eastern Underwriters by specifying that the |
| (D, Vermont) seem to be gaining ground in their | | | | states retained the authority to continue to regulate |
| efforts to pass an amendment to remove insurance | | | | and tax the business of insurance. According to |
| companies from the protection of antitrust laws. The | | | | Senator Patrick Leahey, Judiciary Committee |
| ongoing health care overhaul currently being debated | | | | Chairman, the antitrust exemption in the 1944 |
| has brought to the fore the privilege the insurance | | | | McCarran-Ferguson Act was meant to be temporary. |
| industry has enjoyed for the past 64 years: | | | | Senator Trent Lott and others have argued that the |
| Insurance companies, like Major League Baseball, | | | | exemption has led to collusion by insurance |
| have been exempt from federal antitrust laws. | | | | companies on setting rates and denying claims, as |
| Monopolies stagnate markets by preventing others | | | | witnessed by the experience of hurricane Katrina. |
| from engaging in healthy market competition. Is the | | | | McCarran-Ferguson, in other words, is obsolete, and |
| exemption a dying dinosaur? | | | | potentially damaging. |
| Brief history of antitrust laws | | | | Department of Justice position |
| Given the fears of monopolies in the late 1800s and | | | | Christine A. Varney, Assistant Attorney General |
| to preserve America's free market economy, | | | | (Antitrust Division), testified before the Committee |
| Congress passed the Sherman Antitrust Act in 1890; | | | | on the Judiciary United States Senate hearing on |
| its aim being to combat anticompetitive practices, | | | | "Prohibiting Price Fixing and Other Anticompetitive |
| reduce market domination by individual corporations, | | | | Conduct in the Health Insurance Industry." The |
| and preserve unfettered competition as the rule of | | | | following points can be gleaned from her testimony: |
| trade. | | | | Ms. Varney argues: Health insurance reform should be |
| Soon the courts found certain activities to fall outside | | | | built on a strong commitment to competition in all |
| the scope of the Sherman Antitrust Act. To plug this | | | | health-care markets, including those for health and |
| loophole Congress passed the Clayton Antitrust Act | | | | medical malpractice insurance. Repealing the |
| of 1914. The Clayton Act added the following | | | | McCarran-Ferguson Act would allow competition to |
| practices to the list of impermissible activities: price | | | | have a greater role in reforming health and medical |
| discrimination between different purchasers, if such | | | | malpractice insurance markets than would otherwise |
| discrimination tends to create a monopoly; exclusive | | | | be the case. |
| dealing agreements; tying arrangements; and mergers | | | | The House health-care reform bills contemplates |
| and acquisitions that substantially reduce market | | | | quasi-national exchanges, the Senate Finance bill |
| competition. | | | | contemplates national health insurance plans, and all |
| The Robinson-Patman Act of 1936 amended the | | | | the bills contemplate interstate compacts that would |
| Clayton Act. The amendment aimed to outlaw certain | | | | allow insurers to sell a single product across an array |
| abuses in manufacturers' practices. | | | | of states. These moves are all likely to increase |
| Brief history of the insurance exemption | | | | competition and make it less likely that antitrust |
| Before the 1940s, insurance regulation fell under sole | | | | enforcement is necessary, but they also make the |
| province of the states. A Supreme Court case by | | | | presence of the exemption more dangerous." |
| the name of United States v. South-Eastern | | | | Conclusion |
| Underwriters challenged that in part on grounds of | | | | When the top lawyer of the Justice Department |
| antitrust. The Supreme Court rules that the federal | | | | identifies the exemption as "dangerous," to the |
| government could regulate insurance companies | | | | functioning of quasi-national exchanges [this is the |
| under the authority of the Commerce Clause in the | | | | public option, really], the time might just be ripe for |
| U.S. Constitution. The McCarran-Ferguson Act of 1944 | | | | Congress to remove the exemption. On the other |
| provides that federal anti-trust laws will not apply to | | | | hand, by spending countless millions of dollars lobbying |
| the "business of insurance" as long as the state | | | | Congress, the insurance industry might still have the |
| regulates in that area, but federal anti-trust laws will | | | | upper hand in influencing the health-care reform. Why |
| apply in cases of boycott, coercion, and intimidation. | | | | should they lose this monopoly? In some states, one |
| The intention of the McCarran-Ferguson Act was to | | | | or two insurance companies control all the insurance |
| return the legal climate to that which existed prior to | | | | business. Is this a 'free market economy? |