Just when you thought the health insurance legal and regulatory landscape couldn't get any more interesting, along comes the Competitive Health Insurance Reform Act of 2017 (the Act). The Act removes a longstanding antitrust exemption and places health insurers back under federal antitrust scrutiny. The House recently passed the Act overwhelmingly (416 – 7), and the Senate's Judiciary Committee is now weighing it.
The Act amends the 1945 McCarran-Ferguson Act, which provides that federal antitrust laws, such as the Sherman Act and Clayton Act, do not apply to the "business of insurance." McCarran-Ferguson allows states to regulate insurance, as state regulation of insurance was commonplace for much of American history. In 1944, however, the Supreme Court decided United States v. South-Eastern Underwriters Association, 322 U.S. 533 (1944), in which it determined that insurance was "commerce among the states," making it subject to the Sherman Act. In response, Congress passed the McCarran-Ferguson Act, which was designed to legislatively repeal South-Eastern Underwriters and restore state prominence in insurance regulation.
Despite the history of state regulation of insurance, and the prompt nature of the McCarran-Ferguson Act's passage after the Supreme Court's decision in South-Eastern Underwriters, the insurance exemption from federal antitrust laws has been widely criticized. Democrats have long supported a full repeal of McCarran-Ferguson with respect to all insurance, including health insurance. For instance, in the aftermath of Hurricane Katrina, perceived abuses by insurers led to calls by lawmakers to repeal the antitrust exemption. More recently, in 2010, a similar bill to repeal the exemption specific to health insurers stalled in the Senate after passing easily in the House.
The much-publicized focus on health insurance in recent years has again caused a reconsideration of the insurance antitrust exemption. The proposed Competitive Health Insurance Reform Act would prohibit price fixing, bid rigging and market allocation, which – according to the Act's proponents – would unlock greater competition in the health insurance marketplace. This time, there is reason to believe that attempts to repeal the antitrust exemption may be different than prior unsuccessful attempts. While Democrats have long favored repeal, Republicans are also now behind the effort. The GOP sees repeal as part of the broader health insurance overhaul and hopes the potential increases in competition will lead to lower prices, increased choice and greater innovation in the health insurance industry. The White House also supports the Act, as Trump Administration advisers have stated they would recommend signing the Act into law if presented in its current form.
Keep your eye on this issue, as it may slip through the cracks in the news due to the flurry of activity related to health insurance and the Trump Administration, generally. If passed, health insurers would require additional compliance focus, as antitrust issues involving price fixing, bid rigging and market allocation have been outside health insurers' wheelhouse for some time.
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