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Rep. Eric Massa Votes To End Antitrust Exemption For Health Insurance Industry

Press Release

Date: Feb. 24, 2010
Location: Washington, DC

Today, Rep. Eric Massa voted for H.R. 4626, the Health Insurance Industry Fair Competition Act. This bill ends the blanket antitrust exemption for the Health Insurance industry which has allowed the virtual monopolies that HMO's have enjoyed for decades. This bill will make it illegal for health insurance companies to engage in price fixing, dividing up territories among themselves, sabotaging their competitors in the marketplace in order to gain monopoly power, and other practices that unjustly harm consumers. In turn this will increase competition in the marketplace, increase consumer choice and lower healthcare costs. The bill passed by a vote of 406-19.

The core of this legislation was not part of H.R. 3962, the House healthcare bill, which Rep. Massa voted against on 11/7/09. This exclusion was one of Rep. Massa's most fundamental objections to the legislation.

"I spent all summer listening to my constituents at townhall meetings to learn what the families of this district wanted to see in health care legislation and ending the antitrust exemption for the health insurance industry was a key requirement," said Rep. Eric Massa. "Well, today I am proud to announce that we helped get it done in the House. This is an important step toward cutting costs, increasing competition and increasing consumer choice. This is one of the critical components of healthcare reform that I fought for and today I think we are moving in the right direction."

"I look forward to seeing the results of President Obama's healthcare summit, but I am reserving my comments on it until there is something concrete to analyze upon its conclusion."


Removing the Health Insurance Industry's Antitrust Exemption

A Free-Market Route to Improved Affordability, Quality, and Consumer Choice

This bill holds the health insurance industry accountable under America's fundamental fair competition laws by removing them from the McCarran-Ferguson Act's special blanket antitrust exemption for the business of insurance.

Removing this antitrust exemption will not only enable appropriate enforcement against these unjust practices when they are uncovered; it will give all health insurance companies healthy competitive incentives that will promote better affordability, improved quality, increased innovation, and greater consumer choice, as the antitrust laws have done throughout the rest of the economy for over a century.

The antitrust exemption was enacted in 1945, as part of legislation whose main purpose was simply to reaffirm the authority of States to regulate insurance for the protection of their citizens. The antitrust exemption was quietly inserted at the end of the legislative process, in conference committee.

The antitrust exemption shields insurance companies from legal accountability for price fixing, dividing up territories among themselves, sabotaging their competitors in the marketplace in order to gain monopoly power, and other practices that unjustly harm consumers.
Antitrust court actions alleging each of these practices, and more, have been blocked by invoking the McCarran-Ferguson antitrust exemption.

Two years ago, New York State Attorney General Andrew Cuomo opened an investigation into reported collusion by health insurers, acting through a billing data clearinghouse owned by one of them, to artificially depress the level of "reasonable and customary" charges they would reimburse to health care providers, which shifted additional costs onto policyholders. Facing imminent court action, the clearinghouse agreed to disband, and the insurance companies agreed to pay sizable sums to resolve the charges.

Because the immediate targets of this price-fixing conspiracy were the third-party providers, not the policyholders, under the case law the conspiracy would likely be deemed outside the "business of insurance" and therefore subject to antitrust enforcement. But if the insurance companies had simply targeted the policyholders instead, with a conspiracy to impose the higher co-pay or percentage on them directly, McCarran-Ferguson would have completely shielded them from legal accountability under the antitrust laws.

This case starkly demonstrates how powerful the temptation to collude can be, and why the antitrust laws are so important as a protection and deterrent.

Leading consumer groups and senior groups, State attorneys general, the American Bar Association, and others, have supported repealing this antitrust exemption for decades. The bipartisan Antitrust Modernization Commission, established by Congress and President Bush in 2002, echoed this call in its 2007 report.

No other industry in America enjoys this kind of blanket exemption from the antitrust laws. (Major League baseball, sometimes cited as the other such "industry," pales in importance to the pocketbooks of every American family.)

The bill makes absolutely no change in the State-based system for regulating insurance. The part of the McCarran-Ferguson Act that reaffirms State regulatory and taxing authority is unchanged. Only the blanket antitrust exemption is removed, and only for health insurance.

Nor does the bill interfere in any way with the legitimate collective gathering and distribution of statistical information that the insurance industry uses in assessing risks for policies. This kind of information sharing has long been established in antitrust law as legitimate -- as distinct from the collusive sharing of future pricing plans in order to fix prices at inflated levels to gouge consumers.