Another reason to “kill the bill”

I’ve just finished reading a series of articles at the web site Main Justice dealing with the fate of the health insurance industry’s exemption from Federal anti-trust law.

First of all, I did a little research on the McCarran-Ferguson Act of 1945 which granted the exemption in the first place.  Its original intent was not to weaken regulation of the insurance industry, but to strengthen it.  The act came about as a result of a Supreme Court decision, United States v South-Eastern Underwriters Assn. which ruled that insurance companies that sold policies across state lines were engaged in interstate commerce, and were thus subject to federal anti-trust law.

The original intent of McCarren-Ferguson was to enable the states to tightly regulate the insurance industry.  Many states had become concerned that, as a result of the Supreme Court ruling, they no longer had the authority to regulate the insurance industry within their boundaries.  It stipulated that no act of Congress could invalidate any state law dealing with the regulation of insurance unless the federal law specifically related to insurance.  The Act permitted the federal government to regulate insurance, but it also stipulated that only the states have broad authority to regulate the insurance industry unless the federal government enacts specific legislation intended to regulate insurance and displace state law.

In plain English that means that the states have the power to regulate the insurance industry if the federal government fails to do so.  McCarran-Ferguson also stipulated that the Sherman Anti-Trust Act of 1890 (which prohibits abusive monopolies)  and the Clayton Act of 1914 (passed by the U.S. Congress as an amendment to clarify and supplement the Sherman Anti-Trust Act and  which prohibited exclusive sales contracts, local price cutting to freeze out competitors, et al, thus prohibiting abusive monopolies), apply to the business of insurance to the extent that such business is not regulated by state law.

In short, McCarran-Ferguson was designed to empower both the federal government and the individual states to keep insurance companies from becoming abusive monopolies.  How ironic that it has instead been used to enable the insurance companies to become the abusive monopolies it was intended to prevent.  This in itself would seem to suggest that it is time to eradicate any confusion or ambiguity that has arisen over the years by repealing McCarran-Ferguson and restoring the original intent which was to subject the insurance industry to state and/or federal regulation and federal anti-trust law.

Nancy Pelosi apparently saw it that way and the anti-trust exemption was stripped from the House reform bill at her insistence. Not so with the Senate Finance Committee chaired by Max Baucus and his special interest-friendly gang of three, which produced a bill apparently written by Elizabeth Fowler, a former Baucus staffer who left his employ in 2006 to become VP and Director of Policy for WellPoint Insurance and then left to go to work for Senator Baucus’s Finance Committee in 2008.  Apparently Baucus, Fowler, and WellPoint saw no need to strip the insurance industry of its anti-trust exemption, so they didn’t – even though it was never intended to actually be an anti-trust exemption.

Vermont Senator Patrick Leahy had other ideas.  He proposed an amendment to the Baucus Finance Committee Senate bill that would subject health and medical malpractice insurers to federal laws that forbid firms from fixing prices, rigging bids, or dividing up markets, an amendment initially favored by the final arbiter, Senate Majority Leader Harry Reid, who  maintained that a repeal of the anti-trust exemption would produce more competition and better prices for consumers. President Obama seemed to agree when, in his weekly radio address, he championed revocation of the anti-trust exemption, complaining that the health insurance industry is “earning these profits and bonuses while enjoying a privileged exemption from our antitrust laws.”

You may have noticed that the bill passed by the Senate this week maintained the anti-trust exemption, though the media has largely ignored that little detail. Why, you might ask?  Nebraska Senator Ben  Nelson, a former insurance industry executive, apparently took issue with revocation of that anti-trust exemption being included in the bill.  The insurance industry had also lobbied to keep the Leahy provision out.  Harry Reid, desperate for Ben Nelson’s 60^th filibuster-proof vote, went along.

Does the continuation of the insurance anti-trust exemption really make a difference?  In a word, absolutely!

Both the Senate and House bills leave regulation of the insurance industry to the states which have never been known for holding the industry’s feet to the fire.  A study recently published by The Center for American Progress  found that “State regulatory authorities haven’t brought any consumer protection suits against insurance companies in the last five years…” The study asks whether states have the resources to enforce antitrust laws or if they are stretched too thin. The study cites Georgetown health policy professor Karen Pollitz’s recent comments to Congress: “In four states, the Insurance Commissioner is also the fire marshal.” Sen. Patrick Leahy (D-Vt.) used the study to reiterate his support for a repeal of the antitrust exemption for health and medical malpractice insurers. “If we remove it, they will have to compete,” Leahy said in a conference call with reporters.

Of course we have come to learn that the minority, not the majority, rules, if the minority bears the name of Ben Nelson or Joe Lieberman (sometimes referred to as the Senator from Aetna)..

I know there are some serious reformers who think it is time to hold our collective noses and pass this bill.  I respect their opinions, but count me out.  I don’t see the insurance companies mending their ways, and now, with mandates,  they will have even more power and more money to thwart any attempt to enforce regulations that already exist or that may be enacted in the future.  This, to me, is just one more reason to “kill the bill.”