McCarran-Ferguson and the Healthcare Debate

There have been a number of concerns regarding the effect of the McCarran-Ferguson Act and its impact on healthcare reform, particularly on The Affordable Care Act. McCarran-Ferguson was passed in 1945 and essentially affirmed the States’ role in regulating the insurance industry while giving insurers a limited exemption from federal antitrust laws. The antitrust exemption is limited to those activities that constitute the business of insurance, are state regulated, and do not constitute an agreement “to boycott, coerce or intimidate.”

There has been a serious legislative movement n the past several years for repealing McCarran-Ferguson since some observers argue that its purpose is no longer relevant. In 1945, there were small insurance companies that needed certain data from larger insurers to set appropriate premiums. The legislation was designed to give insurers an escape clause from antitrust laws that prohibited such sharing.

In the decades since, the insurance industry has become highly concentrated so that the law is no longer relevant. Further, most states offer few regulations controlling insurers so that the industry is among the least competitive and has shown itself to be rife with corruption and deceptive practices. Insurers often work together to stifle competition and to keep prices high without transparency or accountability.

Will There Be Enough Competition?

Many lawmakers are concerned that unless McCarran-Ferguson is repealed, there will be a dearth of competition and options for consumers. The exemption offered by the law seemingly makes it difficult for the Federal Trade Commission, the chief federal enforcer, to bring antitrust cases against health insurers.

Opponents of repeal argue that McCarran-Ferguson keeps the government from imposing even more regulations and telling States what to do. Since many legislators abhor the role of the federal government in all but the most basic functions, they argue that repeal of the act would endanger the exchange of essential data among insurers, would make participation by smaller insurers more difficult and threaten revenue to the states from licensing fees, fines and premium taxes.

Repeal is Unlikely–For Now

With Congress loathe to change much of anything, especially if it involves potentially giving the federal government a greater role in anything but defense, repeal of the McCarran-Ferguson Act probably remains a long shot.

 

 

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