Health Insurance Monopolies and The Anti-Trust Exemption

Posted by AzBlueMeanie:

During debate of the Senate Finance Committee "Baucus Caucus" bill, several Republican Senators said rather matter-of-fact-ly that there are 1,300 health insurance companies, "we have a competitive market." This was of course completely false. That number is derived at by counting subsidiaries and even vendors. It was disappointing that Democrats on the panel did not immediately call out their colleagues for their falsehood. This whole Senate comity and civility thing keeps getting in the way of telling the American people the truth.

I have written on this blog before about the market domination and monopoly control that a few health insurance companies enjoy. What we really need is insurance anti-trust reform to restore competition to the market I cited the 2006 American Medical Association study. Study confirms health monopoly fears

But in May 2009, Health Care for America Now released a national report (pdf) and state-specific reports detailing the extreme consolidation in the health insurance marketplace. During a conference call debuting the report, Senator Chuck Schumer said, “This is the starkest evidence yet that the private health care insurance market is in bad need of some healthy competition. A public health insurance option is critical to ensure the greatest amount of choice possible for consumers.” Pointing Out The Obvious: Health Insurance Companies Lack Competition:

“Health insurance companies are exempt from antitrust regulations, and as a result, a small number of very large companies have almost total control of the health insurance marketplace. These big insurers aren’t competing for our business by lowering costs. Instead, they are driving up prices as high as the market will bear because they know we have nowhere else to turn,” said Richard Kirsch,National Campaign Manager, Health Care for America Now.

“We need the choice of a public health insurance option in the marketplace to inject real competition. Private insurers will have to work a lot harder to get costs under control and put people’s health before their profits if they know consumers have a viable health insurance alternative that’s not beholden to Wall Street.”

Health Care for America Now has unleashed a new campaign that addresses the core problem of affordable health insurance coverage – namely, where are you gonna go? There's no competition.

Senator Patrick J. Leahy, Democrat of Vermont, has introduced a bill — the Health Insurance Industry Antitrust Enforcement Act — that would repeal the insurance industry’s limited exemption. Senior Democrats, including Senator Charles E. Schumer of New York, have begun calling for Mr. Leahy’s bill to be included in the major health care legislation that is now advancing in Congress. (Only health insurance companies and Major League Baseball are exempt).

The New York Times reported For Insurers, a Question of Trust (and Antitrust) – Prescriptions Blog:

In a rare appearance as a witness at a Senate hearing, the majority leader, Harry Reid of Nevada, told the Judiciary Committee on Wednesday that it should repeal a 1945 law that granted the insurance industry limited exemption to national antitrust laws by allowing states to regulate insurers.

The law, the McCarran-Ferguson Act, is often cited by Mr. Reid and other critics of the health insurance industry as a reason why coverage can be so expensive for many people. They say the law allows insurers to monopolize markets and fix prices in ways that are usually illegal.

“Since 1945, the insurance industry has enjoyed exemption from federal antitrust laws because of the McCarran-Ferguson Act,” Mr. Reid said. “Pat McCarran, who was the senior senator from Nevada at the time, lent his name to this piece of legislation. Although we’re both Nevadans, I’m not sure what Pat McCarran had in mind when he pushed this bill. And if Pat were around today, he couldn’t be happy with the state of the insurance industry.”

“Providing an exemption for insurance companies to antitrust laws has been anticompetitive and damaging to the American economy,” Mr. Reid continued. “Health insurance premiums have continued to rise at a rapid rate, forcing businesses to cut back on health insurance coverage and forcing many families to choose between health insurance and basic necessities.”

He added: “Insurance companies have become so large they dominate entire regions of the country. They have become so powerful they block start-up businesses from entering the market, and they put smaller companies out of business. They have become so dominant that they dictate business practices. They are so influential that they exert tremendous influence over public policy.”

Blogger mcjoan of Daily Kos reiterates a point I have made previously: anti-trust laws are only as good as their enforcement (has any financial services giant on Wall Street been prosecuted yet?)

[The] exemption should most definitely be repealed, and likely will be in whatever reform bill passes this fall.

But here's the thing: antitrust laws only work if they're enforced. The financial industry isn't exempt from antitrust laws. That didn't stop them from the very questionable practices that led to the economic collapse while regulators looked the other way. Absent a system of regulation that has real teeth andis actually enforced, the existence of anti-trust laws isn't a significant stop on bad corporate behavior. You not only have to have those regulations with sharp-eyed, effective regulators, you have to have Justice Department and a court system willing to back them up.

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If Reid and the Senate Dems are really serious about ending the anticompetitive nature of the insurance industry, do what has always worked most effectively in regulating business–create competition. Use the corrective power of the marketplace to rein in industry abuses. Create a strong public option capable of providing that competition.