CBO: Effects of Repealing Insurers' Antitrust Exemption Minimal

The Congressional Budget Office has analyzed the legislative effort to repeal health insurers' antitrust exemption, and the office concluded that it would neither have a significant impact on the insurance business, as its industry opponents have argued, nor significantly lower premiums, as its proponents have contended.

The legislation, which is aimed at health and medical liability insurers, is a partial repeal of the antitrust exemption provided in the McCarran-Ferguson Act of 1945, disallowing the anti-competitive practices of price fixing, bid rigging and market allocations. However, as the CBO pointed out, these actions are already prohibited under state regulation of insurers.

The bills -- one of which has passed through a House committee and another of which is promised as an amendment to the Senate health reform bill -- "could affect the costs of and premiums charged by private health insurance companies; whether premiums would increase or decrease as a result is difficult to determine, but in either case the magnitude of the effects is likely to be quite small," according to the brief CBO report.

The CBO analysts said they considered information provided by federal agencies, the National Association of Insurance Commissioners, consumers groups and private attorneys. Though the legislators that are championing the effort -- such as Sen. Patrick Leahy, D-Vt., the chairman of the Senate Judiciary Committee -- contend that stripping the exemption would lower prices for consumers, the CBO predicted the idea "would have no significant effect on the premiums that private insurers would charge for health insurance."

Insurance industry opponents of the bills have said they are concerned that smaller insurers wouldn't be permitted to share data with other companies. But the CBO report said, "The bill's restrictions would not apply to certain collaborative activities involving actuarial services."

The congressional analysts also said that the bill's cost or benefit to the federal budget "would not be significant because of the small number of cases likely to be affected."

Insurance groups from other sectors have jumped into the debate, though, because of fears that the removal of the exemption for these health-related insurers could soon become a repeal of their own exemptions.

The American Insurance Association weighed in after Leahy and Senate Majority Leader Harry Reid said they would try to push this idea into the health reform legislation. The group issued a statement: "Ironically, statutory uncertainty ... will bring years of litigation and discourage new companies from entering the medical malpractice insurance market -- undercutting the primary purpose of federal antitrust laws, which are designed to promote market competition free from government or private interference." The statement went on to say: "Any legislative effort to modify McCarran-Ferguson would be bad for consumers and for business" (BestWire, Oct. 26, 2009).