Schumer: Revoke Health Insurance Industry's Antitrust Exemption As Part Of Health Care Overhaul

Under 1945 Law, Insurance Industry Among Only Handful Of Industries -- Like Major League Baseball and Railroads -- To Be Exempt From Federal Antitrust Laws

October 14, 2009 -- WASHINGTON, DC—Days after the health insurance industry openly declared it will use the emerging health care reform overhaul as an excuse to raise premiums on millions of Americans, U.S. Senator Charles E. Schumer (D-NY) urged Wednesday that the legislation should include a new provision to revoke the industry’s anti-trust exemption.

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By virtue of the McCarran-Ferguson Act, passed by Congress in 1945, the insurance industry is one of only a handful of select industries in the United States, such as Major League Baseball and railroads, to be exempted from federal antitrust laws. Schumer, a co-sponsor of a bill authored by Senate Judiciary Chairman Patrick Leahy (D-VT) to repeal the exemption, said the health insurance industry should lose its special status as part of the landmark health care bill scheduled to reach President Obama’s desk later this year.

“The health insurance’s antitrust exemption is one of the worst accidents of American history. It deserves a lot of the blame for the huge rise in premiums that has made health insurance so unaffordable. It is time to end this special status and bring true competition to the health insurance industry,” Schumer said.

Schumer called for attaching a floor amendment to the health care bill that Majority Leader Harry Reid plans to bring to the floor later this month. Schumer said the amendment should be based on Leahy’s legislation.

Schumer made this declaration a day after the Senate Finance Committee approved a milestone health care bill by a bipartisan vote of 14-9. On the eve of that vote, the health insurance industry launched an eleventh-hour broadside against the reform effort in an effort to sink its chances. On Monday, the health insurers’ trade association, America’s Health Insurance Plans (AHIP) issued a flawed report that attempted to show that the emerging bill would force health insurers to raise premiums on their customers much more than they otherwise would. Soon after the report’s issuance, the company that developed it on behalf of AHIP acknowledged that it did not include the bill’s many cost-saving measures in its analysis.

Throughout the debate on health care reform, Schumer has been a lead proponent of a public option that would lower health care costs by competing alongside private insurers. The public option would put patients ahead of profits; unlike private insurers, it would have no profit motive whatsoever and would have greatly reduced marketing costs. Private health insurers have scorned the prospect of just such a new competitor.

While the fight for a public option continues, Schumer said Wednesday that the health care reform bill should also seek to impose competition on other ways, like repealing their antitrust exemption. The McCarran-Ferguson Act was enacted in 1945 to protect the insurance industry after the Supreme Court ruled that it was subject to federal regulation under the Constitution’s Commerce Clause. The legislation ceded oversight over the insurance industry to states by exempting the so-called “business of insurance” from federal laws. A repeal of McCarran-Ferguson would have the effect of restoring the federal government’s power to curtail price-fixing, collusion and other anti-competitive practices that may exist within the health insurance industry.

Source: Senator Charles E. Schumer