Interesting fact of the day: Insurance companies exempt from antitrust laws

This really doesn’t come as a huge surprise, but it turns out that health insurance providers are exempt from federal antitrust laws.  From NPR:

It was Congress, after all, that in 1945 overrode a Supreme Court ruling that the insurance industry was indeed part of interstate commerce and thus subject to federal antitrust laws. Lawmakers that year passed the McCarran-Ferguson Act; the law has ever since shielded insurance firms from federal prosecution for price fixing, bid rigging and carving out protected markets.

This week, Senate Judiciary Committee Chairman Patrick Leahy declared the time had come to do away with that protection.

“The antitrust laws exist to protect consumers, but also to promote competition,” he said. “You remove the antitrust laws, you don’t protect consumers, and you don’t promote competition.”

Anyone who doubts that the current market isn’t competitive need only look at the numbers.  In 39 states, two health insurers control at least half the market, while in nine states, one insurer controls at least three-quarters of the market.  There is no way for customers to purchase health insurance across state lines, and even if there was, the tax-exempt status of employer-provided benefits means most consumers don’t have any direct say in their insurance choices to begin with.

I’m all in favor of repealing McCarran-Freguson, but as long as interstate competition is restricted, and the tax-exemption on benefits remains in place, the move will be largely symbolic.

Another thing to note: this sort of deregulation may not lead to “busted-up” health insurers.  Quite possibly it will actually lead to fewer, and bigger, insurers.  The difference is, they’ll be competing against one another far more than they are now.  Think of it like the supermarket industry.  Once upon a time you only had one, maybe two grocers in a medium-sized city.  They didn’t compete much, even if they were small operations.  Now you have massive corporate grocery chains – but they’re competing quite heavily for customers.   Health insurance would look very similar to this if it were deregulated.  And that would be a good thing for costs and consumers.

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