I saw a question on Yahoo Answers about Insurance companies benefitting from being exempt from anti-trust laws. Until I saw that question and some of the subsequent discussion, I was not aware that this was an issue in the health care debate. Actually, the anti-trust exemption has little or no impact on health care, so I did some research and provided an answer. I am reprinting that below. I also debunked comments suggesting Republicans are against capitalism - presumably because Republicans are in favor of the anti-trust exemption.
Here is a shortened version of my answer:
A summary of my answer is 1) insurance companies are exempt from anti-trust for valid reasons; 2) the exemption is not relevant to health insurance because coverage is not always been written by insurance companies; 3) historical facts say Republicans were the "good guys" and the Democrats were the "bad guys."
1. History of the Exemption
In 1869, the US Supreme Court ruled that insurance was not commerce and therefore was exempt from Federal regulation. This was the case of Paul v. Virginia. Because of the Supreme Court ruling, Congress could not allow insurance companies to be included in the Sherman Anti-Trust laws passed in 1890. It would have been clearly unconstitutional for Congress to have done have applied the anti-trust laws to insurers.
In 1944, the Supreme Court reversed that 1869 decision and said that, under the Commerce Clause, the Federal Government could regulate insurance companies. In 1945, Congress enacted the McCarran-Ferguson Act which said that the Federal Government could only regulate insurance companies when Congress passed a law specifically saying that insurance was to be regulated.
My guess is that Congress did this to prevent federal regulators from applying laws to insurance companies that Congress had not intended to be applied to insurance companies. When Congress enacted laws prior to 1944, Congress never considered what the impact of that law would be on insurance companies. In that context, when you think about it, what Congress did in 1945 makes sense.
2) The anti-trust exemption really is not relevant to health insurance
The largest companies offering health care coverage in the United States tend to be Blue Cross and Blue Shield Plans, HMOs, and Third Party Administrators (for self-insured coverage). Guess what - these organizations were not insurance companies.
While some Blue Cross plans have converted into insurance companies in the last 10 years or so, the fact is most Blue Cross and Blue Shield Plans were incorporated as non-profit companies and not as insurance companies. So from the 1930s through the 1990s, the majority of Blue Plans were NOT exempt from anti-trust laws. The Blue Plans that have not converted to insurers are still subject to anti-trust laws today. Example: Independence Blue Cross and Highmark Blue Cross Blue Shield (both in PA) wanted to merge just last year. Their proposed merger was reviewed by federal regulators for anti-trust approval.
HMOs, like Blues, may be incorporated as something other than insurance companies (you would have to look at the laws of each state to determine whether HMOs would be considered insurers or not). Thus, many HMOs may be subject to anti-trust laws too.
Then there are third party administrators or TPAs, who are definitely not insurance companies. They administer benefits for groups that self-insure. Why is that important? Well, at least 50% of all Americans with group health coverage have self-funded coverage. Thus at least 50% of the people with group coverage have their benefits processed by a company that IS subject to the anti-trust laws.
Finally, the States regulate very carefully the activity of insurers and so does the federal government (e.g. HIPAA, Gramm-Leach-Bliley, ERISA, COBRA). So I don't understand what regulatory oversight an anti-trust exemption prevents. Remember - anti-trust laws don't prevent a company from winning in the market place and capturing a dominant market share.
3) History does not support saying the Republicans are the bad guys
The Sherman Anti-trust Act was anti-big business and it was adopted when the Republicans controlled the White House and both the House and the Senate. When the Sherman Anti-trust Act passed it was unconsitutional for the Federal Government to regulate insurance companies. That was why insurers were exempt and not because of political influence.
When McCarran-Ferguson passed, the Federal Government could regulate insurers but Congress decided to continue the protection of insurers from federal regulation. At that time, the Democrats controlled the White House, the Senate and the House of Representatives.
Here is a shortened version of my answer:
A summary of my answer is 1) insurance companies are exempt from anti-trust for valid reasons; 2) the exemption is not relevant to health insurance because coverage is not always been written by insurance companies; 3) historical facts say Republicans were the "good guys" and the Democrats were the "bad guys."
1. History of the Exemption
In 1869, the US Supreme Court ruled that insurance was not commerce and therefore was exempt from Federal regulation. This was the case of Paul v. Virginia. Because of the Supreme Court ruling, Congress could not allow insurance companies to be included in the Sherman Anti-Trust laws passed in 1890. It would have been clearly unconstitutional for Congress to have done have applied the anti-trust laws to insurers.
In 1944, the Supreme Court reversed that 1869 decision and said that, under the Commerce Clause, the Federal Government could regulate insurance companies. In 1945, Congress enacted the McCarran-Ferguson Act which said that the Federal Government could only regulate insurance companies when Congress passed a law specifically saying that insurance was to be regulated.
My guess is that Congress did this to prevent federal regulators from applying laws to insurance companies that Congress had not intended to be applied to insurance companies. When Congress enacted laws prior to 1944, Congress never considered what the impact of that law would be on insurance companies. In that context, when you think about it, what Congress did in 1945 makes sense.
2) The anti-trust exemption really is not relevant to health insurance
The largest companies offering health care coverage in the United States tend to be Blue Cross and Blue Shield Plans, HMOs, and Third Party Administrators (for self-insured coverage). Guess what - these organizations were not insurance companies.
While some Blue Cross plans have converted into insurance companies in the last 10 years or so, the fact is most Blue Cross and Blue Shield Plans were incorporated as non-profit companies and not as insurance companies. So from the 1930s through the 1990s, the majority of Blue Plans were NOT exempt from anti-trust laws. The Blue Plans that have not converted to insurers are still subject to anti-trust laws today. Example: Independence Blue Cross and Highmark Blue Cross Blue Shield (both in PA) wanted to merge just last year. Their proposed merger was reviewed by federal regulators for anti-trust approval.
HMOs, like Blues, may be incorporated as something other than insurance companies (you would have to look at the laws of each state to determine whether HMOs would be considered insurers or not). Thus, many HMOs may be subject to anti-trust laws too.
Then there are third party administrators or TPAs, who are definitely not insurance companies. They administer benefits for groups that self-insure. Why is that important? Well, at least 50% of all Americans with group health coverage have self-funded coverage. Thus at least 50% of the people with group coverage have their benefits processed by a company that IS subject to the anti-trust laws.
Finally, the States regulate very carefully the activity of insurers and so does the federal government (e.g. HIPAA, Gramm-Leach-Bliley, ERISA, COBRA). So I don't understand what regulatory oversight an anti-trust exemption prevents. Remember - anti-trust laws don't prevent a company from winning in the market place and capturing a dominant market share.
3) History does not support saying the Republicans are the bad guys
The Sherman Anti-trust Act was anti-big business and it was adopted when the Republicans controlled the White House and both the House and the Senate. When the Sherman Anti-trust Act passed it was unconsitutional for the Federal Government to regulate insurance companies. That was why insurers were exempt and not because of political influence.
When McCarran-Ferguson passed, the Federal Government could regulate insurers but Congress decided to continue the protection of insurers from federal regulation. At that time, the Democrats controlled the White House, the Senate and the House of Representatives.
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