In the U.S., only two industries are exempt from the consumer protections provided by federal anti-trust law: baseball and the health insurance industry.  These two seemingly different industries are subject to antiquated laws: in the case of health insurers, the 1945 McCarran-Ferguson Act grants this broad exemption.

A new report by the Center for American Progress (Center) urges Congress to reverse the exemptions from federal anti-trust and consumer protection laws that now insulate the health insurance industry from federal enforcement and legal challenges.   Sen. Patrick Leahy and Rep. John Conyers each filed bills to rescind the exemption; the House proposal was adopted into the health reform bill introduced last week, and the Senate bill is in play.

Without the authority for effective federal (and state) oversight, this exemption strips the regulatory framework for effective federal (and state) oversight and has quashed competition among insurers.  This causes harm to consumers, the authors write, through “supracompetitive profits,” as well as a growing uninsured class, spiraling costs, systemic fraud. They go on:

Over 47 million Americans are now uninsured, and premiums have risen over 120 percent in the past decade for those who do have coverage. Health insurers engage in an endless list of deceptive, fraudulent, and unfair practices that deny millions of consumers adequate coverage. And meanwhile, 10 of the largest health insurers saw their profits balloon from $2.4 billion in 2000 to $13 billion in 2007.”

As noted above, insurer gains have come at the expense of uninsured and underinsured consumers.  The elimination of this exemption would allow federal regulators to play hardball with the insurers and address the: “misleading and abusive conduct such as egregious pre-approval provisions, deception about scope of coverage, unjustifiably denying or reducing payments to patients and physicians, and other coercive conduct.”  If the House provision is included in health reform, health care consumers would be again protected as they are in every other industry (except for baseball, of course).

FTC at bat
The Federal Trade Commission (FTC), as the lead federal agency on fraud, should referee the health insurance markets, and it needs more support to extend consumer protections in a meaningful way. Currently, the FTC focuses on some companies that market in a fraudulent or deceptive manner,  but cannot pursue insurers due to the anti-trust law. Lacking oversight, the true actions of insurers are hidden from view from the people who purchase health plans.

According to the Center, the government, through the FTC, should target health insurers and intermediaries like pharmacy benefit managers using “a broad range of powers, including studies, workshops, policy hearings, legislative testimony, and industry conferences to better inform marketplace participants of how to properly abide by the law.”

States pinch-hitting
Some in the insurance industry have argued that state regulation of the insurance industry is sufficient, but the Center lays out the true stats.

The authors point to a striking lack of resources, for example: in four states, the insurance commissioner doubles as the fire marshal. As a result of such lack of resources, state insurance commissioners have not brought a single action against an anti-competitive product, the authors observe, and have brought  relatively few consumer protection actions.

State regulators are also hampered by the limits of their home field –  under state law, states can only effectively solve the problem for fully-insured plans within their state borders, but because of ERISA, cannot prosecute the self-funded plans that comprise 40 percent of the insurance market .

People are protected in almost every area against business collusion.  Protections should not be denied because of an antiquated law written about health insurance.

–Georgia Maheras, Prescription Access Litigation