While most of the attention over the last several months regarding the health care reform debate has centered on the public option, changes to Medicare and Medicaid, and federal funding for abortion, the possibility that the insurance industry’s antitrust exemption might be repealed — at least for health and medical malpractice insurers — has clearly taken a back seat. However, when Congress returns from their recess in January, McCarran will unquestionably face the strongest challenge to its continued existence ever, and significant change in the manner in which the federal antitrust laws are applied to the insurance industry is a significant possibility.
The Current Status
While stand-alone bills to repeal McCarran were introduced earlier this year — as they have been many times in the past — McCarran’s continued existence took a dramatically more dangerous turn when it became ensnared in the current health care reform debate. After several Congressional hearings this Fall, which included testimony in support of repeal from Christine Varney (who heads the DOJ Antitrust Division), the American Bar Association’s Antitrust Section, and Senator Harry Reid, among others, McCarran repeal was made a part of the House’s omnibus health care reform legislation (HR 3962). With the passage of the bill by the House on Nov. 7, McCarran repeal had cleared its first hurdle, and to the surprise of many, the legislation that was passed by the House turned out to be broader in scope than had been anticipated.
Specifically, as expected, Section 262 of the House bill would repeal McCarran for health and medical malpractice insurers with respect to all conduct except: (a) “collecting, compiling, classifying or disseminating historical loss data; (b) determining a loss development factor applicable to historical loss data; and (c) performing actuarial services if doing so does not involve a restraint of trade.” However, the bill contains two other related provisions that were added late in the process that have the potential to be equally significant. First, subdivision (b) of Section 262 expands the Federal Trade Commission’s authority to bring actions under Section 5 of the FTC Act (for anticompetitive conduct) against non-profit health and medical malpractice insurers. Currently, the FTC has no such authority. Even more significantly, Section 260 of the bill permits the Federal Trade Commission to conduct studies and prepare reports concerning the entire insurance industry – not just as to health and medical malpractice insurers. Such studies and reports are also currently outside the scope of the FTC’s authority.
At the same time, McCarran repeal efforts advanced in the Senate, with Senator Leahy of Vermont, who has been one of the most outspoken advocates for McCarran repeal for many years, leading the charge. In September, Senator Leahy introduced a stand-alone McCarran repeal bill (S. 1681). That bill, unlike the House McCarran provision that was passed, does not contain any of the “safe harbors” described above. In early December, Senator Leahy offered his McCarran bill as an amendment to the Senate’s omnibus health care reform legislation. However, with the Senate Democrats needing all 58 Senate Democrats, plus Senators Sanders and Lieberman, to defeat a Republican filibuster and push the bill forward to passage — including Senator Ben Nelson of Nebraska, a former insurance industry executive and a former state insurance commissioner — that was not to be.
As is now well known, Senator Nelson voiced his strong condemnation for many aspects of the Senate bill, and indicated that he would not provide the critical 60th vote necessary for the Senate Democrats to push the Senate bill forward, if changes to the legislation were not made. One of the provisions in the bill Senator Nelson refused to support was Senator Leahy’s McCarran repeal amendment, and for that reason the Senate health care bill that was approved by the Senate on Dec. 24 does not include any McCarran repeal provisions.
What Happens Now?
While, for a moment, it appeared that the Senate’s failure to include McCarran repeal in the bill meant that McCarran had, once again, survived, any clear indication that this was in fact the case was quite short-lived. In late December, Senator Leahy issued a statement indicating his profound “disappointment” that McCarran repeal had not survived. He stated that McCarran repeal is “an integral part of injecting competition into the health insurance market” and that McCarran repeal “would ensure that basic rules of fair competition will apply to insurers.” Moreover, Senator Leahy stated that he “looked forward to working to include [McCarran repeal] when the Senate and House conference to reconcile their versions of the legislation.” Accordingly, we may not yet have heard the last from Senator Leahy on this issue.
Congress is in recess until Jan. 19. At that time, because the bills passed in the House and Senate differ, a Conference Committee will likely be created that will try to harmonize the two bills for another vote in the House and Senate. While many Senators have publicly stated that any changes made to the Senate bill by the Conference Committee will make it unlikely the legislation will continue to garner the 60 votes necessary to defeat a Republican filibuster, only time will tell whether McCarran has, once again, remarkably avoided repeal. Stay tuned.