While the House of Representatives put repeal of the Affordable Care Act (ACA) on hold last week, it passed legislation that would eliminate the 70-year-old "McCarran-Ferguson" antitrust exemption for the insurance industry. The Competitive Health Insurance Reform Act of 2017 (HR 372), which passed with broad bipartisan support, is now in the Senate and has been referred to the Judiciary Committee. If the bill becomes law, it could mean significant new antitrust compliance challenges for the health insurance industry.
The McCarran-Ferguson Act gives states the power to regulate most aspects of the business of insurance, and grants a limited antitrust exemption from the Sherman Act and Clayton Act. The exemption functions principally to allow certain information sharing between insurance companies that might otherwise be prohibited by the antitrust laws. In particular, it allows insurers to pool historic loss information, which bears directly on pricing.
Critics of the McCarran-Ferguson Act say that it harms competition and leads to higher premiums. Accordingly, there have been numerous bipartisan attempts to eliminate the antitrust exemption in recent years. One such bill was passed by the House during the ACA debates in 2010, but died in the Senate.
The most recent attempt at eliminating the antitrust exemption was sponsored by Arizona Republican Paul Gosar. The bill passed the House of Representatives 416 to 7 and has the support of the White House, but it remains to be seen what the bill’s fate will be in the Senate. That is particularly true because it was passed as part of the broader Republican effort to repeal the ACA, which is now stalled.
If the legislation is passed, eliminating the McCarran-Ferguson Act antitrust exemption will mean a new layer of compliance challenges for the health insurance industry. Insurance companies are already heavily regulated at the state level and are subject to the antitrust laws of many states. They also face federal antitrust scrutiny in areas outside of the exemption, particularly merger clearance. Eliminating the McCarran-Ferguson Act antitrust exemption would further complicate that already complex compliance picture and likely mean new enforcement risk for insurance companies.