Critical Condition

Congress Should Not Pre-Empt State Antitrust Regulation of Health Insurance

One interesting contradiction about the majority faction’s position on health-insurance “reform” is that, while they don’t want a national market for health insurance (in the sense that they don’t want each American to have health insurance that is portable from job to job and state to state), they do want Congress to regulate health insurance federally.

With the “reform” in limbo, the majority has found one thing that they think will fly: Subjecting health insurers to federal antitrust laws. This would be pointless, and likely counter-productive.

Claiming that health insurers are uniquely “exempt” from antitrust laws is misleading in more than one way. In fact, federal law ensures that state antitrust and other consumer-protection laws dominate the field of insurance regulation. And this goes for all lines of insurance, not just health insurance.

The law that limits the federal government from pre-empting state antitrust laws is the McCarran-Ferguson Act (15 U.S.C. § § 1011-1015), which Congress passed soon after a surprising decision by the U.S. Supreme Court in 1944. The decision overturned precedent and determined that insurance was interstate commerce. McCarran-Ferguson immediately restored insurance to state regulation, as it had always been.

Furthermore, market concentration in health insurance is not significantly different than it is in other lines of insurance, as I demonstrate in a recently published article. Nor have states failed to regulate health insurers. States enthusiastically regulate — even over regulate — all aspects of insurance. A federal intrusion into insurance regulation would be redundant, adding another layer of bureaucracy to an already heavily regulated activity.

John R. Graham is director of Health Care Studies at the Pacific Research Institute.

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