New Bill Would Break Up Health Insurance MonopoliesSeptember 24, 2009 - by Donny Shaw
Sen. Patrick Leahy [D, VT] and Rep. John Conyers [D, MI-14] have thrown a new concept into the health care reform debate. They’re pushing legislation to take away insurance companies’ exemption from federal anti-trust laws.
“In the midst of the healthcare debate, where so many proposals contemplate how to bring added competition to the health insurance market, this legislation ensures that health insurers and medical malpractice insurers will at least be subject to normal laws of competition,” Sen. Leahy said upon introducing the bill last week.
Since 1945, the McCarran-Ferguson Act has given individual states the authority to regulate insurance companies instead of the federal government. It also stipulated that if the companies are regulated by the states, they won’t be susceptible to federal anti-trust laws that ban anti-competitive, monopolistic practices like price fixing, bid rigging and dividing up markets amongst themselves.
A 2007 study (pdf) by the American Medical Association found that some states have become almost entirely dominated by a single insurer. In Alabama, for example, Blue Cross, Blue Shield controls 83 percent of the market. In Maine, Wellpoint controls 78 percent of the market. And in some metropolitan areas, concentration of insurance by a single company is as high as 96 percent.
Even though breaking up these big insurance monopolies would increase competition and cause insurance premiums to go down, just like the public option would, Majority Leader Sen. Harry Reid [D, NV] says he won’t include the Conyers-Leahy legislation in the final health care reform bill. Why? Alexander Bolton at The Hill offers this explanation:
So far the powerful insurance industry has held back waging a full-out battle against Democratic health reform proposals because companies stand to gain tens of millions of new customers. But adding language that would open health insurance companies to prosecution by the Justice Department would provoke a strong counterattack from the industry.