The U.S. Senate Committee on the Judiciary has just held a hearing entitled "Prohibiting Price Fixing and Other Anti-Competitive Conduct in the Health Insurance Industry." The hearing is in the context of S. 1681, the Health Insurance Industry Antitrust Enforcement Act of 2009, recently introduced by Chairman Patrick Leahy (D-VT).

The legislation states that nothing in 15 U.S.C. 1011 et seq.--the McCarran-Ferguson Act--"shall be construed to permit health insurance issuers ... or issuers of medical malpractice insurance to engage in any form of price fixing, bid rigging, or market allocations in connection with the conduct of the business of providing health insurance coverage ... or coverage for medical malpractice claims or actions."

In his opening statement to the hearing, Senator Leahy said his legislation will repeal the antitrust exemption for health insurance and medical malpractice insurance providers. Leahy stated that antitrust oversight is needed in the health insurance industry, as the industry "does not have to play by the same rules of competition" as other industries are required to do. Leahy said that the anti-competitive conduct of health insurers includes price-fixing, bid-rigging and market allocation--for which there is no pro-competitive justification. Leahy decried the industry's influence in maintaining statutory exemption from federal antitrust laws, which he says has led to patients and doctors paying artificially inflated prices.

"These laws promote competition, which ensures that consumers will pay lower prices and receive more choices," Leahy stated, adding that implementing antitrust oversight in the health insurance industry is likely to provide consumers reassurance that companies are not in alliance to raise prices artificially.

The first of four witnesses in the hearing was Senator Harry Reid (D-NV), who is Senate Majority Leader. Senator Reid explained the history of the insurance industry exemption from the federal antitrust laws due to the McCarran-Ferguson Act of 1945 (the act allows state law to regulate the insurance business without federal government preemption). He also stated he had received hundreds of letters from constituents who are struggling with rising insurance rates or unable to find companies to cover them, or having to drop insurance because of the rise in rates.

Senator Reid further stated that the insurance company industry exemption has been damaging to the American economy in several ways, including: companies becoming so large they dominate entire regions of the country; becoming so powerful they block start-up businesses from entering the market; exerting tremendous influence over public policy, and having an imbalance of authority that allows them to dictate the course of treatment patients receive.

More Industry Headlines