The Antitrust Trap for Health Care Insurance

There is a stealth legislative initiative flying below the media radar that will help enable the feds to drive private health care insurers out of business. On February 24, the House passed an amendment, HR 4626, to a 1945 piece of legislation called the McCarran-Ferguson Act. This amendment seeks to restore federal power over insurance regulation.

The McCarran-Ferguson Act was a congressional response to a 1944 Supreme Court ruling on the case United States v. South-Eastern Underwriters Association. The Court decided that Congress does have the power to regulate insurance under the Commerce Clause of the U.S. Constitution.

A year later, The McCarran-Ferguson Act was passed to quell fears of federal infringement on states' rights. The act declares that the "business of insurance" is the prerogative of individual states unless federal law explicitly declares otherwise, such as in antitrust legislation.

Ironically, the fear of Franklin Roosevelt's proposals through the "Second Bill of Rights" prompted a previous Democrat-controlled Congress to respect the limited power delegated to the federal government. It is a fear our current Congress has apparently gotten over.

A day before the president's health care summit, the House passed an amendment to the McCarran-Ferguson Act seeking to "restore the application of the federal antitrust laws to the business of health insurance to protect competition and consumers." In effect, the amendment all but repeals The McCarran-Ferguson Act by adding the wording, "Nothing contained in this Act shall modify, impair, or supersede the operation of any of the antitrust laws with respect to the business of health insurance."

In other words, Congress appears to be gearing up for federal regulation of health insurance and clearing away any states' rights impediments to that end. Although strengthening antitrust laws would ensure that major providers do not collude for unfair advantages, the same power in the hands of the federal government -- a party now with a vested interest in health care -- brings a conflict of interest.

Even though President Obama stressed that the new plan would "work with employer-based insurance" and offers "choice and competition," the House and Senate framework underpinning that plan does not. As Republicans pointed out at the summit, the Democrats' plan incentivizes employers to "drop employees from coverage because it's cheaper to pay the fine than pay for insurance." The admitted use of tax revenue to subsidize such a plan for insurance exchanges puts the private sector and citizens unwilling to use a government health care plan at a severe disadvantage.

Since 85 percent of the insured are satisfied with their medical care and cost, they'll be unable to find similar coverage at the same price without the large risk-pool advantage of their employer's former plan. Those searching for similar plans to what they previously enjoyed will have to use government-sponsored insurance or suffer higher costs for private options.

New or small insurance providers who service those wishing to opt for private plans will be forced to merge in order to stay competitive by increasing their client pools to spread risk and lower costs. To protect its own insurance pool, the federal government can wield regulations and arbitrary antitrust laws (HR 4626) to stop mergers and drive their private-sector competition out of business. This strategy effectively slams the door on spontaneous free-market forces to offer lower costs and real competition.

According to the source Tulsa Today,

U.S. Senator Tom Coburn, M.D. (R-OK), released the following statement regarding a new report by the non-partisan Congressional Research Service (CRS) that shows that 60 percent of health care spending in the U.S. ($1.35 trillion out of $2.24 trillion) is controlled by state, local and federal government.

"Defenders of the Reid bill say we need ‘reform' to keep insurance companies honest.  A better question would be: ‘Who's going to keep the government honest?'  This new report shows that the so-called ‘reform' effort is based on a false premise.  Government is already the majority-shareholder in our health care system," Dr. Coburn said.

Considering that government is the major "business" controlling health care, then also having the ability regulate its own competition (the free market system itself) would present a grave conflict of interest. The amassing of such power, as suggested by the amendment to the McCarran-Ferguson Act, demonstrates questionable and possibly unethical intentions.

One need only look to the recent congressional hearings on General Motor's competition, Toyota, for examples of how government is unhindered by the ethics of a conflict of interest when dealing with market competitors.

Andie Brownlow blogs at
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