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Antitrust Immunity for Health Insurance Providers Ending Soon

Lani Shadduck's picture

President Barack Obama's health care reform bill has yet another obstacle to face: antitrust laws. The health insurance industry has been up in arms over the proposed health insurance overhaul. Should it go through, health insurance providers would most likely have to pay more taxes, risking their profits. Now, they face losing their holy grail: antitrust exemption.

For the past 64 years, the health insurance industry has enjoyed a privilege that few others can claim: exemption from antitrust laws. In 1945, Supreme Court declared the ruling that because health insurance providers were an interstate commerce industry, they had to be subject to antitrust laws. This was called the McCrarran-Ferguson Act and ensured health insurance companies from prosecution for price fixing, and reaching out to protected markets among other things.

The law as it stands today, seems like a fluke. Little know about the law, yet it makes sense that health insurance costs what it does. Without preventative legislation, insurers can do what they want, including making ridiculous pricing plans that cover barely the basics.

It is no secret that there is a monopoly on health insurance. Google health insurance and one is likely to come with Blue Cross or Aetna. It’s akin to Microsoft’s stranglehold on operating systems and software. The public is so used to Vista and Windows that they do no think twice about any other possibilities.

Antitrust laws promote competition and ensure that no one company or gang of companies control the market. Competition promotes lower pricing and more selection for the consumer. As it stands today, the health insurance industry is largely dominated by two companies.
The subject of antitrust laws and the health insurance industry has been until now pushed aside in the name of change. Already, too many issues such as funding, fiscal responsibility, and illegal immigrants have been the main obstacles of passing an actual overhaul. However, now with public reticence and failure to come to any sort of agreement over reform, politicians are forced to think out the box and deal with new issues.

Of course, the question arises: who gave health insurers invincibility in the first place? The answer is Congress. The idea behind the legislation was to allow health insurance providers to share information without being held accountable for price fixing or collusion. This, however seems to have backfired on Congress.

Speaker of the House, Nancy Pelosi has been the leader in getting this new cause off the ground. She hopes to pass the legislation as a completely separate legislation from the overall health care reform. It is a shrewd move on Pelosi’s part to highlight a negative on health insurance providers that many citizens are completely blind to.

Naturally, there is some dissent from health insurance providers and lobbyists. They claim that the move is unfair and may actually be detrimental in the long run. Opponents point out that if insurance companies are not in a position to lower prices and antitrust lawsuits may even deter price competition, making prices even higher. They would be competing at an even higher level than previously.

Pelosi’s move has already attracted support from both sides of the spectrum. If passed, it should be more of an impetus to get health care reform passed so that all Americans will have the option of getting affordable health insurance that is subject to scrutiny and antitrust laws.

Written by Lani Shadduck

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