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Michael Hiltzik: The real antitrust scandal in health insurance

November 2, 2009 |  3:00 am
Sometimes a minor dust-up distracts attention from a major problem, as when a police officer stops a car for a busted taillight and overlooks the dead body in the trunk.

The health insurance industry's so-called "antitrust exemption," the subject of my column today, is something like that. Liberal members of Congress have spent the last couple of weeks decrying an exemption enacted back in 1945 and have moved to repeal it. This seems to be such an obvious crowd-pleaser that it even attracted a handful of Republican votes on the House Judiciary Committee, which moved the repeal effort to the House floor.

Yet repeal of the McCarran-Ferguson Act would do almost nothing to halt the wave of mergers and acquisitions that turned a competitive industry into a nationwide oligarchy -- even a monopoly in some regions -- over the last 10 years. That's because it doesn't apply to mergers, which are still subject to federal antitrust scrutiny, and the collusive practices it does outlaw don't normally take place in the health insurance sector.

The real problem, as my column documents, is that federal antitrust regulators haven't taken their statutory authority seriously. They've waved through hundreds of mergers that have resulted in the elimination of competition across the nation and the disappearance of choice for millions of American consumers. And there lies the real rationale for the "public option" -- since the regulators have failed to preserve competition, it's up to Congress to reinstall it by fiat.

The column starts below:

I suspect I had the same reaction as many other Americans after hearing that Congress was planning to strip the health insurance industry of its antitrust exemption.

My question was: What idiots exempted health insurers from antitrust law in the first place?

The answer, of course, is Congress.

The antitrust exemption supposedly comes from the McCarran-Ferguson Act, which was passed in 1945 to protect state regulation of insurance companies, and also to allow insurers to share loss data with each other without being haled into federal court on antitrust or collusion charges.

It’s tempting to see McCarran-Ferguson as a giveaway to big business. What’s especially grating about it is that antitrust immunity should be grudgingly given. Major League Baseball has it — but it’s the national pastime, affording Americans months of pleasure every year (unless the Yankees win). Health insurers, by contrast, afford Americans endless frustration, and always seem to win, in the end. One would think the country needs antitrust immunity for health insurers like, well, the New York Yankees need another free-agent slugger.

Read the whole column.

-- Michael Hiltzik