CBO Finds No Savings From Altering Antitrust Exemption

Legislation to modify the federal antitrust exemption for health and medical malpractice insurers "will have no significant effect" on premiums charged for private health insurance, the Congressional Budget Office has determined.

"Based on information from the Justice Department, the Federal Trade Commission, the National Association of Insurance Commissioners, consumer groups and private attorneys, CBO estimates that both of those effects would be very small, and thus that enacting the legislation would have no significant effect on the premiums that private insurers would charge for health insurance," the agency reported.

The CBO also said that to the extent insurers would otherwise engage in prohibited practices and be prevented from doing so by enactment of this bill, premiums might be lower.

However, the CBO report added, "that effect is likely to be small because state laws already bar the activities that would be prohibited under federal law if this bill was enacted."

Responding to the CBO analysis, officials of the Physician Insurers Association of America, which represents medical malpractice insurers owned by physicians' groups, said the report refutes claims by "several consumer groups" that repealing the provision would reduce health insurance costs by 20 percent.

Lawrence E. Smarr, president of the PIAA, added that the CBO report has "revealed that this legislation is in essence a politically motivated attempt to appease personal injury lawyers via a spurious bill."

The CBO's projections were based on an analysis of H.R. 3596, passed by the House Judiciary Committee and incorporated into the overall House health care reform package–H.R. 3962, "the Affordable Health Care for America Act."

The House bill includes an amendment that provides "safe harbors" for joint insurance industry activities now protected from antitrust regulation, such as compilation of historic loss data across the industry.

When the notion of stripping certain types of insurers of their antitrust exemptions under the McCarran-Ferguson Act was raised last month, after health insurers criticized the latest health reform bills, a group of nine property and casualty insurance trade groups charged that backers had a hidden agenda of opening up some segments of the insurance industry to more lawsuits.

The p&c groups characterized the move as "an attempt to radically rewrite the antitrust laws for a certain segment of the insurance business," and argued that those who support them have "a much broader, but undisclosed agenda."

A joint letter was sent to the leadership of the House Judiciary Committee that voiced "strong opposition" to the "Health Insurance Industry Antitrust Enforcement Act of 2009″–H.R. 3596 in the House and S. 1681 in the Senate.

Further, the letter said there is no demonstrated need "to expand the scope of the health care reform debate in this fashion."

The letter was signed by the chief executives of the American Insurance Association, Council of Insurance Agents and Brokers, Financial Services Roundtable, Independent Insurance Agents and Brokers of America, National Association of Mutual Insurance Companies, National Association of Professional Insurance Agents, Physician Insurers Association of America, Property Casualty Insurers Association of America, and the Reinsurance Association of America.

The letter contended the bills would "repeal long-standing provisions" of the McCarran-Ferguson Act with respect to health and medical malpractice insurers.

"We, therefore, urge you to oppose these current bills, as they would bring no consumer benefit while causing enormous marketplace disruption that might have the perverse effect of discouraging new marketplace entrants," the letter said.

"It would be ironic indeed if the primary purpose of the federal antitrust laws–promoting competition–was undercut through enactment of either bill," the letter concluded.