Every so often, someone in Congress decides to go after that tempting but misguided political target: the repeal of the insurance industry's limited anti-trust exemption. People are generally suspicious when they hear the term "anti-trust exemption," especially because repeal advocates often forget to include the word "limited" when talking about McCarran-Ferguson. This allows politicians to paint themselves as fighting a noble battle against the mythical monolithic giant that is the insurance industry
kage, the latest debate over McCarran-Ferguson would strip the health and medical professional liability insurance markets of their limited exemptions. The measure was proposed as a possible amendment to the Senate healthcare package, but was never taken up. Healthcare reform in general ran into a roadblock with the election of Scott Brown (R-Mass.) to the Senate, and leaders in both chambers of Congress have begun seeking
new ways to move their healthcare reform proposals.
House Majority Leader Steny Hoyer (D-Md.) has said the repeal could be introduced as a separate piece of legislation, and some in the House leadership even believe the repeal should be expanded to include property-casualty insurance.
Like a lot of political theater, any resemblance to the truth in the grand speeches by repeal advocates seems to be entirely coincidental. With more than 4,000 property-casualty insurers in the U.S. alone, the insurance industry is about as monolithic as a herd of cats. Additionally, the crimes that repeal proponents allege are already crimes under current law. In reality, repealing McCarran's limited exemption would bring only chaos to the industry and make life more difficult for everyone involved with insurance including companies, agents and brokers, and most certainly consumers.
One of the most important things the limited exemption has done is set boundaries for insurance within the legal system. Insurers and plaintiffs' attorneys have a history of legal precedent establishing the rules involving insurance-related lawsuits. If the limited anti-trust exemption were repealed, those boundaries would be eradicated, giving rise to a wave of lawsuits as the trial bar tests how far the courts will allow them to go.
Repeal proponents will argue that exemption inhibits competition between insurers and allows collusion. In reality, the opposite is true. By allowing a degree of data sharing, exemption ensures that smaller companies can accurately price their products, giving consumers, and their agents or brokers, a competitive market. Without the exemption, only large companies would have enough data to determine the risks facing potential policyholders, giving them an inherent economic advantage.
Exemption also allows insurers to operate from a common form, enabling comparison of different policies from different companies on an "apples to apples" basis rather than sorting through different policies with clauses written in different legal language that may, or may not, offer the same coverage.
Exemption repeal would turn order into chaos and create a lose-lose-lose scenario for everyone. Agents would have fewer companies to shop their clients' business with and less competition on pricing and service. There would be more complexity and confusion in securing coverage and an uncertain legal environment.
There's no doubt that the phrase "anti-trust exemption" will raise suspicions for politicians and voters. However, lawmakers have a duty to act for the public good rather than political expediency. Repealing McCarran-Ferguson would be a costly mistake for the insurance industry, its customers and the economy.
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