Antitrust Protections Could be Repealed for Insurance Industry
In the midst of negotiations and hand-wringing over health care reform and bills pending legislation and votes in Congress, the House of Representatives is working on a bill that could send shockwaves through the insurance industry.
The bill is designed to repeal a long-standing law that protects the industry from antitrust regulation. Mostly backed by House Democrats, the bill would repeal the McCarran-Ferguson act from 1945.
Some industry watchers say this act has been one of the primary issues that has blocked consumers from having more control when it comes to their coverage. The act is blamed for issues related to price fixing and even collusion.
Why it could help
Deregulation has been blamed for many financial problems in recent years, particularly in the banking sector. The non-regulation and antitrust exemptions for the insurance business leave it in prime position for consolidation. This means that consumers could have fewer and fewer choices for their coverage and, in time, could mean that competition becomes almost nonexistent when it comes to both quality and price.
Greater competition, some analysts say, could mean lower premiums for Americans. Others aren’t as sure, and that’s why there’s some debate as to the usefulness of this legislation.
Why it could hurt
There is another way to look at this legislation, however. The industry received the exemption initially to protect itself. Through the exemption, companies can share information about pricing and risk. For example, there is an industry standard of how much it should cost to insure a certain individual (age, physical condition). If the companies cannot share this information because of competition, there is a risk that the insurers could be charging too little. And that leaves everyone vulnerable.
Most specifically, small insurance companies or “start-up” companies that are just beginning to establish themselves could be hurt by the legislation because they would not have access to existing industry research and information. Existing and financially viable insurers, however, would probably fare well because they have the infrastructure within their corporate network.
While this smaller bill is worked on in the House, the rest of the House and the Senate continue to work on negotiations related to the overall health insurance reform bills. Those are expected to face increased scrutiny and debate in the coming weeks.