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Dems Aim To Strip Insurance Industry Of Anti-Trust Exemption

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WASHINGTON — Democrats launched a drive at both ends of the Capitol on Wednesday to strip the insurance industry of its decades-old exemption from federal antitrust laws, part of an increasingly bare-knuckled struggle over landmark health care legislation sought by President Barack Obama.

If enacted, the change would put an end to "price-fixing, bid-rigging and market allocation in the health and medical malpractice" insurance areas, said Sen. Patrick Leahy, D-Vt., chairman of the Senate Judiciary Committee. Leahy said he would seek a vote on the plan when the Senate debates health care legislation in the next few weeks.

Leahy made his comments at virtually the same time the House Judiciary Committee voted 20-9 to end an industry exemption that dates to 1945. Three Republicans supported the move.

Senior Democratic officials in the House said the leadership was inclined to incorporate the measure into the broader health care bill expected to be brought to the floor for a vote within a few weeks. No final decision has been made, they added.

In response, an industry official said Democrats were targeting a problem that does not exist.

The events coincided with a vote in the Senate to sidetrack legislation averting a 21 percent cut in Medicare payments for doctors in January and raising their fees by $247 billion over a decade. The 47-53 vote was 13 short of the 60 needed to advance the bill, reflecting concerns that the measure would have raised deficits. The result was a defeat for Democrats and an embarrassment for the American Medical Association, which had mounted a seven-figure advertising effort to assure passage of one of its top priorities.

Republicans grumbled that Senate Democrats timed the offensive on antitrust matters to obscure their defeat on the bill setting pay rates for doctors, a measure that GOP leader Mitch McConnell, R-Ky., called "the Senate's first vote on health care this year."

Even so, taken together, the threats to revoke long-standing antitrust protections reflect the fury Democrats have projected in response to recent insurance industry attempts to influence the shape of legislation. The events occurred less than a week after the insurers' trade association issued a report saying a measure in the Senate Finance Committee would produce sharp increases in premiums for millions of people who currently have insurance.

Democrats and the White House reacted angrily, attacking the study as flawed and politically motivated.

Responding to the day's developments, the industry said the legislation was based on a misperception of existing law. "We believe that health insurers have not been engaging in anticompetitive conduct and that McCarran-Ferguson does not provide a shield for such conduct," Karen Ignagni, president and CEO of American's Health Insurance Plans, wrote to Rep. John Conyers, the Michigan Democrat who chairs the Houses Judiciary Committee.

"Thus, the bills attempt to remedy a problem that does not exist," she wrote.

The McCarran-Ferguson Act of 1945 gives states authority to regulate the insurance industry for antitrust matters, and the companies are exempt from federal jurisdiction.

To buttress its case, industry officials circulated a paper from JPMorgan, the investment bank. "Ultimately, just using the terms antitrust and health insurers in the same sentence makes a great headline, but in practice given the narrow scope of the act, we doubt a repeal has meaningful implications for the publicly traded companies," it said.

The industry holds a large conference beginning on Thursday several blocks from the Capitol.

The White House had no reaction. Instead, aides pointed to Obama's statement last weekend that insurers are earning "profits and bonuses while enjoying a privileged exception from our antitrust laws, a matter that Congress is rightfully reviewing."

The developments came as Democrats struggled in both houses of Congress to enact Obama's call for legislation to expand health care to millions who lack insurance, provide greater consumer protections to millions more, and rein in the cost of medical care in general.

In the Senate, Reid, key committee chairmen and White House aides are at work crafting legislation the Senate can vote on later this fall.

The House is also on track for a vote this fall, although weeks of private negotiations among Democrats have yet to produce agreement on a bill.

Among the most controversial unresolved issues concerns proposals for the government to sell insurance in competition with private companies. The House bill is certain to include such a provision. Although the rank and file have yet to come to an agreement on key details, officials said the leadership was counting carefully to see if it had the votes to establish a system that would pay doctors 5 percent more than they receive for treating Medicare patients. Hospitals and other providers would be paid at Medicare rates, without the additional 5 percent, they said.

It is unclear what type of so-called "public option" will be incorporated into the Senate measure, where Democratic moderates are wary of the idea, even though public polling consistently shows its popularity.

Until recently, the insurance industry has played a noncommittal role as legislative proposals developed in both houses of Congress. AHIP announced months ago it supported comprehensive health care reform and Obama called on Ignagni to speak at a televised White House event designed to showcase widespread agreement that the time had come to change the current system.

Essentially, industry offered a trade. It agreed to abandon practices such as denying coverage on the basis of pre-existing medical conditions if the legislation required nearly universal coverage, a step that would give it access to millions of new customers. At the same time, it vigorously opposes any legislation that would allow the government to sell insurance.

The tone began to change when the Finance Committee voted to excuse an estimated two million lower income Americans from a requirement to purchase insurance, at the same time it greatly reduced the penalties for those who were still covered, but refused to buy coverage.

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Associated Press writer Erica Werner contributed to this report.

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