Insurance Industry Antitrust Fight Headed To Conference Committee

03/18/2010 05:12 am ET | Updated May 25, 2011

The insurance industry successfully fought off a Senate threat to revoke its antitrust exemption as part of health care reform, but the issue lives to fight one more battle in the conference committee negotiations that will take place between the two chambers.

The issue surfaced in mid-October, shortly after the industry lobby, America's Health Insurance Plans (AHIP), pushed hard against the Democratic health care reform effort, claiming it would significantly raise premiums.

Senate Majority Leader Harry Reid (D-Nev.) responded by saying the industry should lose its cherished antitrust exemption -- implemented some 60 years ago by the McCarran-Ferguson Act -- and be forced to compete under the same rules as any other enterprise.

"Insurance companies have become so large they dominate entire regions of the country," he said. "They have become so powerful they block start-up businesses from entering the market, and they put smaller companies out of business. They have become so dominant that they dictate business practices. They are so influential that they exert tremendous influence over public policy."

House Speaker Nancy Pelosi (D-Calif.) seconded Reid the next day, twisting the knife and adding that "it is well known to the public that the health insurance companies are the problem." The following day Judiciary Committee Chairman John Conyers announced a hearing and a committee vote on revoking the exemption. It passed and was included in the House health care bill that passed two weeks ago.

The insurers recognized the politics at work and strongly voiced their opposition to the provision. "Health insurance is one of the most regulated industries in America at both the federal and state level. McCarran-Ferguson has nothing to do with competition in the health insurance market. The focus on this issue is a political ploy designed to distract attention away from the real issue of rising health care costs," AHIP spokesman Robert Zirkelbach told HuffPost.

A week before House passage, HuffPost reported that Reid decided not to include the repeal of the exemption but to go for it as a floor amendment instead. The move was seen as a sop to Nebraska Democrat Ben Nelson, an industry backer who had yet to offer his support for Reid's motion to proceed and who is a strong public supporter of keeping the antitrust exemption in place.

Asked by HuffPost if he had asked Reid to drop the measure in exchange for his vote, Nelson demurred. "That would come as a surprise to Harry Reid," he said of multiple reports that he had pushed for it to be left out.

But there's more than one way to push in the Senate and, regardless of whether Nelson raised the issue with Reid, even the Capitol cafeteria workers were aware of Nelson's strong position.

Nelson argues that repealing the exemption wouldn't hurt the big insurers because they're already so big they don't need to collude with each other. Repealing it, he argues, would only hurt the little guys.

But there are very few little guys left: one or two big insurers are dominant in almost every region of the country.

Nelson, now that he has voted to move the bill forward, is still threatening to filibuster a final bill if he finds it objectionable. Nelson and others want the public health insurance option stripped from the Senate bill, but if it goes to conference too friendly to the industry, the antitrust repeal is likely to be in the bill that comes back. For the industry, it's pick your poison.

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