Insurance Regulation

While the U.S. House of Representatives was busy impeaching President Trump for the second time, the President was busy. Lost in news of the tumult of violence in the Capitol was the White House announcement of the signing of legislation breaking a pillar of insurance law – the McCarran-Ferguson Act of 1945. Health insurers, including dental plans, are no longer exempt from federal antitrust laws except for limited purposes related to pricing and drafting insurance policies.

Nothing contained in this Act shall modify, impair, or supersede the operation of any of the antitrust laws with respect to the business of health insurance (including the business of dental insurance and limited-scope dental benefits).

The Act known as the Competitive Health Insurance Reform Act of 2020, exempts from the legislation life insurance and annuities and property/casualty insurance. The Act also permits health insurers to continue:

“(A) to collect, compile, or disseminate historical loss data;

(B) to determine a loss development factor applicable to historical loss data;

(C) to perform actuarial services if such contract, combination, or conspiracy does not involve a restraint of trade; or

(D) to develop or disseminate a standard insurance policy form (including a standard addendum to an insurance policy form and standard terminology in an insurance policy form) if such contract, combination, or conspiracy is not to adhere to such standard form or require adherence to such standard form.”

Finally, the amendment removes the antitrust exemption for both profit and non-profit health insurers.

While you may be on the verge of fainting, you should remember that the exemption has been limited to the “business of insurance” as that phrase has been interpreted by the U.S. Supreme Court over the years. Essentially, the “business of insurance” relates to activities:

  • that have the effect of transferring or spreading a policyholder’s risk,
  • that are “an integral part of the policy relationship between the insurer and the insured” and
  • that are “limited to entities within the insurance industry.” Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982).

The amendment raises interesting (or if you wish, scary) questions about health plan practices in markets where the plan dominates such as in contracting with providers and insurance producers. Moreover, questions arise with respect to collaboration among plans for practices not authorized in the amended federal law. I’ll have to dust off the computer screen and review old cases to see which case outcomes might be different under the new law.

In the meantime, the change in federal law may cause a resurrection of the Washington State law that capitalizes on the “state action doctrine” which immunizes anti-competitive behavior that a state specifically authorizes to promote health care reforms. See the article I wrote about this a long, long time ago – Health Care Reform Leftovers – Washington’s Anti-trust Law.

With a Congress and President of the same political party, I expect the FTC and DOJ to help us quickly understand he limits of permitted health insurance practices. Who wants popcorn?

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