Senate approves bill eliminating antitrust exemption for health insurers

On Tuesday, December 22, 2020, the Senate approved HR 1418, the Competitive Health Insurance Reform Act, by unanimous consent.  The House passed the identical bill on September 21, 2020, and the bill is now on President Donald J. Trump’s desk, expected to be signed into law. 

The new legislation would eliminate the 70-year-old "McCarran-Ferguson" antitrust exemption for the insurance industry and result in significant new antitrust compliance challenges for the health insurance industry.

The McCarran-Ferguson Act gives states the power to regulate most aspects of the business of insurance and grants a limited antitrust exemption from the Sherman Act and Clayton Act.  The exemption functions principally to allow certain information sharing between insurance companies that might otherwise be prohibited by the antitrust laws. In particular, it allows insurers to pool historic loss information, which bears directly on pricing.

Critics of the McCarran-Ferguson Act say that it harms competition and leads to higher premiums.  Accordingly, there have been numerous bipartisan attempts to eliminate the antitrust exemption in recent years.  One such bill was passed by the House during the ACA debates in 2010, but died in the Senate.  The House passed a nearly identical version of the bill in 2017 and had the support of the White House, but it too stalled in the Senate.  Congressperson Paul Gosar (R-AZ), the sponsor of the 2017 bill, was a co-sponsor of HR 1418 in the House, along with Representative Peter DeFazio (D-OR).  Senators Patrick Leahy (D-VT) and Matt Daines (R-MT) introduced the bill in the Senate.

If the legislation is signed into law, eliminating the McCarran-Ferguson Act antitrust exemption will mean a new layer of compliance challenges for the health insurance industry. Insurance companies are already heavily regulated at the state level and subject to state antitrust laws. Such companies now face the additional layer of federal antitrust scrutiny outside of the exemption, watered down by the McCarren-Ferguson Act. Eliminating the Act and antitrust exemption would complicate the already complex compliance picture and would mean new enforcement risk for insurance companies.

Find out more by contacting the authors or your DLA Piper relationship partner.