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Would Revoking The Anti-Trust Exemption For Insurers Lower Health Care Costs?

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"Would Revoking The Anti-Trust Exemption For Insurers Lower Health Care Costs?"

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Last week, spurred by two disingenuous industry reports, the Judiciary Committee held hearings to consider revoking the insurance industry’s exemption from Federal antitrust laws. For more than 65 years, insurers have been regulated by the states, and in that time, few markets have become “as concentrated, opaque and complex, and subject to rampant anticompetitive and deceptive conduct.” During his radio address on Saturday, President Obama formally endorsed the effort, condemning the industry for “earning these profits and bonuses while enjoying a privileged exception from our anti-trust laws, a matter that Congress is rightfully reviewing.”

But would eliminating the exemption increase competition or lower health care costs? The short answer is no. “At this point, there is really no need from the industry’s perspective, for an anti trust exemption,” former anti-trust enforcer David Balto explained in an interview with the Wonk Room. “This anti trust exemption permits them to coordinate activities which would be considered collusion in other industries. When you are a monopolist, there is no need to collude”:

It certainly can make a difference. The exemption currently serves as an obstacle to federal anti-trust and consumer protection enforcement. Thus we need to eliminate the exemption so we can finally start bringing anti-trust and consumer protection enforcement to bear, to stop the anti-competitive and egregious practices of insurance companies. [...] The most immediate direct effect will be that the federal trade commission will be able to go after deceptive and egregious conduct by health insurers, that it hasn’t been able to go after before now.

Watch parts of the interview:

Balto, who is now a Senior Fellow at the Center for American Progress, stressed that while removing the exemption won’t have an immediate impact on health care markets, it would allow anti trust enforcers to begin preventing anti-competitive activities and enforcing the new regulations of reform. If “the purpose of health reform is to bring competition to the insurance markets,” Balto said, then “without the elimination of the exemption, once that competition breaks out, the insurance companies can enter into other types of collusive arrangements to really still born any kind of competition that might occur.”

In other words, in order to inject competition, reformers should both establish a new public option and remove the anti-trust exemption. “You need both. You need a public option. An entity which is not beholden to stockholders, which is not engaging in deceptive and fraudulent activities, to disrupt the market, but then you need to buttress that with a very strong enforcement program to go after decades of egregious practices by health insurers.”

Transcript:

When this exemption was passed 64 years ago, the federal government really wasn’t doing anything in insurance and there were state insurance commissioners, so it was sensible to rely on those state insurance commissioners. Now we have strong federal ant-trust and consumer protection agencies which are being prevented by this exemption, in part, from having an effective enforcement program. [...]

At some point in time, the anti-trust exemption probably served as some type of an obstacle and inhibited the federal anti trust agencies from going in and blocking some of the mergers that have led to such a concentrated market. At this point, there is really no need from the industry’s perspective, for an anti trust exemption. This anti trust exemption permits them to coordinate activities which would be considered collusion in other industries. When you are a monopolist, there is no need to collude.

It certainly can make a difference. The exemption currently serves as an obstacle to federal anti-trust and consumer protection enforcement. Thus we need to eliminate the exemption so we can finally start bringing anti-trust and consumer protection enforcement to bear, to stop the anti-competitive and egregious practices of insurance companies. Moreover, the purpose of health reform is to bring competition to the insurance markets. Without the elimination of the exemption, once that competition breaks out, the insurance companies can enter into other types of collusive arrangements to really still born any kind of competition that might occur. [...]

The most immediate direct effect will be that the federal trade commission will be able to go after deceptive and egregious conduct by health insurers, that it hasn’t been able to go after before now. [...]

You need both. You need a public option. An entity which is not beholden to stockholders, which is not engaging in deceptive and fraudulent activities, to disrupt the market, but then you need to buttress that with a very strong enforcement program to go after decades of egregious practices by health insurers.

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