H.L. Mencken once observed that for every human problem, there is a solution that is “neat, plausible, and wrong.”   Exhibit A is the House Democrats’ successful effort to eliminate the antitrust exemption granted to health insurance companies by the McCarran-Ferguson Act.  This law permits insurers to share information without running afoul of federal antitrust laws.

The ostensible purpose of repeal is to increase competition in the health insurance market. But, as the Congressional Research Service recently noted, removing the exemption could actually reduce competition, if enough small and mid-size insurers decide they can’t enter (or remain in) the market without the ability to share information. 

The proposal is widely seen as payback for an October 2009 report by the health-insurance lobby finding that the Democrats’ legislation would result in higher premiums.  A contemporaneous press release by Sen. Charles Schumer (D-NY) blared, “Two days after health insurance lobby tried to sucker-punch health care reform effort…Schumer [says] revoke health insurance industry’s antitrust exemption.”  The Obama Administration has thrown its support behind the proposal, which will likely pass the House of Representatives today.  

Sean Hannity FREE

Senate Majority Leader Harry Reid (D-NV) argues that “there is no reason why insurance companies should be allowed to form monopolies and dictate health choices.”  Rep. Betty McCollum (D-MN) asserts that repeal “will save every family in America who purchases health insurance at least 10 percent” on their premiums. 

A bit of background will help evaluate these claims.  In 1944, the Supreme Court overturned prior case law and held that the antitrust laws should apply to insurance.    

David Hyman

David A. Hyman, M.D., is Richard W. and Marie L. Corman Professor of Law at the University of Illinois College of Law, and an adjunct scholar at the Cato Institute.