Bill To Repeal Mccarran-Ferguson Act Antitrust Exemption For Insurance Business Introduced

A bipartisan group of senators has introduced Senate Bill 618, the Insurance Industry Competition Act of 2007 to repeal the 60 year old McCarran-Ferguson Act’s partial antitrust exemption for the insurance business. Leading Senate members Leahy, Lott, Reid and Landrieu, who hold leadership positions in the Senate and on the Judiciary Committee, introduced the bill on February 15th.

The McCarran-Ferguson Act was passed in 1945 and provides that the antitrust laws, including the Sherman Act, the Clayton Act, and the Federal Trade Commission Act, shall apply to the “business of insurance” to the extent it is not regulated by a state, and shall also apply to boycotts, coercion and intimidation. As construed by the courts. As interpreted by the courts, the law exempts the business of insurance from government and private antitrust liability, unless the conduct is unregulated by a state or goes beyond otherwise actionable restraints of trade to constitute boycotts, coercion or intimidation.

Litigation under the MFA has long centered on three key issues. The first is whether the – (1) whether the activity at issue involves the “business of insurance”, since all activities of insurers are not included in that phrase. Health plans’ provider contracting actions, for example, have been ruled outside the “business of insurance” and therefore have not been considered exempt from antitrust.

The second is whether conduct is state regulated. This issue could arise, for example, if an antitrust action were brought with regard to Medicare Advantage plan or Medicare Prescription Drug plan activities. Third, the exemption will not apply, even to activities within the insurance business that are state regulated, if the conduct amounts to a boycott, coercion or intimidation.

The McCarran-Ferguson Act exemption from the antitrust laws has long been criticized as giving an unwarranted exception to the insurance industry that is not available to other sectors of the economy. Health care providers, in particular, have been vocal in criticizing the exemption as unfair, while they are subject to frequent antitrust investigations and challenges to their conduct.

In practice, the exemption has been more important over the years to sectors of the property and casualty insurance business, particularly in the past when rating bureaus were used widely. In the health insurance field, a McCarran-Ferguson exemption defense has been relied upon successfully only occasionally, such as a Rhode Island case involving allegedly anticompetitive minimum enrollment terms included in group policies issued by a large health plan that were claimed to have an exclusionary effect on smaller health plans.

The bill would not alter the application of the McCarran-Ferguson Act to the non-antitrust components of the Federal Trade Commission authority, such as its consumer protection enforcement directed at false advertising. So, even if the bill were to become law, insurance advertising that is subject to state regulation would not be subject to FTC oversight.