Why the Antitrust Exemption Matters

McCarran-Ferguson is poorly understood even by otherwise bright people. On the MSNBC show “Morning Joe,” Joe Scarborough said it allows price fixing between insurers. No, it doesn’t — as explained by National Underwriter, which writes, “the current antitrust exemption gives (insurers) no ability to join together to set prices or use acquisitions to build monopolies.”

Insurers have always been subject to most federal antitrust provisions, including bans on price fixing, divvying up markets, and tying arrangements. They are also completely subject to state antitrust laws. As NAIFA points out, the only thing that will be affected here is the ability of carriers to pool claims data for actuarial purposes. The result will be that small carriers won’t have enough historical information to project future costs. So they will not be able to determine how to price their products. So they will go out of business. So there will be less, not more, competition in the health insurance market.

Comments (4)

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  1. Larry C. says:

    Greg, thanks for this comment. There has been so much nonsense written and said about this topic. Thanks for sheding a few rays of light.

  2. Tom H. says:

    Good post Greg. What we are seeing in Congress is pure Demagoguery.

  3. Devon Herrick says:

    The Congressional Leadership does not want insurers to pool and analyze claims data, which is used to underwrite for risk.

    The cornerstone of the Obama/House/Senate plans is that everyone should be charge community rated premiums and insurers should merely pay claims. Would-be reformers in Congress want to turn insurance into an inefficient, medical bill payment and health risk subsidy system.

    The problem arises because the whole concept of insurance requires the adverse event must be expensive and rare – otherwise it is not insurable.
    For most people routine medical care is neither expensive nor rare.

  4. Vicki says:

    Very interesting. This is the only place I have seen this issue explained.