Legislation in the 111th Congress

		H.R. Since virtually all states regulate the insurance industry, the effect is to immunize "the business of insurance" generally from application of the federal antitrust laws. Each of two, identical, stand-alone bills introduced in the 111 th Congress— H.R. 3596 , S. 1681 (each titled the Health Insurance Industry Antitrust Enforcement Act of 2009)—would apply only to issuers of health insurance and medical malpractice insurance. Notwithstanding any provision in the McCarran-Ferguson Act, those entities would be prohibited from engaging "in any form of price fixing, bid rigging, or market allocations in connection with the conduct of the business of providing" such insurance. Hearings were held in the House Judiciary Committee on October 8, 2009, and in the Senate Judiciary Committee on October 14, 2009; H.R. 3596 was reported on October 21, 2009 with an amendment to permit the collection, compilation or dissemination of historical loss data, or the performance of actuarial services to the extent that those activities do "not involve a restraint of trade." S. 1681 remains in the Senate Judiciary Committee; whether it might ultimately contain a provision concerning information sharing is unknown; its substance was not inserted in the Senate health care reform bill passed on December 24, 2009. Section 262 of H.R. There is also, as in H.R. The provision defines, in language similar to that inserted in H.R. 3596 as reported, the information-sharing terms, "historical loss data" and "loss development factor." H.R. 4626

Introduced on February 22, 2010, and passed by the House on February 24, 2010, this measure (Health Insurance Industry Fair Competition Act) is unlike H.R. 3596 and S. 1681 and more like Section 262 in that it does specifically amend McCarran-Ferguson: "nothing contained in this Act [i.e., McCarran-Ferguson Act] shall modify, impair, or supersede the operation of any of the antitrust laws with respect to the business of health insurance." But it is limited to "the business of health insurance" and does not address the business of medical malpractice insurance. The uniformity of policy forms, however, also may reduce consumer choice. Further industry cooperation, both through the advisory organizations and other state-created mechanisms, occurs in state residual market mechanisms and state guaranty funds. The Bills' "Safe Harbor" for Information Sharing

At least some of the information sharing that occurs in much of the industry would purportedly be immunized by both H.R. 3596 as reported, and section 262 of H.R. 3962 . Effect of State Action Exemption

Notwithstanding any limitation imposed at the federal level on the McCarran-Ferguson antitrust exemption available to health and medical malpractice insurers, any activity that the subject insurance companies currently (or might in the future) undertake—including joint ratemaking or certain information sharing—might nevertheless remain legally permissible. The "state action" doctrine in antitrust law immunizes from the federal antitrust laws: (1) all actions of state public entities and (2) those of private entities that are legislatively mandated or authorized and are "actively supervised" by the states. 4626 , or section 262 of H.R. In the event that any insurer practices are determined to be violations of the antitrust laws, the issue in the absence of (some or all) McCarran-Ferguson immunity, likely would be whether and to what extent existing state mandates or authorizations, while adequate to meet the requirements of the McCarran-Ferguson exemption, would be adequate to meet the more rigorous requirements of the antitrust "state action" doctrine. Inasmuch as "state action" immunity is available only if a state "clearly articulates" a state policy that mandates or contemplates anticompetitive conduct, and engages in the "active supervision" of any private activity that occurs in response to that articulation, it is at least questionable whether a general scheme of insurance regulation would be sufficiently specific to allow successful invocation of "state action."
Narrowing or eliminating the 1945 McCarran-Ferguson Act's antitrust exemption for the "business of insurance" has been pursued for many years in many Congresses, and in the 111th Congress, there have been at least four measures—three stand-alone bills, and a provision in the House health care reform bill. Unlike prior legislation to eliminate the entire exemption—currently applicable generally to the extent such business is regulated by state law—however, three of the current measures (H.R. 3596, S. 1681, and section 262 of H.R. 3962 (the House-passed health care reform bill)) are applicable only to the provision of health and medical malpractice insurance; H.R. 4626, as introduced, and as passed by the House on February 24, 2010, is applicable only to health insurance. Two of the stand-alone bills, H.R. 3596 and S. 1681, would prohibit issuers of such insurance from engaging in "price fixing, bid rigging, or market allocations in connection with the conduct of the business of providing" health or medical malpractice insurance. H.R. 4626, like Section 262 of H.R. 3962, does not specify particular, prohibited activities, mandating instead that nothing in McCarran-Ferguson shall prevent the application of the antitrust laws to the business of health [or medical malpractice] insurance.
H.R. 3596 as voted out of the House Judiciary Committee on October 21, 2009, was amended to permit the sharing of historical loss data or the "perform[ance of] actuarial services" if doing so "does not involve a restraint of trade." H.R. 4626 contains no information-sharing provisions. Hearings have been held on S. 1681, but the bill remains in the Senate Judiciary Committee; whether it will ultimately be amended to contain a provision concerning information sharing is unknown, as is the likelihood that its substance will be inserted in a final health care reform bill. Section 262 of H.R. 3962 contains language similar to the information-sharing provision in H.R. 3596, including a section to define several of the terms used. There is not currently any provision addressing McCarran-Ferguson in the Senate health care reform bill (H.R. 3590), passed on December 24, 2009. Due largely to the importance of information sharing to insurers, the insurance industry has cooperated in the past in a variety of ways, including sharing loss information, jointly developing policy forms and rates, operating residual market mechanisms, and participating in state guaranty funds. Some forms of cooperation, including publication of mandatory advisory rates, have already been curtailed because of antitrust concerns.
Passage of any of the measures is likely to precipitate litigation to define the scope of the prohibition and/or any remaining exemption. The precise impact on the affected portion of the insurance industry will depend critically, therefore, on future court decisions.
Notwithstanding any limitation imposed at the federal level on the McCarran-Ferguson antitrust exemption available to health and medical malpractice insurers, however, any activity that the subject insurance companies currently (or might in the future) undertake—including joint ratemaking or certain information sharing—may nevertheless remain legally permissible. The "state action" doctrine in antitrust law immunizes from the federal antitrust laws: (1) all actions of state (but not necessarily, municipal) public entities and (2) those of private entities that are "clearly articulated" and legislatively (or otherwise) mandated or authorized and are "actively supervised" by the states. Currently, all states regulate the insurance industry. The "state action" issue, then, is whether and to what extent existing state mandates or authorizations, while adequate to meet the requirements of the McCarran-Ferguson exemption, would be adequate to meet the requirements of the antitrust "state action" doctrine, which dictates both that there be a "clear articulation" of state policy, and that a state engage in "active supervision" of the private activity that occurs in response to that articulation. This report will be updated as necessary.