	Introduction

In Paul v. Virginia (75 U.S. (8 Wall.) 168 (1868)), the Supreme Court ruled that "[i]ssuing a policy of insurance is not a transaction of [interstate] commerce." United States v. South-Eastern Underwriters Ass ' n. (322 U.S. 533 (1944)) held that the federal antitrust laws were applicable to an insurance association's interstate activities in restraint of trade. Although the 1944 Court did not specifically overrule its prior determination, the case was viewed as a reversal of 75 years of precedent and practice, and created significant apprehension about the continued viability of state insurance regulation and taxation of insurance premiums. Congress' response was the 1945 McCarran-Ferguson Act. In addition to preserving the states' ability to tax insurance premiums, McCarran-Ferguson prohibits application of the federal antitrust laws and similar provisions in the Federal Trade Commission Act, as well as most other federal statutes, to the "business of insurance" to the extent that such business is regulated by State law —except that the antitrust laws are applicable if it is determined that an insurance practice amounts to a boycott. "
About 25 years after National Securities limited the term "business of insurance" to activities involving only insurance companies' relationships with their policyholders, the Court extended that ruling. Some Past Legislation Concerning McCarran-Ferguson

		110th Congress

At least two, bipartisan bills to "end the insurance industry's exemption from the requirements of [the antitrust] laws," by amending the McCarran-Ferguson Act were introduced in the 110 th Congress. The identical bills— S. 618 (Leahy, with the co-sponsorship of Senators Specter, Lott, Reid, and Landrieu) and H.R. Both however, would have specified that the Federal Trade Commission Act, "as it relates to areas other than unfair methods of competition" would continue to be applicable to the "business of insurance to the extent that such business is not regulated by State law." It would have amended McCarran-Ferguson to clarify that the antitrust laws would be generally applicable, except with respect to the smallest entities in the insurance industry, to such activities as price fixing ( e.g ., currently permissible joint rate setting), geographic market allocation, "tying the purchase of insurance to the sale or purchase or another type of insurance," or monopolization of "any part of the business of insurance." § 1012(b)) to clarify that the federal antitrust laws would be applicable to the business of insurance "except to the extent [that] the conduct of a person engaged in the business of insurance is undertaken pursuant to a clearly articulated policy of a State [and] that is actively supervised by that State; ..." Those words appeared to represent tacit acknowledgment that (1) the original purpose of McCarran-Ferguson was to assure the ability of the states to regulate the business of insurance; and (2) the existence of the state action doctrine in antitrust law. The State Action Doctrine and its Relevance to McCarran Immunity

The state action doctrine, first enunciated by the Supreme Court in Parker v. Brown , has come to stand for the proposition that federalism dictates that the antitrust laws are not applicable to the states.
In Paul v. Virginia (75 U.S. (8 Wall.) 168 (1868)), the Supreme Court ruled that "[i]ssuing a policy of insurance is not a transaction of [interstate] commerce." United States v. South-Eastern Underwriters Ass'n. (322 U.S. 533 (1944)) held that the federal antitrust laws were applicable to an insurance association's interstate activities in restraint of trade. Although the 1944 Court did not specifically overrule its prior determination, the case was viewed as a reversal of 75 years of precedent and practice, and created significant apprehension about the continued viability of state insurance regulation and taxation of insurance premiums. Congress' response was the 1945 McCarran-Ferguson Act. It prohibits application of the federal antitrust laws and similar provisions in the Federal Trade Commission (FTC) Act, as well as most other federal statutes, to the "business of insurance" to the extent that such business is regulated by State law—except that the antitrust laws are applicable if it is determined that an insurance practice amounts to a boycott. Early McCarran-Ferguson decisions mostly favored insurance companies. After 1969, however, the exemption for the "business of insurance" was generally limited to activities surrounding insurance companies' relationships with their policyholders. In 2003, the Supreme Court ruled that McCarran case law prohibiting the indirect application of federal antitrust (or other) laws to the "business of insurance" would no longer control with respect to those areas over which Congress has unquestionable legislative authority (e.g., ERISA, civil rights, securities), notwithstanding insurance-company involvement. The issue of amending McCarran Ferguson so as to further limit the scope of the exemption for the "business of insurance" continued to receive attention in the 110th Congress, with the introduction of at least two bipartisan measures. S. 618 would not only have eliminated the antitrust exemption provided by McCarran-Ferguson, it would also have restored the FTC's authority to investigate the insurance industry. An identical bill, H.R. 1081, was introduced in the House. Both bills would have retained the exemption for the applicability of the FTC Act, "as it relates to areas other than unfair competition." It is not known at this time whether the issue will be revisited in the 111th Congress.
Even in the event the McCarran exemption were to be severely limited or totally eliminated, however, the state-action doctrine in antitrust law has the potential to mitigate the consequences of either. State action stands for the proposition that the federal antitrust laws do not apply to the states, nor to private individuals acting either under state order or authorization. To the extent that state regulation of insurance embodies "clearly articulated" state policy, and regulators "actively supervise" the activities of insurance companies, the industry's antitrust exemption could actually be broadened to include actions not clearly "the business of insurance." (Those phrases have been firmly embedded in the state-action-doctrine jurisprudence in the antitrust law for more than 25 years.) This report will be updated as needed. See, also, CRS Report RL31982, Insurance Regulation: History, Background, and Recent Congressional Oversight, CRS Report RL32789, Insurance Regulation: Issues, Background, and Current Legislation, CRS Report RL33439, Insurance Regulation in the United States and Abroad, CRS Report RL33892, Post-Katrina Insurance Issues Surrounding Water Damage Exclusions in Homeowners' Insurance Policies, and CRS Report RS22506, Surplus Lines Insurance: Background and Current Legislation for information on other issues affecting or concerning insurance regulation, including a discussion of issues surrounding the option of federal chartering and regulation of insurance companies, which would generally make the federal antitrust laws applicable to those entities opting for federal regulation.