House Passes Repeal of Antitrust Exemption for Health Insurance

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The business of health insurance would no longer enjoy the McCarran-Ferguson Act antitrust exemption, under a provision in the proposed “Protecting Access to Healthcare Act” or “PATH Act,” which passed the House of Representatives on March 22. The McCarran-Ferguson exemption would continue to apply to life insurance, annuities, property and casualty insurance, and other non-health types of insurance.

The proposed PATH Act (H.R. 5), which would repeal portions of the two-year-old health care overhaul, was amended to include the proposed “Health Insurance Industry Fair Competition Act of 2012.” The amendment, contained in Title IV of the PATH Act, was introduced by Rep. Paul Gosar (R, Ariz.).

“[I]t is time for this exemption to be repealed so that we can empower health insurance companies to compete more aggressively . . .” said Congressman Gosar, who has been a practicing dentist for over 25 years.

Ban on Class Actions

The amendment would prohibit federal antitrust class action suits against health insurers. “Frivolous lawsuits cause defensive medicine that drive up the cost of medicine, hinder access to specialty care for patients, and often enrich trial attorneys,” according to Rep. Gosar. Congressman Gosar serves as the vice chairman of a health care subcommittee of the House Committee on Oversight and Government Reform.

The ban on class actions has been criticized by some House Democrats. "If you eliminate class actions, you have effectively destroyed the McCarran-Ferguson repeal," decried Rep. John Conyers (D, Mich.).

Antitrust Agencies Defend Health Care Enforcement Efforts at Congressional Hearing

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The FTC and Department of Justice were called upon to defend their records of antitrust enforcement in the health care industry by House Judiciary Committee Chair John Conyers (D, Mich.) at a hearing held yesterday by the Judiciary Committee’s Subcommittee on Courts and Competition Policy.

The hearing considered the role of antitrust in light of the health care reform effort. Conyers expressed concern that the enforcers were not following through with President Obama’s plan to reinvigorate antitrust enforcement in the health care area.

“Pay-for-Delay” Drug Patent Settlements

FTC Bureau of Competition Director Richard A. Feinstein delivered the FTC testimony. Chief among the anticompetitive tactics targeted by the FTC are “pay-for-delay” drug patent settlements, in which a branded drug company compensates a generic competitor for not bringing its lower-cost drug to market for a certain period of time, according to the agency’s testimony.

Agency challenges to mergers involving hospitals, drug manufacturers, and medical device makers were also discussed.

“The FTC has an important role to play: by protecting and promoting competition we can help to lower costs and improve quality,” Feinstein said. “Years of experience have shown us that continued effective antitrust enforcement is a necessary component of any plan to improve health care.”

The FTC testimony is available here at the FTC website.


Health Care Delivery, Insurance

Sharis A. Pozen, Chief of Staff and Counsel to the Assistant Attorney General in charge of the Department of Justice Antitrust Division, delivered a statement on behalf of the Antitrust Division. Pozen’s remarks focused on two areas:

(1) The importance of encouraging innovation and efficiency in health care delivery and the ways in which coordination and integration among health care providers can help achieve these goals while still preserving competitive markets; and

(2) The importance of measured, responsible antitrust enforcement in preserving open and vigorous competition in health insurance markets.

The Justice Department’s civil antitrust lawsuit against Blue Cross Blue Shield of Michigan alleging that the insurer used its dominance to impose anti-competitive “Most Favored Nation” provisions in its agreements with Michigan hospitals was cited as an example of the agency’s “measured enforcement to prevent . . . anticompetitive behavior.”

With respect to merger enforcement, Pozen warned that the Justice Department “will carefully review mergers in the health insurance industry and will continue to challenge those mergers that are likely to substantially lessen competition.”

Text of the remarks is available here on the Department of Justice Antitrust Division’s web site.


Accountable Care Organizations

Conyers spoke about the perceived disparity in prosecutorial treatment between health care providers on the one hand and health insurers on the other. He questioned the continuing need for antitrust immunity for health insurance companies, while physicians fear antitrust attack for coordinated activity.

Pozen noted that Accountable Care Organizations or ACOs are a good example of how providers might work together to provide more efficient, high-quality care without inhibiting competition. The Affordable Care Act permits the formation of ACOs to enable competing physicians and other providers to coordinate care for Medicare beneficiaries in an effort to improve quality and lower costs.

Pozen said that the Justice Department was actively working with Health and Human Services and the FTC as the ACO regulator process evolves. She added that the Justice Department was committed to “providing efficient, quick review to any new business model that plans to deliver integrated care.”

A video webcast of the hearing is available here on the House Judiciary Committee’s website.

Repeal of Health Insurance Antitrust Exemption Passes House

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Health insurers would lose their exemption from the federal antitrust laws under the proposed "Health Insurance Industry Fair Competition Act," which was overwhelmingly approved by the House of Representatives on February 24. The measure (H.R. 4626) passed 406 to 19.

Specifically, the bill would amend the McCarran-Ferguson Act to add a provision stating that the Act does not "modify, impair, or supersede the operation of any of the antitrust laws with respect to the business of health insurance."

Freestanding Measure

The measure was introduced by Representatives Tom Perriello (D-Virginia) and Betsy Markey (D-Colorado) on February 22. The freestanding measure followed a similar bill, which had been incorporated into the comprehensive health care bill passed by the House last year.

The now-stalled "Affordable Health Care for America Act" (H.R. 3962) contained a provision repealing the McCarran-Ferguson Act exemption for health insurance as well as medical malpractice insurance from certain antitrust violations, including price fixing, market allocation, or monopolization.

Upholding “Free Market Protections”

House Judiciary Committee Chairman John Conyers, Jr. (D-Michigan) said that the bill "will uphold free-market protections by making insurance companies legally accountable for collusion schemes to fix prices, divide up markets and customers to restrict choice, and use monopoly power to sabotage anyone who seeks to offer meaningful competitive choice to consumers."

House Judiciary Committee Ranking Member Lamar Smith (R-Texas) said the Health Insurance Industry Fair Competition Act "has all the substance of a soup made by boiling the shadow of a chicken." Smith contended that the McCarran-Ferguson Act's federal antitrust exemption promotes competition by allowing small and medium-sized insurers to aggregate information for underwriting purposes so they can compete effectively against larger companies.

Impact on Premiums

According to Smith, the Congressional Budget Office had concluded that the impact on health insurance premiums resulting from the repeal of the antitrust exemption would likely to be quite small. In any event, Smith ultimately offered his reluctant support for what he called the "ineffective bill."

Following passage by the House, the bill was received by the Senate on February 25 and then read for the first time and placed on the Senate Legislative Calendar on February 26. It was read the second time and placed on the Senate Legislative Calendar under General Orders on March 1.

Further information about the bill, including full text, is available here at the Library of Congress Thomas legislative website.

Trade Regulation Tidbits

This posting was written by Jeffrey May and John W. Arden.

News, updates, and observations:

 President Barack Obama on October 17 commented on Congressional efforts to repeal the antitrust exemption for the health insurance industry. (See October 15, 2009 posting on Trade Regulation Talk.) In his weekly address, the President discussed the industry’s efforts to derail health care reform to protect its profits and bonuses. “[T]hey’re earning these profits and bonuses while enjoying a privileged exception from our antitrust laws, a matter that Congress is rightfully reviewing.” The White House did not go so far as to announce the President's support for legislative efforts to repeal the antitrust exemption. Appearing on ABC’s "This Week with George Stephanopoulos" on Sunday, October 18, David Axelrod, Senior Advisor to the President, was noncommittal on the legislation. “We’ll see what Congress does,” he said.

 A Minnesota-based packaged-ice company and three of its former executives have admitted to allocating customers, have agreed to plead guilty, and have agreed to pay a $9 million criminal fine, the Department of Justice has announced. The company and the individual defendants have agreed to cooperate with the Justice Department's ongoing antitrust investigation into the industry. The separate charges were filed in the federal district court in Cincinnati under seal in September. The seals were lifted on October 13. A news release on the plea agreement appears here on the U.S. Department of Justice Antitrust Division website.

 On October 16, the Maine House Joint Standing Committee on the Judiciary voted to recommend repeal of a recently-enacted state privacy statute, in light of constitutional issues raised by a federal court challenge to the law. The controversial law—“An Act to Prevent Predatory Marketing Practices Against Minors” (Public Law 230)—prohibits the collection of health-related or other personal information for marketing purposes from a minor without parental consent and bars “predatory marketing” to minors.

On August 28, challengers filed an action for injunctive relief in the federal district court in Maine, claiming that the statute violates the First Amendment rights of adults, as well as minors and online operators; violates the Commerce Clause; and is preempted by the federal Children’s Online Privacy Protection Act. On September 2, Maine Attorney General Janet Mills announced that she would not enforce the law, due to her concerns about its constitutionality. (See September 3, 2009 posting on Trade Regulation Talk.) On September 8, U.S. District Court Judge John Woodcock instructed the plaintiffs and Maine officials to work out acceptable language for an order settling the lawsuit. The parties agreed to an order acknowledging the constitutional defects of the law, documenting the state’s promise to refrain from enforcing the law, citing the legislature’s promise to revise the law in the next session, and putting Maine plaintiff attorneys on note that suits brought under the law would have to overcome constitutional questions raised in the action. (See September 14 posting on Trade Regulation Talk.)

After its hearing last week, committee members and staff indicated that a new legislative proposal—curing defects in the current law—would be introduced when the legislature convenes its next session in January 2010. None of the judicial or legislative action thus far repeals the law or bars private actions enforcing the law.