The Insurance Locator

Sen. Chuck Schumer (D, NY) and Patrick Leahey (D, Vermont) appear to be gaining ground in its efforts to adopt an amendment to eliminate the insurance companies protection of the antitrust laws.

The current health reform currently under discussion has highlighted the privilege of the insurance industry has enjoyed during the last 64 years: Insurance companies, as Major League Baseball, have been exempt from federal antitrust laws.

The markets stagnate monopolies by preventing others from participating in healthy market competition. It is the exemption of a dying dinosaur?

Brief history of law antitrust

Given the fears of monopolies in the late 1800s and to preserve America's free market economy, Congress passed the Sherman Act in 1890, and aims to combat anti-competitive practices, reduce the market dominance of individual companies, and preserve unfettered competition as the rule of trade.

Soon the courts found that certain activities are not within the scope of the Sherman Act. To fill this gap in the Congress passed the Clayton Antitrust Act of 1914. The Clayton Act added the following practices to the list of unacceptable activities: discrimination price between different purchasers if such discrimination tends to create a monopoly, exclusive dealing, tying arrangements, and mergers and acquisitions substantially reducing market competition.

The Robinson-Patman Act of 1936 amended the Clayton Act. The amendment to prohibit certain abuses in practices of manufacturers.

Brief history of the insurance exemption

Before the 1940s, regulation of insurance fell under the exclusive domain of states. A Supreme Court case by the name of the United States v. South-Eastern Underwriters challenged that partly for reasons of competition. The Supreme Court of the federal government can regulate insurance companies under the authority of the Commerce Clause in the Constitution of U.S..

The McCarran-Ferguson Act of 1944 stipulates that federal anti-trust laws do not apply to the business of "insurance" provided when the State regulates in this area, but federal anti-trust laws will apply in cases of boycott, coercion and intimidation.

The intention of the McCarran-Ferguson Act was to return to the legal climate that existed before South-Eastern Underwriters specifying that the states retained the authority to further regulate and tax the insurance business.

According to Senator Patrick Leahey, Judiciary Committee chairman, the antitrust exemption in 1944 the McCarran-Ferguson Act was intended to be temporary. Senator Trent Lott, and others have argued that the exemption has led to collusion by insurance companies in the setting tariffs and deny claims, as evidenced by the experience of Hurricane Katrina. McCarran-Ferguson, in other words, is outdated and potentially harmful.

Department of Justice position

Christine A. Varney, Assistant Attorney General (Division of Competition) testified before the Judiciary Committee of the United States Senate hearing on "Prohibition of price fixing and other anticompetitive conduct in the insurance industry physician. "The following points can be gleaned from his testimony:

Ms. Varney argues,

"The health insurance reform should be based a strong commitment to competition in all markets in health care, including health and malpractice insurance. Repeal of McCarran-Ferguson Act Competition law would allow for greater role in reforming health insurance and markets for medical malpractice than would be the case.

"The Home-health Care Reform Bills provides almost national exchanges, the bill includes Senate Finance plans national health insurance, and all bills provide interstate compacts that would allow insurers to sell a single product through a series of states. These movements are likely to increase competition and make it less likely that the application of competition is necessary, but also that the presence of the exemption more dangerous. "

Conclusion

When the leading counsel of the Department of Justice defined the exemption as "dangerous" to the operation of quasi-national exchanges [this is the public choice, actually], the time might be propitious for Congress to remove the exemption.

By Moreover, by spending untold millions of dollars in the halls of Congress, the insurance industry could have the upper hand in influencing health care reform. Why what should lose its monopoly? In some states, one or two insurance companies controlling all insurance companies. Is this an "economy free market? "

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Retired. Former investment banker, Columbia University-educated, Vietnam Vet (67-68).
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Article Source: ArticlesBase.com – Insurance Companies Are Exempted From Antitrust Laws – Why?

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