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Property/casualty sector spooked by potential antitrust exemption rollback

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An effort to remove a key antitrust exemption for health insurers has property/casualty industry stakeholders concerned that they could be next. 

The U.S. House Judiciary Committee approved H.R. 372, the Competitive Health Insurance Reform Act of 2017, by voice vote on Feb. 28. The bill would repeal the antitrust exemption featured in the McCarran-Ferguson Act of 1945 for the health insurance sector, while preserving the exemption for auto and property insurance.

The Republican interest in repealing the provision for the health insurance sector is driven by the perception that the exemption is one of the contributors to market concentration in the sector, alleged collusion and persistently high health care costs, experts said. 

“There seems to be a perception that the insurance industry is somehow using this antitrust exemption to engage in all sorts of terrible activity that other people wouldn’t be allowed to engage in under the federal antitrust law,” said Robert Woody, senior counsel for policy for the Property Casualty Insurers Association of America in Washington. “In fact, all that’s happened is that we have to abide by state antitrust laws and state insurance regulation instead of federal laws and price fixing, bid rigging and market allocation are all illegal at the state level.” 

The legislative proposal could move forward as a stand-alone bill or as part of a package to reform or repeal Obama’s signature health care law. 

“Those members of Congress that are interested in restricting or limiting or repealing the antitrust exemption for traditional health insurance have tried to be as careful as they can to not touch property/casualty insurance,” said Stef Zielezienski, senior vice president and general counsel for the American Insurance Association in Washington. “We appreciate that. The problem is it’s very difficult to precisely draw the line between traditional health insurance that you’re trying to target with the antitrust repeal and spillover effect into the property/casualty field because a lot of what we do has some medical component.” 

“We’re always concerned from the property/casualty side when somebody starts tinkering with McCarran because fundamentally it’s not just an antitrust exemption,” he added. “Everything that relates to antitrust is caught up with how the business is actually regulated. McCarran is a balance of regulatory and federal antitrust policy.” 

During the Affordable Care Act debate, there was a proposal for a broader repeal of the antitrust exemption that would have affected certain property/casualty lines of business so stakeholders say they are monitoring this current legislative effort very carefully. 

“We’re fairly confident that the way the bill is worded, it doesn’t apply to property/casualty insurers,” Mr. Woody said. “There is essentially a P/C carveout and we actually suggested some language to strengthen that carve out. But our concern is that it sets a very bad precedent. Our industry relies on the McCarran-Ferguson antitrust exemption much more than the health insurance industry does so the concern is that if they repeal it for health, it’s only a matter of time before they come back and try to repeal it for us too.”

The insurance industry relies on aggregated industry data to set its pricing, which normally would be considered an antitrust violation, but ensures more competition in the insurance sector, Mr. Woody said. The bill includes several safe harbors to protect elements such as sharing of historical loss data.
“There’s never going to be a bill, I don’t care what the safe harbors said, that we would very actively support because we don’t see that there is a necessity to change the current law,” he said.