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New Federal Law Limits Federal Antitrust Exemption for Health Insurers

New Law Will Apply Federal Antitrust Laws to Anticompetitive Behavior By Health Insurers, Ensure Consumer Protections Are In Place to Guard Against Health Insurance Industry Abuses and Greed

On January 13, 2021, President Trump signed into law the Competitive Health Insurance Reform Act of 2020, legislation that limits the antitrust exemption available to health insurance companies under the McCarran-Ferguson Act, which allowed insurance companies that conduct interstate business to operate outside of the antitrust provisions established by the nation’s first antitrust law, the Sherman Act of 1890. The new law will give the Department of Justice (DOJ) and the Federal Trade Commission (FTC) the authority to apply federal antitrust laws to anticompetitive behavior by health insurance companies, reining in skyrocketing health care costs and ensuring consumer protections are in place to guard against the health insurance industry’s abuses and greed.

Keep in mind, the Competitive Health Insurance Reform Act applies only to health and dental insurance, not property, casualty, life, or other insurers.

The McCarran-Ferguson exemption has sometimes been interpreted by courts to allow a range of harmful anticompetitive conduct in health insurance markets. According to the U.S. Department of Justice (DOJ), the Competitive Health Insurance Reform Act, which requires health insurers to play by the same rules as competitors in other industries, will assist the DOJ Antitrust Division in its mission to enforce antitrust laws by narrowing this defense and clarifying that, except for certain activities that improve health insurance services for consumers, the conduct of health insurers is subject to the federal antitrust laws. 

When the bill unanimously passed the U.S. House of Representatives last September, lead bill sponsor Congressman Peter DeFazio of Oregon said: “Today, while accessible, affordable medical care is more important than ever, insurance companies still have free rein to price-gouge consumers and reap massive profits on the backs of seniors, working families, and everyday Americans. That’s obscene… As long as this exemption is still on the books, health insurance companies legally can, and do, collude to drive up prices, limit competition, conspire to underpay doctors and hospitals, and overcharge consumers. My legislation will protect consumers and make sure the health insurance industry plays by the same rules as virtually every other industry in America.”

“The American Chiropractic Association advocated for this important change for many years,” said ACA President Robert C. Jones, DC. “The passage of this bill is an essential step toward increasing competition in health insurance markets and lowering prices for consumers.”

Prior to the signing of the Competitive Health Insurance Reform Act into law, the insurance industry and Major League Baseball were the only industries exempt from antitrust laws.

Some conduct protected under McCarran–Ferguson remains protected, including:

  • Collecting, compiling, or distributing “historical loss data,” defined as “information respecting claims paid, or reserves held for claims reported, by any person engaged in the business of insurance”
  • Determining a “loss development factor” applicable to historical loss data (“loss development factor” means an adjustment to be made to reserves held for losses incurred for claims reported by any person engaged in the business of insurance, for the purpose of bringing such reserves to an ultimate paid basis)
  • Performing actuarial services, if such contract, combination, or conspiracy does not involve a restraint of trade
  • Developing or disseminating a standard insurance policy form (including a standard addendum to an insurance policy form and standard terminology in an insurance policy form) if such contract, combination, or conspiracy is not to adhere to such standard form or require adherence to such standard form

It is unclear at this time exactly what effect the signing of the Competitive Health Insurance Reform Act into law will have on insurers and providers. Much will depend on exactly how the DOJ and FTC decide to enforce it. Stay tuned as additional information becomes available.

Additional information on the Competitive Health Insurance Reform Act can be found here and here.


Text of the Competitive Health Insurance Reform Act, H.R. 1418, as enacted

ACA Press Release, “ACA Applauds Signing of Competitive Health Insurance Reform Act”, January 20, 2021

Congressman Peter DeFazio Press Release, “DeFazio Bipartisan Bill To Curb Health Insurance Price-Gouging Unanimously Passes House,”” September 21, 2020

U.S. Department of Justice Office of Public Affairs Press Release 21-46, “Justice Department Welcomes Passage of The Competitive Health Insurance Reform Act of 2020,” January 13, 2021

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