Democrats launch attack on insurer exemption

Wednesday, October 14, 2009 - 10:54am

WASHINGTON — The long-simmering tension between insurers and congressional Democrats is erupting into open warfare, with lawmakers stepping up their push to revoke a key federal protection for the insurance industry.

Sen. Chuck Schumer (D-N.Y.) on Wednesday will call for an amendment to the health care reform bill that would remove the long-standing antitrust exemption for insurers, echoing a push by other Democrats to crack down on the industry.

“The health insurance’s antitrust exemption is one of the worst accidents of American history," Schumer said. "It deserves a lot of the blame for the huge rise in premiums that has made health insurance so unaffordable. It is time to end this special status and bring true competition to the health insurance industry."

Senate Majority Leader Harry Reid (D-Nev.) joined the push to eliminate the exemption Wednesday morning, saying at a Senate Judiciary Committee hearing, ““It’s something that should have been done a long time ago.”

As for insurance companies, “There isn’t anything we could do to satisfy them in this health care bill. Nothing,” Reid said. “They are so anti-competitive. Why? Because they make more money than any other business in America today. . . .What a sweet deal they have.”

Top Democrats in the House also floated the idea during a meeting among party leaders Tuesday evening in Speaker Nancy Pelosi’s Capitol suite, someone present said afterward.

This push comes on the heels of a controversial industry-sponsored report released over the weekend that makes the case that insurance premiums will go up by as much as $4,000 per family by 2019 if the Senate Finance Committee legislation is signed into law. The release of that report by the industry group America’s Health Insurance Plans sparked angry blowback from Democrats in both chambers.

At first glance, this assault on the antitrust exemption is more political than practical. But repealing the antitrust exemption would give the federal government more authority to oversee the business side of health insurance companies — something states now have the sole authority to monitor.

And the push by Reid and Schumer signals that Democrats are planning to intensify their efforts to paint insurance companies as the villains in the health reform fight, something that could prove useful as President Barack Obama and others try to rally a skeptical public around a sweeping health reform measaure.

Health insurance officials dismissed the effort as a “political ploy.”

“Health insurance is one of the most regulated industries in America at both the federal and state level,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans. “McCarran-Ferguson has nothing to do with competition in the health insurance market. The focus on this issue is a political ploy designed to distract attention away from the real issue of rising health care costs.”

The exemption, known as McCarran-Ferguson, cedes regulatory control of the industry, on the business side, to individual states. Since health insurers are already heavily regulated at the state level, its repeal would have a much broader impact on property and casualty insurers — a group that has also found itself in Congress’s cross-hairs recently.

Schumer isn’t the first member of his party to push for this repeal. Chairmen of the Senate and House Judiciary committees both introduced legislation already this year to eliminate the exemption or gut it substantially.

But the push is likely to gather momentum as Democrats try to find a way to lash back at the insurance industry — whose report was viewed as a last-minute attempt to scuttle health care reform just days before Tuesday’s critical Senate Finance Committee vote. The legislation there was approved 14-9, with Republican Sen. Olympia Snowe of Maine voting yes and giving reform efforts a boost.

Senate Judiciary Chairman Pat Leahy (D-Vt.) introduced a bill in September to repeal an exemption established in the 1945 McCarran-Ferguson Act for any companies engaged in price fixing or bid rigging — which are both already illegal. He has introduced similar legislation in other Congresses, including a broader repeal of the underlying law. Reid is a co-sponsor of the current bill.

In the House, where Democratic leaders are exploring the issue further, Judiciary Committee Chairman John Conyers (D-Mich.) has introduced legislation that would essentially end McCarran-Ferguson and give the federal government the right to regulate insurers at the national level.