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Health and Dental Insurers Lose Long-Standing Antitrust Immunity with Passage of the Competitive Health Insurance Reform Act

Posted  January 25, 2021

This past year has been very eventful for antitrust. While most of the focus has been on Big Tech, such as the recent lawsuits against Facebook, other developments also deserve attention. One such development is the end of antitrust immunity for health and dental insurers under the recent amendment to the McCarran-Ferguson Act of 1945, 15 U.S.C. §§ 1011-1015.

The McCarran-Ferguson Act, in part, provided an exemption for insurance companies from federal antitrust laws for conduct that constituted the “business of insurance,” as long as it was “subject to state regulation” and did not constitute an act of “boycott, coercion, or intimidation.” Congress passed McCarran-Ferguson in response to a U.S. Supreme Court decision subjecting insurers to federal regulation, including antitrust laws.

Late last year, in a rare change to federal antitrust law, Congress passed the Competitive Health Insurance Reform Act of 2020 (the “Act”), or H.R. 1418. With President Trump’s signing of the legislation on January 13, 2021, it became law. The bipartisan legislation was sponsored by Rep. Peter DeFazio (D-OR) and Sens. Steve Daines (R-MT) and Patrick Leahy (D-VT). The co-sponsors argue that the Act will “help address instances of artificially higher premiums, unfair insurance restrictions, and harmful policy exclusions.”

The Act, inter alia, amends McCarran-Ferguson by repealing the federal antitrust protections that were afforded to health and dental insurers for 75 years. Accordingly, the Act only eliminates the antitrust exemption with respect to health and dental insurance. It does not apply to other types of insurance, such as property or life insurance.

It is important to note that certain conduct will remain protected. Specifically, the Act explicitly maintains immunity for the following: (1) to collect, compile, or disseminate historical loss data; (2) to determine a loss development factor applicable to historical loss data; (3) to perform actuarial services if the collaboration does not involve a restraint of trade; and (4) to develop or disseminate a standard insurance policy form if adherence to the form is not required.

Despite its limited repeal, the Act has brought a considerable change in the health insurance industry. More than seven decades of antitrust immunity has come to an end for health and dental insurers. McCarran-Ferguson will no longer be a significant obstacle for antitrust enforcement agencies or private litigants seeking redress for anticompetitive conduct by health or dental insurance companies. The hope is that the repeal of the long-standing antitrust immunity will bring increased competition in the industry resulting in lower healthcare costs across the nation.

The Act will allow antitrust enforcement agencies to investigate potential antitrust violations by health and dental insurance companies and help enforce antitrust laws. In welcoming the passage of the Act, former Assistant Attorney General Makan Delrahim of the U.S. Department of Justice’s (“DOJ”) Antitrust Division stated, “[l]imiting the scope of conduct exempt from the antitrust laws will strengthen the Antitrust Division’s ability to investigate and prosecute anticompetitive behavior.  Americans deserve competition in health insurance markets just as they do in any other industry.”

The Act has already been raised in litigation in the U.S. Court of Appeals for the Eleventh Circuit. The court is currently considering an appeal of a dismissal of a lawsuit challenging a health insurance company’s exclusivity requirements with brokers. The DOJ submitted an amicus brief in the case and appeared at oral argument in November 2020, arguing that McCarren-Ferguson’s immunity provisions should be narrowly construed and did not apply. Earlier this month, the DOJ filed a notice of supplemental authority, informing the appellate court that the recently passed Act supports the lawsuit’s challenge of the insurer’s exclusivity rules.

Numerous healthcare organizations supported the passage of the Act, including the American Chiropractic Association, the American Dental Association (“ADA”), and the American Hospital Association. ADA President Daniel J. Klemmedson, D.D.S., M.D., commented, “[u]ltimately, expanding choices under health and dental insurance plans will mean better plans for consumers, and improvements for health care professionals who seek to provide health care to patients within a more consumer-friendly framework.”

Antitrust laws are complex, and their application is fact specific. The provisions, and potential implications, of the Act are no different. Individuals and organizations should consider contacting antitrust counsel with any questions as to how the Act affects their business or potential legal claims.

Edited by Gary J. Malone



Tagged in: Antitrust Enforcement,