As the White House and Congress make a final push to overhaul the nation’s health care system, the Justice Department claimed a small victory on Monday when Blue Cross Blue Shield of Michigan said it would drop its proposed plan to purchase another Michigan insurer, the Physicians Health Plan of Mid-Michigan. Blue Cross cited the threat of a lawsuit from the DOJ in announcing it had abandoned the deal.
The acquisition would have given Blue Cross control of 90 percent of the health insurance market in Lansing, Mich., the DOJ said.
“We welcome the decision by Blue Cross-Michigan and Physicians Health Plan of Mid-Michigan to abandon their deal, which will preserve competition among health insurance companies in Lansing,” Assistant Attorney General Christine Varney said in a statement. “The merger would have likely led to higher prices, lower levels of service and decreased quality of health care for consumers.”
The companies had argued the deal would let them spread administrative costs over a larger member pool and help bring health care costs down.
Observers applauded the Justice Department’s decision to block the deal.
“They never really just said no to a health insurance merger before,” said David Balto, a fellow at the Center for American Progress, in an interview. ”The record is becoming clearer that mergers haven’t led to more efficiencies but rather increased premiums and led to a larger number of uninsured.”
A recent American Medical Association study found that the market for health insurance in 96 percent of cities was highly concentrated, but experts disagree to what extent such concentration was the effect of weak antitrust enforcement.
Recent mergers have often included a buyer that had little presence in the local market and therefore did not raise serious antitrust concerns, said Alwyn Cassil, who heads public affairs at a non-partisan think tank, the Center for Studying Health System Change.
Concentrated health insurance markets aren’t primarily a function of mergers, Cassil said, but owe more to the fact that regional health plans and provider-owned plans have largely disappeared.
Having a dominant insurer can indirectly help consumers, Cassil said, because they can negotiate with large hospitals and provider networks.
A 1940s law shields the “business of insurance” from federal antitrust laws, but insurance mergers still undergo a review by the Justice Department. A repeal of the law, the McCarran-Ferguson Act, has taken center stage on Capitol Hill after broader health care legislative efforts stalled. The House passed the antitrust measure on Feb. 24 as a stand-alone bill. The Senate has yet to act on the legislation.
On the heels of a House vote last week, Senate Democrats sent a letter Wednesday to Majority Leader Harry Reid (D-Nev.) urging him to schedule a vote on a Senate bill that would subject health insurers to more federal antitrust scrutiny.
The House passed a bill last Wednesday, 406-19, that would partially repeal a 1945 law that exempts insurance companies from some federal antitrust regulation.
House leaders took up the narrower bill to target the antitrust exemption after a broader health care overhaul stalled.
The letter to Reid was signed Sen. Patrick Leahy (D-Vt.), the chairman of the Senate Judiciary Committee, which has jurisdiction over antitrust issues along with 20 Democrats and one Independent.
“This is an important step toward bringing competition to the health insurance market, and would ensure that anticompetitive abuses such as price fixing and monopolization are policed in the health insurance industry,” the letter reads.
“This reform is long overdue, and we are pleased that the House voted in such an overwhelming manner to bring antitrust scrutiny to the health insurance industry.”
Leahy has led efforts in the Senate to repeal the exemption.
Despite Democrats championing the issue, the repeal would have little affect on health insurance companies, according to The New York Times. In an article Wednesday, Paul Ginsburg, the president of the nonpartisan Center for Studying Health System Change, told The Times:
The effect would be almost trivial. Insurance companies have long been subject to most federal antitrust laws. They can’t merge without the approval of the Department of Justice, for example. The only thing that might occur is that some of the data that they share — malpractice insurers share data on claims trends, for example — might not be permitted.
The House Wednesday voted overwhelmingly to strip health insurers of an exemption from some federal antitrust scrutiny they have enjoyed since the 1945 enactment of the McCarran-Ferguson Act. The tally was 406-19. All of the nay votes were cast by Republicans.
The legislation, introduced by Tom Perriello (D-Va.), is a trimmed-down version of similar legislation that was included in the health overhaul package that passed the House last year. That measure also would have included medical malpractice insurers, who fall under the larger property and casualty umbrella.
Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) introduced a slightly different bill last fall, but it did not make it into the final version of the health bill passed by the Senate.
After Wednesday’s House vote, Leahy issued a statement urging his colleagues to consider legislation to repeal the health insurance industry antitrust exemption.
“We cannot introduce competition to the health insurance market while allowing the insurance industry to hide behind a special-interest, anachronistic, statutory antitrust immunity,” Leahy said in a statement. “I hope the Senate will quickly pass this repeal and send it to President Obama to be signed into law.”
Courts have cut back on the exemption over the years. Recent studies have shown that local markets are dominated by large health insurers. The American Medical Association found that more than 90 percent of metropolitan markets are “highly concentrated”, but experts disagree to what extent such concentration is a product of lax antitrust oversight.
In an op-ed article today in The New York Times, Robert Reich, who was secretary of Labor in the Clinton administration, voiced support for the repeal. Here’s his take:
Anthem’s parent is WellPoint, one of the largest publicly traded health insurers in America, which runs Blue Cross and Blue Shield plans in 14 states and Unicare plans in several others. WellPoint, through Anthem, is the largest for-profit health insurer here in California, as it is in Maine, where it controls 78 percent of the market. In Missouri, WellPoint owns 68 percent of the market; in its home state, Indiana, 60 percent. With 35 million customers, WellPoint counts one out of every nine Americans as a member of one of its plans.
Antitrust laws are supposed to prevent this kind of market power.
On Tuesday, the White House also announced its support for the legislation.
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Sen. Patrick Leahy (D-Vt.) and 18 other senators sent a letter to President Obama, Majority Leader Harry Reid, and Speaker Nancy Pelosi today, urging them to include a provision in the final health bill that would subject health and medical malpractice insurers to federal antitrust laws.
Obama has also signaled his support this week for including the provision in the bill.
Insurance companies have been exempt from federal antitrust regulation since the 1940s McCarran-Ferguson Act. A repeal of the exemption is included in the House version of the health care reform legislation, but was left out of the Senate bill after Sen. Ben Nelson (D-Neb.) expressed reservations about the provision.
“Regulation of the insurance industry has been left with the states, which often lack the time and resources to effectively investigate antitrust conspiracies,” lawmakers said in their letter today. “Thus, the competitive activities of health insurers and medical malpractice insurers remain effectively unchecked.”
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An effort to repeal the antitrust exemption for health insurers took a step back this weekend, when Democratic leaders left it out of a package of changes to the health system overhaul bill the Senate is voting on this week.
Sen. Patrick Leahy (D-Vt.) three weeks ago offered language to repeal the exemption as an amendment to the Senate’s health care legislation. The proposed repeal would subject health and medical malpractice insurers to federal laws that forbid firms from fixing prices, rigging bids, or dividing up markets with competitors.
In a statement on Saturday, Leahy said he was “disappointed” the amendment would not be a part of the Senate’s debate.
Similar language, which represents a partial repeal of the 1945 McCarran-Ferguson Act, is included in the House version of the legislation. Leahy said he will continue to push for the repeal as the the Senate and the House work to reconcile their bills.
The amendment, which had the support of Majority Leader Harry Reid (D-Nev.), was a casualty of Reid’s well-chronicled struggle for the 60th vote in favor of the bill from Sen. Ben Nelson (D-Neb.)
Nelson, a former insurance executive, had earlier expressed reservations about the repeal. Insurers had also lobbied to keep the provision out. Nelson also has been at the heart of tense negotiations over other provisions of the bill, including whether it would include a government-run health care plan option and restrictions on taxpayer funding of abortions.
But congressional Democrats have little room to deviate from the Senate version of the legislation. “It is very clear that the bill — the final bill — to pass in the United States Senate is going to have to be very close to the bill that has been negotiated here,” said Sen. Kent Conrad (D-N.D.) on “Fox News Sunday.” “Otherwise, you will not get 60 votes in the United States Senate.”
Whether the House repeal language will survive in a House-Senate conference negotiation over the final version of the bill is largely dependent on what Nelson is willing to give up. In an interview with CNN, Nelson laid out several provisions in the House bill that are deal-breakers for him, but he did not single out the antitrust exemption as one such deal-breaker.
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The effort to repeal the antitrust exemption for health insurers inched another step forward today, when Sen. Patrick Leahy (D-Vt.) announced he would file a proposed repeal as an amendment to the health care reform bill on the Senate floor.
Leahy’s amendment would subject health and medical malpractice insurers to federal laws that forbid firms from fixing prices, rigging bids, or dividing up markets with competitors. Insurers have been exempt from such federal regulation since the 1940s McCarran-Ferguson Act.
The House bill includes a similar provision, but allows insurers to share some data used to set rates.
The fate of Leahy’s amendment is unclear. Sen. Ben Nelson (D-Neb.), whose support Senate Democrats have assiduously courted, has expressed displeasure with the amendment. Majority Leader Harry Reid (D-Nev.) has signaled he would be willing to drop the amendment in exchange for Nelson’s support on the health bill.
The White House and congressional Democrats made repeal of the 1945 law a priority, after negotiations over health care reform with the insurance industry broke down.
Reid testified before a Senate Judiciary Committee hearing in October, along with Assistant Attorney General Christine Varney, and argued that a repeal would produce more competition and better prices for consumers.
In his weekly radio address that week, President Barack Obama also attacked the exemption, complaining that the industry is “earning these profits and bonuses while enjoying a privileged exemption from our antitrust laws.”