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House Panel Approves Curbs for Insurers’ Antitrust Exemptions

October 22, 2009 at 12:00 AM EST
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The House approved a bill on Wednesday that would limit the health insurance industry's exemption from federal antitrust laws. Betty Ann Bowser and Judy Woodruff report.
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JUDY WOODRUFF: And still to come on the “NewsHour” tonight: a religious revival in Indonesia; following the stimulus money; and poet Sherman Alexie.

That follows the latest on health care reform, tonight’s focus, the insurance industry.

“NewsHour” correspondent Betty Ann Bowser reports for our Health Unit, a partnership with the Robert Wood Johnson Foundation.

PROTESTER: What do we want?

PROTESTERS: Health care!

PROTESTER: When do we want it?

PROTESTERS: Now!

BETTY ANN BOWSER: Protesters created another headache today for the insurance industry, rallying outside the Washington hotel where the annual meeting of the industry’s state lobbyists took place.

PROTESTERS: People over profit!

BETTY ANN BOWSER: President Obama and Democrats in Congress are also cranking up the pressure on insurers.

U.S. PRESIDENT BARACK OBAMA: It’s smoke and mirrors.

BETTY ANN BOWSER: On Saturday, the president took them to task during his weekly radio address.

BARACK OBAMA: Every time we get close to passing reform, the insurance companies produce these phony studies as a prescription and say, take one of these and call us in a decade.

Well, not this time. The fact is, the insurance industry is making this last-ditch effort to stop reform, even as costs continue to rise and our health care dollars continue to be poured into their profits, bonuses, and administrative costs that do nothing to make us healthy, that often actually go toward figuring out how to avoid covering people.

BETTY ANN BOWSER: The study the president was referring to was the insurance industry’s 11th-hour attack on the Senate Finance Committee’s health care reform bill last week.

It came in the form of a report paid for by its lobbying trade group that said the Finance Committee proposal would increase the cost of private insurance coverage for individuals, families, and businesses faster and higher than under the current system.

Yesterday, the House Judiciary Committee voted to strip the insurance industry’s exemption from federal antitrust regulations. That’s a protection insurance companies have had for more than 60 years. And a similar bill is also under consideration in the Senate.

The 1945 McCarran-Ferguson Act exempts the business of insurance from antitrust laws and leaves states to regulate the industry. The chairman of the Senate Judiciary Committee, Democrat Patrick Leahy, is sponsoring legislation in the Senate.

SEN. PATRICK LEAHY, D-Vt: Virtually every company in America has to follow the antitrust rules. They can’t conspire to set prices and cut out competition. There’s one exception, in all the industries in America, one exception: health insurance.

And they can get together, without violating the antitrust laws. They can do what they want in carving up markets without getting involved in the antitrust laws. All I’m saying, if the law applies to everybody else, it should apply to them.

BETTY ANN BOWSER: In a letter to sponsors of the legislation, the top lobbyist for the insurance industry Karen Ignagni, said: “We believe that health insurers have not been engaging in anti-competitive conduct, and that McCarran-Ferguson does not provide a shield for such conduct. Thus, the bills attempt to remedy a problem that does not exist.”

NARRATOR: Health insurance companies made $25 billion in profits last year.

BETTY ANN BOWSER: Today, health care reform groups launched their attack on health insurers in a new ad campaign.

NARRATOR: … report full of lies, trying to influence Congress to kill health care reform.

BETTY ANN BOWSER: Democrats in both the House and Senate said they may include the antitrust legislation in health care overhaul bills under consideration.

Criticism of the insurance industry

JUDY WOODRUFF: We invited representatives from several leading insurance companies to respond on our program tonight, but they declined our request.

We take a closer look of our own now. Ed Haislmaier, senior research fellow at the Center for Health Policy Studies at the Heritage Foundation, a conservative think tank, joins us. And Richard Kirsch, national campaign manager for Health Care for America Now, the liberal advocacy group that helped organize today's protests against the health insurance industry.

Thank you both for being with us.

Richard Kirsch, a broader question to you first. The language, the rhetoric criticizing the health insurance industry has really gotten very aggressive in the last few days, accusing them, as you just saw, of lying, of being in this only for the money.

Are they really deserving of that kind of treatment?

RICHARD KIRSCH, national campaign manager, Health Care For America Now: Absolutely.

It's been very clear all along that the only reform they're interested in is reform that will increase their profits. We had a press conference today with seven Americans, six of whom thought they had good health insurance, but one of whom is bankrupt. Another one has had to move home with his parents because of huge debts. Another one had surgery that cost a huge amount of money, because the drug company -- the insurance company wouldn't pay for their drugs.

The everyday experience of Americans is that this is an industry that puts profits before people. And that's why, in terms of trust, we're talking antitrust exemption, Harris Interactive poll, 7 percent of Americans trust the health insurance industry.

JUDY WOODRUFF: Ed Haislmaier, you're not here representing the insurance industry.

EDMUND HAISLMAIER, senior research fellow, Heritage Foundation Center for Health Policy Studies: No.

JUDY WOODRUFF: We said you're with the Heritage Foundation.

But, in general, do you believe the industry is deserving of this kind of criticism?

EDMUND HAISLMAIER: No.

I think -- I mean, what you have going on here is a bit of political theater. I mean, let's start with some facts. Of the Americans today who have health insurance, over half of them have it from an employer self-insured or union plan.

So, there's no insurance company involved, other than maybe being hired to process the paperwork. So, if you're complaining about the insurance company cutting people off or engaging in practices, if you have a complaint, for over half of Americans, there's no insurance company; it's the employer.

So...

JUDY WOODRUFF: Well, let me stop you there and ask, what about that point, Richard Kirsch?

RICHARD KIRSCH: Insurance companies administer these plans. Oftentimes, they decide what the claims are. Yes, there's a backup payer, but the insurance companies is the ones you're interacting, making the rules. That's what they're paid to do.

And the fact is that there are some 200 million Americans in private insurance. They're the ones who understand they're being hurt, oftentimes, any time they have serious problems with health care.

EDMUND HAISLMAIER: Well, in an employer self-insured plan, the insurer has, under federal and state law, a fiduciary duty to follow what the plan tells it to do. So, they're not making necessarily those decisions on their own.

Now...

JUDY WOODRUFF: Your second point?

EDMUND HAISLMAIER: The second point is that there are some abuses in the insurance industry that need to be fixed, absolutely.

But they're, by and large, confined to the individual market, which is about 10 million covered lives. And the problem is that we fixed a lot of this stuff in the group market 12 years ago, which is 80 million covered lives, but we never copied those provisions over into the individual market.

That's something you could do with two or three pages. I would certainly support it. I have helped draft it.

JUDY WOODRUFF: You want to respond quickly to that point?

RICHARD KIRSCH: It's just not true that in -- people have good -- excuse me -- it's not true that people who have coverage at work aren't subject to denials unfairly, aren't subject to going bankrupt because their insurance isn't there for them and adequate.

So many of the problems we're having -- and people testified today at our press conference were people who had coverage at work, but the insurance wasn't there when they needed it, and that's what led them into high costs, bankruptcy, not getting the care they needed.

EDMUND HAISLMAIER: Well, there are legitimate questions, there are legitimate policy questions about how much the insurance company -- or, for example, the question of should there be any lifetime or annual limits on coverage, that's a legitimate policy question.

Now, you have the other question of, do you set it federally or do you do it state by state?

JUDY WOODRUFF: But let's...

EDMUND HAISLMAIER: That's also legitimate.

Benefits of the antitrust exemption

JUDY WOODRUFF: But let's raise this point that has come up in the last few days, and start with you on this one, Ed Haislmaier.

And that is that the insurance industry has benefited from being exempt from antitrust regulations. What about that? Is that something that gives them an undue advantage?

EDMUND HAISLMAIER: Yes, when you say -- and this is again part of the political theater. You're saying antitrust, people think they're conspiring to raise prices.

If you talk to state insurance commissioners, state regulators, they will tell you, if they reviewed, under state law, the insurance companies' pricing, nine times out of 10, they will go back and say, we're afraid you're not charging enough for this product and that you're going to run into trouble, and we don't want the policyholder to, you know, have you not paying the claims.

This is what happened, by the way, with AIG, because it wasn't regulated at an insurance -- at least, that product wasn't regulated. They didn't have any money to pay the claims, so -- which is also another interesting question about the public plan, if you do one of those. Are they going to be able to just, you know, skip out on the claims?

JUDY WOODRUFF: But...

EDMUND HAISLMAIER: So, the problem is not that they're overpricing. The problem is that you would be taking the control out of the hands of the states, and creating a new federal insurance regulator. That's a very different animal.

JUDY WOODRUFF: Why is this a good idea, then? Because, after all, the states have the experience regulating these insurance companies. The federal government doesn't. And that's what some of these proposals would do.

RICHARD KIRSCH: So, Judy, right now, according to American Medical Association data, 94 percent of markets in this country for health insurance are anti-competitive, highly concentrated by Department of Justice standards.

In the last decade, we have seen 400 mergers of health insurance companies. So, this industry is rapidly consolidating. And, in terms of costs, we see costs going up past -- medical inflation, even higher than that. Medical inflation is higher than regular inflation. Premiums go even higher.

So, we're seeing high prices, tremendous consolidation. And what's happened is, nationally, these huge insurance companies. There used to be smaller companies on the state level. Now there's national insurance companies. The federal government's ability to regulate antitrust needs to be brought in.

JUDY WOODRUFF: What about that?

EDMUND HAISLMAIER: Most of those -- there is concentration. Most of it's the state, Blue Cross, that's the dominant player.

But what's interesting is, like, Utah is doing insurance reform where they're having an employee choice arrangement through an exchange, the kind of stuff they're talking about. They're unveiling it right now with 75 products, five different insurers, and there are more insurers that want to get in.

If you level the playing field, you can solve these competition issues in these states.

Insurers fixing prices?

JUDY WOODRUFF: How -- you said a minute ago that it's -- that it's, in essence, nonsense to -- to assume that there's price-fixing or price-setting going on. How can one be so sure?

EDMUND HAISLMAIER: Well, what happens is that, remember, the exemptions...

JUDY WOODRUFF: Because these companies could look at each other's books.

EDMUND HAISLMAIER: That's right.

But, remember, there are two things that are going on with this exemption, very deliberate policies. One is, it says, well, you're exempt from federal law because we know you're under state regulation. And the states require you to report. And they investigate.

And they can shut these companies down, and sometimes do. So, that is the reason that you're not under federal law, is somebody else is watching you. Secondly...

JUDY WOODRUFF: Well, let me stop you there.

Richard Kirsch, why isn't that sufficient?

RICHARD KIRSCH: The states can't regulate, particularly for antitrust, these huge companies.

Right now, WellPoint has 34 million customers. UnitedHealth has 29 million customers. These are companies that operate across the country. And states are oftentimes under-resourced, as we know, and they don't have the experience particularly in antitrust regulation that the Department of Justice has.

Let's talk about the fact that we have these giant companies that are anti-competitive, and we need to have -- both regulate them and their antitrust exemption, and also have a public health insurance option to compete with them.

JUDY WOODRUFF: His argument is that the states aren't strong enough to stand up to these big companies.

EDMUND HAISLMAIER: Yes, well, I think if you had the insurance commissioners and the representatives of the National Association of Insurance Commissioners on here, they would probably disagree with that.

You know, I have been to many and many of those meetings. I have worked with many of the state insurance commissioners. These are competent, professional people. And they do, by and large, a pretty good job. Yes, I have heard complaints in some states where we need more resources to do more stuff. But they do do it.

RICHARD KIRSCH: Interesting on this, Dan Lungren, Republican, voted to end this antitrust exemption. For 10 years, he was the attorney general in state of California.

Attorney generals all across the country think this antitrust exemption -- they are the ones who, at the state level, have to use antitrust enforcement. They say, the federal government needs to do it.

Effects of stripping the exemption

JUDY WOODRUFF: Very quick last question, what difference would it make if this exemption were taken away from the health insurance?

EDMUND HAISLMAIER: The federal government would have to invent a department of insurance regulation tomorrow to replace the states. That would be the first thing.

Secondly, you would have a lot of problems in trying to get insurers to enter the market, because they wouldn't be able to rely on a common pool of data to figure out and price their products.

JUDY WOODRUFF: And what about that? And do we really think something like that could happen?

RICHARD KIRSCH: That's just silly.

First of all, if we ended their exemption, if they're practicing good business, there's no reason they need that. If they're not doing price-fixing, if they're not carving out the market, they don't need an antitrust exemption.

If they're worried about this, what do they have to hide? And we're not talking about a massive federal regulation. We're talking about the antitrust exemption. And that's what the Federal Trade Commission and the Department of Justice are set out to do.

The real question for America is, are we going to have lower prices, competition? And part of that is the choice of a public health insurance option.

JUDY WOODRUFF: Gentlemen, we are going to have to leave it there.

We appreciate both of you joining us, Richard Kirsch, Ed Haislmaier. We appreciate it.

EDMUND HAISLMAIER: Thank you.

JUDY WOODRUFF: Thank you.