The Senate held a hearing yesterday on “Prohibiting Price Fixing and Other Anticompetitive Conduct in the Health Insurance Industry.”  Senator Patrick Leahy and Senator Chuck Schumer spearheaded the hearing.  The fact that this came so sonn after the insurance industry vowed to raise premium prices if health care reform is passed is merely a coincidence according to Sen. Schumer.  Yea right!  Insurance companies have been one upped similar to what happened to the credit card industry when it threatened to raise the price of credit in response to the Credit Cardholders Bill of Rights.  It is good to see that Congress is getting a spine and letting these industries know who is boss.  The isurance industry has enjoyed this exemption for years for no other reason but because they paid for it.  The exemption has resulted in a near monopoly or insurance “cartel” among the top seven health insurers that has increased insurance premiums astromically.  Not to mention the enormous barriers to entry for any newly formed insurance companies.  The exemption is contained in the McCarran-Ferguson Act of 1945

Title  15, Chapter 20of the U.S. Code implements the McCarran Act. Here is its key provision:

No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance: Provided, That after June 30, 1948, the Act of July 2, 1890, as amended, known as the Sherman Act, and the Act of October 15, 1914, as amended, known as the Clayton Act, and the Act of September 26, 1914, known as the Federal Trade Commission Act, as amended [15 U.S.C. 41 et seq.], shall be applicable to the business of insurance to the extent that such business is not regulated by State Law.

The McCarren exemption is very expansive and makes the insurance industry immune from even the most insignificant regulation.  This would be HUGE if as Sen. Schumer has suggested it is included in the final health care reform bill.  The possibility that this exemption may be yanked is exactly what keeps the insurance industry up at night.  This is the same exemption that allows the insurance companis to collude, price fix, bid rigging, and market allocation in addition to allowing companies like AIG to operate outside the federal security laws.  There have been attempts to regulate BIG Insurance but because of the amount of money that the industry pours into Congress it has managed to drown any bill that would allow states or the federal government to regulate the industry.  As mentioned previously, THIS WOULD BE HUGE!!!