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Cheap Health Insurance? Ending the Healthcare Anti-Trust Exemption to Lower Cost Posted: November 17th, 2009

By Sanford Ellowitz

Sanford Ellowitz is a New York State licensed insurance agent. He is also a Certified Financial Planner and a Certified Employee Benefit Specialist. He has over 25 years experience in the insurance and financial services industries.

Legislation has been introduced to end the exemption from anti-trust laws enjoyed by the health insurance industry. The intention is to lower costs by encouraging competition. This could mean that cheap health insurance is on the way.

Health Insurance Company Exemption from Anti-Trust Laws May End

Legislation has been introduced by Patrick Leahy, Senate Judiciary Chairman, to end the healthcare and medical malpractice insurance companies' exemption from federal Anti-Trust laws.

Under the McCarran-Ferguson act of 1945 that granted the exemptions, regulation of the insurance industry was left up to the 50 states and U.S. territories. This accounts for the absence of federal oversight of the industry and the lack of uniformity of state statues that govern the industry.

Why the Effort to Repeal the Exemption?

The intention of repealing the exemption is to increase competition among health insurance companies. It would accomplish this by eliminating price-fixing, bid rigging, and market allocation. This is envisioned to help to bring the cheapest health insurance possible to Americans as part of the healthcare overhaul.

The Effects

There is agreement that the industry is considered to be highly concentrated, with just two health insurers controlling at least half the market in 39 states. In nine states, one insurer controls over 75 percent of the market.

However, many in the industry feel that this move is just symbolic on the part of the bills' sponsors and will have little substantive effect on introducing competition to the field. As the American Medical Association points out, the Department of Justice, which can conduct reviews, has approved over 400 mergers in the industry in since 1996.

Industry officials also note concerns that might be raised by adding an additional agency, with its own rules and regulations, on top of those already imposed on the industry by the 50 states.

Will Consumers Benefit?

Consumers who have health insurance plans that are offered through their employers, leaving them with only limited choices in their coverage, won't see much change. These consumers would only notice a difference if their employers' costs decline and they are offered better plans. For those who have to pay for their own plans, this might just mean that cheap health insurance is on the way.

The Public Option Remains as a Way to Introduce Competition

With this legislation seen as having little effect on introducing competition to the industry, many who are taking part in the overhaul still see the public option as the best, if not only, way to ensure competition in order to make health insurance cheaper.

Sanford Ellowitz