DOJ Weighs In On Possible Repeal of Antitrust Exemption for Insurance Industry

On Wednesday, October 14, 2009, Assistant Attorney General Christine Varney, who leads the Antitrust Division of the Department of Justice, testified before the Senate Judiciary Committee at a hearing entitled “Prohibiting Price Fixing and Other Anticompetitive Conduct in the Health Insurance Industry.” Varney had been invited to present DOJ’s views on the Committee’s reconsideration of the McCarran-Ferguson Act’s antitrust immunity for the insurance industry.

The McCarran-Ferguson Act was signed into law in 1945, creating a broad antitrust exemption for the “business of insurance,” as long as that business is regulated by state law and does not constitute boycott, coercion, or intimidation. Varney noted that this exemption is expansive, and almost all potentially anticompetitive behavior has been found immune under the Act, including premium pricing and market allocations.
While DOJ takes “no position as to how and when Congress should address this issue,” Varney said, she did state that “the Department of Justice generally supports the idea of repealing antitrust exemptions.”

Varney highlighted a report issued by the Antitrust Modernization Committee (AMC), which argued that the Act was no longer necessary to allow insurers to collect and aggregate data on losses to better set their rates. Moreover, she approvingly cited the AMC’s recommendation that “[t]o the extent that insurance companies engage in anticompetitive collusion[,] . . . they [should] be subject to antitrust liability.”

Varney tied DOJ’s views on antitrust exemption to the Administration’s current efforts to enact healthcare reform, arguing that there is a “general consensus that health insurance reform should be built on a strong commitment to competition in all health care markets, including those for health and medical malpractice insurance.” She concluded that “[r]epealing the McCarran-Ferguson Act would allow competition to have a greater role in reforming health and medical malpractice insurance markets than would otherwise be the case.”