Insurance and Federal Antitrust Exemption

Posted on December 16, 2009 by Greenberg & Bederman

Are you tired of the runarounds, denials, and rate hikes of health insurance carriers such as Cigna, Aetna, Blue Cross/Blue Shield and United Health Group? Have you tried to take your business somewhere else? Have you ever tried to find a small, mom and pop style health insurance company in Maryland, D.C. or Virginia?

Good luck with that. There aren’t any.

Every health insurance option that you have in the D.C. metropolitan area is either a direct subsidiary of an enormous health insurance conglomerate or is an enormous health insurance conglomerate. “Taking your business elsewhere” simply means going to another company that will charge you exorbitant amounts of money for the same shabby treatment. 

The reason this is the case is because there is nothing keeping health care giants from buying out or muscling out any other health insurance company that tries to set up shop. Ordinarily, this would be called a “monopoly,” which is supposed to be against the law. It’s the reason that there is a Ben and Jerry’s and Baskin Robbins. It’s the reason that there is Coke and Pepsi, as well as RC or the generic version that you can buy at any supermarket. It is illegal for any one entity to corner the market of any product or service. The only two entities that are exempt from setting up monopolies are Major League Baseball and health insurance.

Health insurance companies were granted this exemption thanks to the McCarran Ferguson Act of 1945, which leaves the regulation of insurance entirely up to the states in which they do business. This means that even if Blue Cross, Humana or any of the health care giants are engaging in ridiculously blatant anti-trust activity, the federal government has no means to stop them.

Currently, insurance companies in charge of your health already have multiple advantages over their policy holders. They can and will drop coverage over the flimsiest of pretenses; they can and will refuse to pay for valid claims; they can and will raise rates to unaffordable levels all while making billions in profits; and they can and will interfere in medical treatment of patients strictly for their own financial benefit. And they are able to do this regardless of whether or not there are antitrust laws in place.

With an antitrust exemption, health insurance companies are able to do the following things:

Price Fixing: Insurance companies often go by what is called a “usual and customary” rate when they pay for services. But these rates aren’t determined by the standard movements of the market. They are often determined by the insurance companies themselves. Just this year in New York, four health insurance companies were investigated in New York for using software that not only set prices, but also skewed them in a way that favored the insurance companies. New York is an anomaly in that the state actually decided to investigate and press charges. Most state governments do not bother. And since the federal government has no power to investigate insurance companies due to their antitrust exemption, many insurers in many states are free to operate as they see fit.

Market Allocation: In case you haven’t noticed, there isn’t exactly a huge variety of health insurance companies to choose from. According to the Government Accounting Office, the largest health insurer in the average state held 43% of the policies for small group coverage. “Small group coverage” usually means the coverage that you get from work, which is where the vast majority of us get our coverage in the first place. With so few choices for consumers, there is no incentive for any of the insurance companies to lower their prices. And since the status quo is so profitable, there is no need for any insurance company to engage in anything but advertising in order to attract customers. Low premiums and fair treatment of policyholders aren’t necessary. Since there is no antitrust exemption, there is also nothing keeping health insurance companies from simply divvying up entire states through prior arrangements. Two insurers could take the majority of one county, three insurers could handle all of the small businesses, four or five could handle all the big employers. These aren’t “markets” as much as they are “fiefdoms.”

Bear in mind that this has been going on since 1945. Health insurance companies have become enormously wealthy and enormously influential on Capitol Hill. The current brawl over meaningful healthcare reform in the House and Senate as well as all the loud and angry protests over the summer can be cited as evidence as to how hard the insurance companies will fight to keep things the way they are.

Back in September, Senator Patrick Leahy (D-Vt.) introduced legislation into the Senate that would finally remove the federal antitrust exemption that insurance companies currently enjoy. The insurance companies are, of course, against the removal of the exemption:

America's Health Insurance Plans, an industry trade group, also opposes a repeal of the antitrust exemption and has cited the cost that additional litigation would impose on the health-care system.

AHIP spokesman Robert Zirkelbach in a statement Tuesday argued that the current exemption is "extremely limited in scope and has nothing to do with health plan competition."

We would beg to differ. There is nothing “limited” about an exemption to a law that is crucial to preventing an entire segment of the economy from being controlled by a handful of companies. And “the cost of additional litigation” seems like a flimsy excuse for keeping this exemption. Do they mean that going to court to defend themselves against charges of price fixing and market allocation would cost too much money? Do they mean that they would probably face lawsuits from states, businesses and private citizens, and that would be too expensive for them?

There is not one person, group, or association in America who can make the argument that they don’t want to have to show up to court because it would cost too much. But thanks to the antitrust exemption, insurance companies have no qualms about using that excuse.

This simply serves to illustrate the uphill battle that most people have to fight when they are dealing with insurance companies. There is no financial incentive for insurance companies to treat policyholders fairly, and there is practically no enforcement to keep them from keeping their prices high and their services poor.  This means health insurance, or auto insurance, or even malpractice insurance carriers can delay, deny, or devalue your case, in hopes that you will give up the fight. This is why obtaining experienced legal counsel when you get injured is incredibly important. Insurance companies have the resources, money and time to get you to settle for an amount that is significantly less than you will need for medical bills and lost income. Having an experienced personal injury lawyer on your side can help you cut through the red tape, and ensure that your legal rights are protected.

Greenberg and Bederman has been helping injury victims in the Washington, D.C. area for a quarter of a century by representing victims and fighting the insurance companies. We help people who have been injured due to car accidents, medical malpractice, injuries from falls and injuries due to dangerous medications. We serve the metropolitan DC area including DC, Maryland,and northern Virginia. If you or a loved one has been injured due to no fault of your own, contact Greenberg & Bederman for a free legal consultation.

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