Columbia, MO – The news is filled gobbledygook that confuses us mere mortal. Today’s word: Antitrust Laws. OK, two words.
In its most simplistic form, antitrust laws mandate that businesses do not violate the trust of the people by collaborating to fix pricing, discriminate or create monopolies (in this case, not the game). In other words, to prevent companies for violating a “rule of reason,” by causing “actual harm to competition … an unreasonable restraint against interstate commerce.”[i] Not just for being “unfair.”
So why are insurance companies exempt from the law? A little history and a drum roll please.
By the time of the American Revolution, the insurance industry was well established from its merger beginnings in a London coffee shop. Property, fire and life insurance had become a norm for commerce. Health insurance will matured after World War II, but the groundwork was laid well.
In America, the Founding Fathers needed to decide who should hold the power under this new experimental rule; the state or the national government. A small provision in our new Constitution, the Tenth Amendment, was the compromise. “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
For 321 years companies offering red umbrellas and good hands, while claiming to be our good neighbors, have worked hard for our trust to insurance our property, lives and health. Here ie the rub: Insurance is not a social contract, not a mandate, a privilege; it is a business. Insurance companies are in business for profit.
There is nothing wrong with a profit motive. The problem, initially anyway, was no one wanted to regulate the insurance industry. Fast forward to 1945 and the McCarran-Ferguson Act. This law gave the insurance industry exemption from the series of antitrust laws: The Sherman Act of 1890; the Clayton Act of 1914, amended by the 1936Robinson-Patman Act, and; the establishment of the Fair Trade Commission in 1914.
The Act allows insurers to share loss data to develop pricing, share related business information and be exempt from the antitrust laws as long as the states regulated the industry. What a sweet deal.
Was it really in the public’s best interest to let the foxes guard the henhouse?
Today, The Tea Party Express has been rolling out their anger over a public option for healthcare. Their rallies include “Don’t touch my Medicare” signs next to “Keep government out of my insurance.” Veterans, hold “No Obamacare” signs, but do not what their VA benefits taken away. What is wrong with this picture?
Here is a quick fix. Revoke the McCarran-Ferguson Act. Eliminate the state insurance regulatory offices and rehire all those people to regulate insurance for what it is, interstate commerce.
Oh yes, get rid of the HMOs.
(David is a former manager of a large insurance agency in Colorado, was a Hearing Officer for the Colorado Division of Insurance, has written 12 professional-development textbooks for the industry and has taught insurance programs for over 25 years.)
[i] Black’s Law Dictionary. Centennial Edition. St. Paul, MN: West Publishing, 1991. Print.