McCarran-Ferguson: The Facts

The property/casualty insurance industry has faced several attempts to repeal its limited antitrust exemption which has been in place for 64 years under the McCarran-Ferguson Act. In the latest move, Senator Patrick Leahy (D-Vt), chairman of the Senate Judiciary Committee, has introduced legislation (The Health Insurance Industry Antitrust Enforcement Act) seeking a tailored repeal of the exemption for medical malpractice insurers, in addition to health insurers. The development comes as the Senate prepares to consider comprehensive healthcare reform legislation and just two years since Sen. Leahy, along with then Sen. Trent Lott sought a much broader repeal of the McCarran-Ferguson Act. Before the proposed legislation goes any further, it’s important to note a few facts about the McCarran-Ferguson Act. Firstly, McCarran-Ferguson does not include a blanket exemption from antitrust laws, but a targeted exemption for certain limited insurance activities. This narrow antitrust exemption allows insurers to pool historic loss information so that they are better able to project future losses and charge an actuarially based price for their products. The act does not exempt insurers from state antitrust laws, which explicitly prohibit insurers (and all businesses), from conspiring to fix prices or otherwise restrict competition. Research supports the view that repeal of McCarran Ferguson would likely reduce competition, increase the cost of insurance and reduce availability for some high-risk coverages because the threat of antitrust litigation would make insurers unwilling to engage in efficiency-enhancing cooperative activities. Check out further I.I.I. information on the McCarran Ferguson Act  and on the medical malpractice market.

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