H.L. Mencken once observed that for every human problem, there is a solution that is “neat, plausible, and wrong.” Exhibit A is the “Health Insurance Industry Fair Competition Act” – also known as H.R. 4626. This bill seeks to repeal the antitrust exemption granted to health insurance companies by the McCarran-Ferguson Act. The Obama Administration has thrown its support behind the proposal, and it passed the House of Representatives two days ago by an overwhelming bipartisan vote of 406-19.
The stated purpose of repeal is to increase competition in the health insurance market and thereby lower premiums. Thus, Senate Majority Leader Harry Reid argued that “there is no reason why insurance companies should be allowed to form monopolies and dictate health choices.” Rep. Betty McCollum asserts that repeal “will save every family in America who purchases health insurance at least 10 percent” on their premiums. Representative Tom Perriello, one of the sponsors of H.R. 4626 stated at a press conference last week that “Americans deserve to know who stands with them against the price gouging of middle-class and working-class folks.” In October, 2009, Senator Charles Schumer stated that the exemption “is one of the worst accidents of American history, [and] it deserves a lot of the blame for the huge rise in premiums that has made health insurance so unaffordable.”
Professor (and former Secretary of Labor) Robert Reich argues in the New York Times that exemption is “why a handful of insurers have become so dominant in their markets that their customers simply have nowhere else to go.” At the health reform summit yesterday, Speaker Nancy Pelosi stated that the overwhelming vote to repeal the exemption was “a very strong message that, yes, the insurance companies need to be reined in.”
Some background is helpful in evaluating [...]