How Congress Can End 60+ Years of Insurance Industry Rip-off and Collusion

It's a simple idea: make health insurance companies compete for the business of Americans.

 

It's also a simple question: would your Congressperson defend your interests over those of a group of large corporations that can spend lots of money helping or hurting his or her re-election chances? In light of the recent Supreme Court decision in Citizens United, which allows corporations to spend an unlimited amount of money in elections, the stakes are substantially higher than they used to be: now those corporations can spend millions from their treasuries to retaliate against or reward members of Congress. That spending can be sufficiently large to make or break an election.

Next week we are likely to get an unambiguous answer to that question for every member of the US House of Representatives, thanks to a bill introduced by Virginia Representative Tom Perriello. Perriello, a favorite target of the Tea Party protesters, seems to have gotten a clear message from both sides of the political spectrum: Congress needs to stop catering to big corporations and start fighting for ordinary people. So he's going straight for the insurance companies' jugular in an opening salvo for larger reform, introducing a bill to "restore the application of the Federal anti-trust laws to the business of health insurance to protect competition and consumers." His bill is wonderfully short and spare: it's two pages long, a mere twenty-nine lines of substantive text. It contains no loopholes and no compromises. It does one thing only: it applies federal anti-trust laws to health insurance companies.

It is a clean litmus test for determining whose side a representative is on.

Since 1945, health insurance companies have been allowed to collude to fix prices. The McCarran-Ferguson Act exempted them from the anti-trust regulations that normally prohibit such behavior. And in a country in which more than 80 percent of markets have only one or two insurers, insurance companies just haven't bothered to compete. Insurance is the only major industry in the United States, besides Major League Baseball, where such collusion and price-fixing is allowed.

Even the most basic understanding of economics makes it clear that without competition, markets won't efficiently solve economic problems. As a result, for sixty-five years the American people have overpaid for insurance; the Consumer Federation of America estimates the anti-trust exemption for insurance companies is costing Americans an extra $50 billion in premiums per year.

Perriello's bill is so clearly both pro-populist and pro-free market that previous versions have received accolades from Republicans--including current Louisiana Governor Bobby Jindal, a conservative Republican, who said in 2007, "The insurance industry, as the result of an antiquated law, is currently one of the only consumer industries in the nation that is exempt from anti-trust laws. This leaves every American at risk to collusion and price fixing by the insurance industry, a practice that is unfair at best, and despicable at worst."

What's this bill makes all too clear is that whether you're a free-market-loving Republican or a progressive populist Democrat, the only principled way to vote is in favor. With no loopholes, no complications and at two pages, the only reason to vote against it is to protect insurance company profits against fair competition. It's a clear us versus them for populism--on either side of the political spectrum.

At the press conference announcing the bill a few weeks ago, insurance industry representatives tried to scare people by claiming that making companies compete would raise prices. Their justification? These reps claim that insurance companies need to be able to calculate how big the risks of certain conditions are in order to accurately set rates. Conveniently, there is a time-tested way of doing that which doesn't involve violating federal anti-trust laws: hiring actuaries. Any state that felt the need to allow cross-company data sharing could set up an organization to do so without being in violation of federal law under the state action doctrine. The arguments the insurers are making are a smokescreen.