October 23, 2009
Slick Willy Would Have Loved It

The flurry of stories about finally putting the health insurance under the antitrust laws like everybody else have left me puzzled. How could such an outrage have been going on since 1945 without anybody noticing? And by anybody, I mean me.

Here’s the answer, taken from an excellent story by Matthew Perrone of the Associated Press:

But industry analysts say courts have long limited the scope of the exemption to allow federal regulators to intervene in instances where competition could be jeopardized. They note the law has never stopped regulators at the Department of Justice and the Federal Trade Commission from intervening in a merger or acquisition.

In practice, the exemption from federal antitrust laws mainly allows insurers to share data on payments and risk ratings — a useful collaboration among life and casualty insurers. But Wall Street analysts point out that giant health insurance companies like Humana, Wellpoint Inc. and UnitedHealth Group have little need to share data, thanks to their national size and scope.

“While the threat to repeal the exemption makes for good headlines, we can’t really see how it alters the business for the established publicly traded players,” wrote JPMorgan analyst John Rex in a note to investors.

With 94 percent of U.S. health insurance markets meeting the Justice Department standards for “highly concentrated” — meaning dominant insurers face little competition — most academics agree reform is needed. But they point out that federal regulators could have prevented much of that concentration under existing law.

Since 1996, the federal government has cleared 400 mergers in the health insurance field, according to the American Medical Association.

The Washington attorney who brought this to my attention was full of admiration. “Terrific politically,” he said. “Scores major PR points without the need to risk any substantive change. Bill Clinton would have loved it.”


Posted by Jerome Doolittle at October 23, 2009 09:35 AM
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