Antitrust exemption for healthcare insurers ends: What does the repeal mean?

After many years of debate and previous failed attempts, the US Congress repealed the McCarran-Ferguson Act's antitrust exemption for healthcare insurers on December 22, 2020, and President Trump signed the legislation into law on Wednesday, January 13, 2021. While the exemption was already narrow, its repeal will mean greater antitrust scrutiny and risk for previously-exempted conduct.

Up until the Competitive Health Insurance Reform Act (the Act) was passed and signed into law, healthcare insurers enjoyed a narrow exemption to antitrust challenges. The McCarran-Ferguson Act, signed in 1945, provided the "business of insurance" with a limited exemption from federal—not state— antitrust actions. The exemption only applied, however, if several conditions were met. Namely, the alleged conduct was in the "business of insurance;" there was existing state regulation of insurance; and the challenged conduct did not constitute "boycott, coercion, or intimidation." 15 U.S.C. § 1013(b). While there have been numerous attempts by the US Congress to repeal the exemption for healthcare insurers over the years, this time the Act enjoyed bipartisan support, including from its sponsors, Senators Steve Daines, R-Montana and Patrick Leahy, D-Vermont.

The Act's express purpose is to "restore the application of the Federal antitrust laws to the business of health insurance to protect competition and consumers." The Act's supporters assert that McCarran-Ferguson Act's exemption immunized artificially-high insurance premiums and unfair trade practices that harmed consumers, but the healthcare insurance industry disputes this. The key amendment to the McCarran-Ferguson Act states, "[n]othing contained in this Act shall modify, impair, or supersede the operation of any of the antitrust laws with respect to the business of health insurance." While the Act effectively ends the antitrust exemption for healthcare insurers, the Act does carve out some safe harbor insurance practices. These include agreements among healthcare insurers to (1) collect or disseminate historical loss data; (2) collaborate on "loss development factor[s] applicable to historical loss data;" (3) perform actuarial services that do not constitute a restraint of trade; and (4) create standardized insurance policy forms. The Act also excludes life insurance and property or casualty insurance from the definition of "business of health insurance," thus preserving the antitrust exemption for those industries.

As for the practical effects of this repeal, healthcare insurers must now exercise antitrust caution towards the conduct and practices that were previously exempt. Specifically, insurers' decisions about both the types of policies to offer members and agreements among insurers as to what premiums members were charged were exempted conduct under the McCarran-Ferguson Act. Feinstein v. Nettleship Co. of Los Angeles, 714 F.2d 928 (9th Cir. 1983); Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 99 S. Ct. 1067, 59 L. Ed. 2d 261 (1979).

Importantly, however, it should be remembered that the McCarran-Ferguson Act was a narrow exemption. Its repeal will not affect insurers' decisions on provider reimbursement rates or market allocation agreements among health plans because the McCarran-Ferguson Act did not protect those agreements. In re Blue Cross Blue Shield Antitrust Litigation, 26 F. Supp. 3d 1172 (N.D. Ala. 2014). Despite the exemption's previous narrowness, its repeal may lead to increased litigation for healthcare insurers as courts and parties begin testing the boundaries of the repealed exemption while sorting out overlapping federal and state antitrust laws and regulations.

In conclusion, while the McCarran-Ferguson Act provided only a narrow exemption for healthcare insurers, its repeal will cause heightened scrutiny on agreements between healthcare insurers relating to what polices and premiums members are offered.