Playing Hardball

The war between health insurers and Democrats in Washington is putting the spotlight on an issue that's been debated for years: the companies' exemption from federal antitrust laws.

Since 1945, insurance companies have been regulated by states and aren't subject to federal rules that prevent monopolies in local markets (the feds still weigh in on mergers). But Democrats in the House and the Senate are considering ending that exemption. And while this idea has come up before, it's picking up steam as insurers have become a Democratic target for everything that's wrong with the health care system.

The House Judiciary Committee plans to vote this week to repeal the 64-year-old law. Senate Judiciary Committee Chairman Patrick Leahy, a Vermont Democrat, also is pushing for a change and held a hearing last week.

Christine Varney, assistant attorney general in charge of the Justice Department’s antitrust division, testified before Leahy's committee saying that repealing the act "would allow competition to have a greater role in reforming health and medical malpractice insurance markets.”

And even Obama, who lashed out at insurers in his weekly address Saturday over their opposition to his health reform plan, says he supports the Congressional scrutiny.

Insurance companies are earning profits and bonuses for their executives while "enjoying a privileged exception to our antitrust laws—a matter that Congress is rightfully reviewing," the president said.

Changing the law wouldn't have an immediate effect on the national landscape, Morningstar Inc. analyst Matthew Coffina says. That's because the largest insurers don't have big enough shares of national business to raise antitrust concerns. WellPoint Inc. has about 15 percent of the commercial health insurance market in the U.S. and UnitedHealth Group Inc. has about 13 percent, Coffina says.

But changing the law could affect large Blues plans if they dominate local markets, particularly if those companies want to cross state lines to acquire other insurers, Coffina says. State insurance regulators already weigh in on such acquisitions and scuttled proposed deals in the past. (As Kansas insurance commissioner, Kathleen Sebelius blocked Anthem Inc.'s takeover of Blue Cross Blue Shield of Kansas in 2002.)

A spokesman with Blue Cross and Blue Shield Association said his group couldn't immediately comment on the proposal. Likewise, a spokeswoman for WellPoint, which is the largest Blues plan in the country, says company officials are studying the issue.

WellPoint's Kristin Binns says the insurer has been focused on the larger health reform bill, and she doesn't know what impact a change in the antitrust law would have. "The insurance industry is pretty heavily regulated as it is," she says.

Likewise, Robert Zirkelbach, a spokesman for lobbying group America's Health Insurance Plans, says the measure has nothing to do with market competition.

“Health insurance is one of the most regulated industries in America at both the federal and state level," he says. "The focus on this issue is a political ploy designed to distract attention away from the real issue of rising health care costs.”