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January 22, 2018

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Reform proposals would get around Nevadan’s legacy, insurers’ privilege

Health care reform vigil

Mary Venable, who is uninsurable because of a pre-existing condition, joins Rudi Kraft in holding signs and candles in support of health care reform during a candlelight vigil Sept. 2 in Boulder City. Launch slideshow »

Before Nevada had Senate Majority Leader Harry Reid at the center of the nation’s health care debate it had Pat McCarran, a Democratic senator from an earlier era who left an enduring mark on the health care system.

As the powerful chairman of the Senate Judiciary Committee in 1944, McCarran led passage of a bill that exempts health insurance companies (and now Major League Baseball) from federal antitrust law.

The McCarran-Ferguson Act passed within a year of a U.S. Supreme Court ruling ending anti-trust exemptions that insurance companies had enjoyed for decades.

The act was controversial at the time. Some viewed it as a necessary rebuke of the court. But others abhorred it, warning it would lead to monopoly control, price-fixing and discriminatory practices by insurance companies operating without federal oversight.

In the years that followed, health care reformers have tried to knock down McCarran-Ferguson and bring insurance companies under the watchful regulation of federal authorities, only to be thwarted. President Bill Clinton attempted it early in his first term as part of his health care reform plan.

In the current health care debate, Reid has taken on McCarran-Ferguson anew, singling out the act during talks with health care providers and constituents this summer.

During his recent tele-town-hall meeting with 10,000 Nevadans, Reid said that other than baseball, “there is only one business that is not subject to the antitrust laws, and that is insurance.” The law, Reid continued, means “insurance companies have the right to gather together and conspire to fix prices … What we need is to make sure we have a way of keeping the insurance companies honest. What would that be? That would be a public option. Remember that word: option.”

No one is seriously discussing striking down McCarran-Ferguson today. It’s not part of the current conversation in the House and Senate bills. Still, the shadow of McCarran-Ferguson hangs over the debate. And some believe it’s no coincidence that Reid has mentioned it.


The bill was signed into law in 1945 as Congress scrambled to reverse the recent Supreme Court ruling.

The court had decided, for the first time, that insurance was a form of interstate commerce, making it eligible for federal oversight under the Commerce Clause of the constitution, which gives Congress authority over such matters.

Putting insurance under federal rather than state oversight could have been a game-changer for the industry, which had operated under state regulations since the mid-19th century. The industry fought the court decision.

Thirty-eight states including Nevada also sought to revisit the court action, according to newspaper accounts from that time.

McCarran took up the legislation with force. Writing in the Judiciary Committee committee’s report on the bill, he said, “This legislation, if enacted, will set at ease the disturbing uncertainties caused by the recent decision of the Supreme Court,” according to the New York Times.

Yet the committee’s dissenting opinion, from a fellow Western Democrat, Sen. Joseph O’Mahoney of Wyoming, warned of the monopoly power of insurance companies if oversight was left only to the states. “Any persons engaged in this business may be permitted to conspire to commit any of the abusive practices which it is the purpose of the antitrust laws to prevent. Monopoly in insurance so far as the federal law is concerned can and will be legal.”

President Franklin Roosevelt eventually signed a compromise law that temporarily extended the exemption for three years while states beefed up their oversight laws. But the courts have since interpreted the exemption in ways that allow it to continue.


The current health care reform proposal ignores McCarran-Ferguson and instead addresses the insurance companies’ perceived ability to set prices, rates and service by offering a new competitor: the public option.

Under the bill making its way through Congress, the public option would work like this: Health care exchanges would be set up so customers could choose from an array of insurance providers, a so-called marketplace of options. Among the options would be a public-backed plan from the government, similar to Medicare, or, as Reid suggests, one operated by a private entity. Buyers could choose the plan they want, and subsidies would be provided to help middle- and low-income people afford the policy.

David Kendall, a senior fellow for health policy at Third Way, a nonprofit think tank in Washington, said creating health care exchanges is an effort to do in one fell swoop what tinkering around the edges of McCarran-Ferguson may or may not accomplish.

McCarran-Ferguson is “a big, messy problem that would be very difficult to unwind ... I don’t see any part of this legislation that’s going to try to reform McCarran-Ferguson,” he said. “Just because of that, it doesn’t mean it’s not part of the analysis ... These exchanges, that’s the simplest way to resolve the problem.”

The public option, however, has become the most polarizing aspect of the health care debate, as Republicans this summer made great strides in branding it as a form of socialized, government-run health care. Democrats have lagged in articulating a counter claim.

In a poll conducted last week, a slight majority of Nevadans, 52 percent, said they favor the public option, according to results from Research 2000 published by the liberal Web site Daily Kos.

Yet the public option could become a casualty of the long, hot August of anger and protests at town-hall meetings.

Some conservative and moderate Democrats say instead of a public option, they prefer government-supported regional co-operatives that could potentially provide an alternative to private insurance plans. Others suggest a public option could remain on the table, to be phased in over time.

President Barack Obama, who has supported the public plan option while signaling a willingness to entertain alternatives, will address Congress this week in a speech that could shift opinion yet again.


Congress’ decision to avoid taking on McCarran-Ferguson is likely to please insurance companies, which have fought any effort to repeal or change to the law.

Insurers say they are strictly monitored by the states and prohibited from attempting to monopolize, conspire or otherwise engage in collusion.

The National Association of Mutual Insurance Companies writes in an online posting this spring that any change to McCarran-Ferguson “could decrease market stability, reduce affordability and availability of products, stifle innovation and expansion, diminish industry efficiency, and ultimately, inhibit rather than increase competition in the insurance marketplace.”

“There’s a lot of mischaracterization of what McCarran-Ferguson is and does,” said Susan Pisano, a spokeswoman at America’s Health Insurance Plans, the national lobby for the 1,300 insurance companies. “As the issue of competition has sort of come up, and there are all these presentations being made, you hear these sweeping and quite inaccurate statements.”

Yet those studying health care reform say even though McCarran-Ferguson may not be the primary culprit (and they’re not sure it is), the problem of lack of competition remains.

Thomas Greaney, a professor of law at St. Louis University wrote this summer on Seton Hall University’s Health Reform Watch blog, “as a result of lax antitrust enforcement and providers’ relentless efforts to gain ‘leverage,’ many hospital and physician markets are now tight oligopolies or de facto monopolies.”

Greaney continued, “The public plan should act as what economic theory calls the ‘maverick’ competitor: one that breaks away from the closely knit band of rivals.”

Reid took a shot at reforming McCarran-Ferguson in 2007, when he joined a bipartisan group of senators proposing a bill in response to the criticism of the insurance industry that followed Hurricane Katrina.

What is Reid’s point now, bringing up the long-ago Nevadan’s handiwork that left such a mark on health care policy?

Some see in Reid’s comments a catchy soundbite to promote the need for competition. Others see a reminder to those balking at the public option: Imagine if Congress went after McCarran-Ferguson instead.

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