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Dems Get Religion on Health Care Antitrust Exemption

POSTED:

MY health insurer here in California is Anthem Blue Cross. So far, my group policy hasn't been affected by Anthem's planned rate increase of as much as 39 percent for its customers with individual policies — but the trend worries me, as it should everyone. Rates are soaring all over the country. Insurers have been seeking to raise premiums 24 percent in Connecticut, 23 percent in Maine, 20 percent in Oregon and a wallet-popping 56 percent in Michigan. How can insurers raise prices as much as they want without fear of losing customers?

Astonishingly, the health insurance industry is exempt from federal antitrust laws, which is why a handful of insurers have become so dominant in their markets that their customers simply have nowhere else to go. But that protection could soon end: President Obama on Tuesday announced his support of a House bill that would repeal health insurers' antitrust exemption, and Speaker Nancy Pelosi signaled that she would put it toward an immediate vote.

via Op-Ed Contributor – Bust the Health Care Trusts – NYTimes.com.

This is how politics is supposed to work. Well, not really — in reality, you'd like to see your leaders actually lead, i.e. do the right thing first, before being forced into it by circumstance. But we'll take the latter.

The sequence: Obama and the Dems got whipped in Massachusetts and it suddenly occurred to them that they might want to start doing things that would be popular outside their Rolodex of campaign contributors. A bailout tax was one early idea. They started searching the landscape for outrages they could get on the other side of and found a good one: Anthem Blue Cross in California raising rates by 39 percent.

Suddenly the Obama administration decided to come out against the antitrust exemption for the insurance industry. Like they only just noticed the problem.

The insurance antitrust exemption has been an outrage for over fifty years. The original bill formalizing the industry's exemption from the Sherman Antitrust Act, the McCarran-Ferguson Act, was dreamed up by two Hollywood villains. Nevada Senator Pat McCarran was the inspiration for the "Senator Pat Geary" character in Godfather Part II ("Senator… my final offer is this: nothing" — that guy), while Homer Ferguson was the inspiration for the Lloyd Bridges character in Tucker who whored himself out for the auto makers to get Tucker's new car struck from the market. These two gigantic assholes teamed up to help the insurance industry avoid the albatross of competitive pricing.

McCarran-Ferguson was supposed to be temporary. Franklin Roosevelt clearly thought so when he signed it into law in 1944, saying that after "a moratorium period," the antitrust laws "will be applicable in full force and effect to the business of insurance." The law was supposed to expire in 1947. It didn't.

As a result, all the evil shit that made for such high drama in Kurt Eichenwald's book The Informant – about a bunch of agricultural firms who get together to fix prices for an additive called Lysine — that's actually legal in the insurance business.

This is why insurers (especially insurers with large market shares in small states) are easily able to gouge customers and deny coverage. There's really no legal mechanism for preventing the firms from getting together and arranging price-fixing and other outrages. In a normal market customers would be able to get better coverage and cheaper rates from a competitor, but insurance is really more like a series of competition-free fiefdoms where the customers can't go elsewhere for a better deal. State Farm even denied coverage to Trent freaking Lott after Katrina and got away with it because State Farm has Misssissippi by the nads. It's crazy.

This is, again, another reason Obamacare was such a joke from the start. The White House vision clearly called for "health care reform" without a repeal of McCarran-Ferguson. Which is technically almost impossible, but they tried it.

That didn't work, naturally, so now they're finally getting around to doing the obvious. They'll fail — every attempt to repeal McCarran-Ferguson inevitably does, mysteriously — but at least they're talking about it. But Jesus, why does this stuff take so long?

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Matt Taibbi

Matt Taibbi is a contributing editor for Rolling Stone. He’s the author of five books and a winner of the National Magazine Award for commentary. Please direct all media requests to taibbimedia@yahoo.com.

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