Saturday, October 17, 2009

Obama Goes on Offensive with Health Care Reform

This past Monday the health insurance trade association, America's Health Insurance Plans, released a study which indicated that the current health care financing reform bills being floated about would cause insurance premiums to increase by 18 percent.

Today, in his weekly radio address, the President hit back. In his address the President said that he is considering a move to repeal the McCarran-Ferguson Act.
The president complained bitterly about the insurers’ attack on the legislation. “The insurance industry is rolling out the big guns and breaking open their massive war chest to marshal their forces for one last fight to save the status quo,” he said.

His signal of support for reviewing the industry’s antitrust exemption put him in league with Democratic leaders in Congress pushing for repeal or revision of the McCarran-Ferguson Act, which was passed in 1945 to keep regulation of insurers in the hands of the states. Although he did not explicitly endorse overturning it, a spokesman said it was the first time he had raised the matter publicly as president.

Senator Harry Reid of Nevada, the Democratic leader, testified at a Judiciary Committee hearing on Wednesday in favor of getting rid of the exemption. A day later, Representative Nancy Pelosi of California, the House speaker, said, “There is tremendous interest in our caucus” in such a move.

Assistant Attorney General Christine A. Varney, the head of the antitrust division at the Justice Department, testified at the Senate hearing that repealing McCarran-Ferguson would create more competition, which could help reform industry practices.
I have to tell you that such a move should be not only considered but actually implemented.

Here is the scenario. Let's assume that you are an individual with their own business in say, Maryland. You have a say three employees. You want to do the right thing and provide health insurance for your employees. You begin to shop around and you find a great policy from an insurance carrier in Pennsylvania. The problem is that under the regime created by McCarran-Ferguson, you probably can't buy that policy because your business and your employees live in Maryland. Simply put, unless that insurance carrier is licensed in Maryland, you have zero hope of buying that plan. Even if the carrier is licensed in Maryland, there is no guarantee that they offer that plan in Maryland--where it must be said, the cost of health care is higher than central Pennsylvania.

See, the McCarran-Ferguson plan ensured that states would be able to regulate insurance companies, but it also stifled competition since most insurance carriers cannot offer coverage across state lines.

Taking our hypotethical, say our central Pennsylvania insurance carrier covered a fair number of people in central Pennsylvania, but was also willing to cover a few people in the more expensive state of Maryland. That PA insurance company could keep premiums low for the Marylanders because they covered more people in PA, thus the majority of the pool of insured were in a less expensive locality. By adding only a few people from Maryland, they can keep their rates premium rates lower.

So to a certain extent, while the President thinks the "anti-trust" exemption is a threat, it may actually be what a fair number of carriers want--that is, a way to expand their business by working across state lines.

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