For nearly 75 years, the McCarran-Ferguson Act established a broad – although not unlimited – exemption from the application of federal law to “the business of insurance,” finding “the continued regulation and taxation by the several states [of that business] in the public interest.” As a result, McCarran-Ferguson exempted insurers from federal antitrust liability where their activity in question (1) was part of the “business of insurance,” (2) was regulated by state law and (3) did not constitute a “boycott, coercion, or intimidation.” With the passage of the Competitive Health Insurance Reform Act (CHIRA) into law on Jan. 13, 2021 however, the activities of health insurers, by and large, are no longer exempt from the federal antitrust laws.
CHIRA formally accomplished this repeal by amending the McCarran-Ferguson Act to state that “[n]othing contained in the Act shall modify, impair, or supersede the operation of any antitrust laws with respect to the business of health insurance (including the business of dental insurance and limited-scope dental benefits).” CHIRA also carved out certain coordinated activities that remain exempt from federal antitrust law even if performed by health or dental insurers, including:
(A) the collection/compilation/dissemination of historical loss data;
(B) the determination of a loss development factor applicable to historical loss data;
(C) the performance of actuarial services that do not involve a “restraint of trade”; and
(D) the development of standard policy forms, as long as adherence to such a form is not required.
CHIRA also expressly defined “the business of health insurance” as not including “the business of life insurance (including annuities)” or “the business of property or casualty insurance.” As a result, the McCarran-Ferguson exemption remains viable for those segments of the insurance industry.
The passage of CHIRA plainly marks a shift in policy toward federal enforcement of the antitrust laws against health insurers, rather than leaving that enforcement to state regulators. On the day CHIRA was enacted, the U.S. Department of Justice’s Antitrust Division issued a press release lauding the passage of CHIRA as helping the department “build upon [its] successes” in enforcing the antitrust laws against health insurers by putting an end to “distracting arguments about when health insurers qualify for the McCarran-Ferguson exemption” and “by requiring health insurers to play by the same rules as competitors in other industries.”
Just how large an impact CHIRA will have on the degree of competition in the health insurance industry will only be determined as the judiciary is ultimately confronted with applying the federal antitrust laws to business practices that for decades may have found protection under the McCarran-Ferguson exemption. It is likely that various practices, including exchange of information by health insurers for the purposes of setting premiums, will expose those companies to federal antitrust scrutiny. There may also be a greater volume of private antitrust litigation in this market. For now, one thing is certain – it won’t simply be “business as usual” in the health insurance industry.