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Professor Clark Havighurst Responds to Proposal Amending Health Insurance Antitrust Laws

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Recently, Members of Congress have introduced legislation to change the antitrust laws as they relate to health insurance. (See: Modern Healthcare of September 18; free registration is required to view).

Some have discussed including such legislation as part of comprehensive health reform. Clark Havighurst of Duke University Law School is the godfather of the field of antitrust and healthcare, so we wrote to him, calling his attention to the Modern Healthcare article. Here is the response that he sent to me and as a letter to the editors of the journal. We hope we’ll be able to turn to Clark for more comments in the future.

— Tim Westmoreland

I submit the following re the proposal to amend the McCarran-Ferguson Act:

I see no particular reason to adopt this legislation. McCarran already makes clear that the antitrust laws apply to “to the business of insurance to the extent that such business is not regulated by State law,” and I am unaware that this limited exemption has ever been (as the bill implies) “construed to permit health insurance issuers . . . or issuers of medical malpractice insurance to engage in any form of price fixing, bid rigging, or market allocations in connection with the conduct of the business of providing health insurance coverage . . . or coverage for medical malpractice claims or actions.” It is of course arguable that the McCarran Act leaves states too much authority to regulate insurers in anticompetitive ways or, by mandating early disclosure of prices or competitive initiatives, to facilitate insurers’ coordination of their pricing and other policies. The bill, however, in its final section declares that state regulators would retain authority to engage in “information gathering and rate setting.” I see no improvement here.

In any event, if this legislation were adopted, the judicially-developed “state-action” doctrine would presumably still limit the reach of federal antitrust law in areas where anticompetitive state regulation controls. As articulated by the Supreme Court in the Midcal Aluminum case, the exemption for state action is not easy to distinguish, substantively, from the McCarran exemption. To be sure, the latter exemption is embodied in explicit legislation rather than inferred judicially from congressional intent in passing the Sherman Act. But it was enacted well before the Supreme Court arrived at the Midcal test to govern other situations in which a state substitutes regulation for competition. There is therefore no reason to think that the McCarran exemption is any broader in scope than the state-action doctrine or that its repeal would change anything important. Indeed, the McCarran Act can be viewed simply as legislative precedent confirming the Supreme Court’s later ascription to Congress of an intention that the Sherman Act not be construed to displace responsible state regulation.

If one were really interested in strengthening competition in health care markets (rather than in merely posturing against private health insurers), one might consider specifying more clearly that the state-action doctrine should not exempt anticompetitive private conduct or state regulation not expressly authorized by the state legislature. Some courts have used a foreseeability test to dilute the requirement that “the state itself” expressly approve of the anticompetitive policy. As I have written, “[F]ew things are more foreseeable than that a trade or profession empowered to regulate itself will produce anticompetitive regulations.” See generally Havighurst, “Contesting Anticompetitive Actions Taken in the Name of the State: State-Action Immunity and Health Care Markets,” Journal of Health Politics, Policy and Law 31(3): 587-607 (2006).

Clark Havighurst
Wm. Neal Reynolds Emeritus Professor of Law
Duke University
Durham, NC

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