Competitive Health Insurance Reform Act: More questions than answers
A final act by the Trump administration nixed certain exemptions to federal antitrust laws for health care players. Now what?
Among his final acts in office that did not involve pardoning cronies, President Donald Trump put his signature on the Competitive Health Insurance Reform Act (“CHIRA”). Done in the spirit of enhancing transparency within the health care ecosystem, CHIRA removes certain exemptions to federal antitrust laws included in the McCarran-Ferguson Act.
These exemptions, which have long been in effect, apply to certain activities that more or less fall under the heading “the business of health insurance.”
Related: Following BCBS antitrust settlement, the competitive insurance landscape could look different
Reasons for the exemptions and the long defense of them are varied. Essentially, proponents of these exemptions, which include data sharing, have argued that they may reduce competition among health insurers but they create a better environment for consumers. Additionally, many of the practices that were exempt were subject to state regulations and, in theory, could have been challenged at the state level.
Balderdash, said the opponents to the exemptions. Why should health insurers receive federal protection from antitrust practices when other businesses must deal with them?
The Trump administration bought the opponents’ argument and successfully removed the exemptions.
Now what?
Observers from both sides of the argument are scratching their heads, wondering what the fallout will be. Although “too early to tell” has been the most popular comment, the national law firm Jones Day produced an early analysis. Here is Jones Day’s basic list of “business of health insurance” practices that no longer are antitrust exempt:
- Cooperative ratemaking efforts
- Development of standard policy forms
- Joint underwriting
- Decisions to accept or deny insurance applications
- Claims handling
- Reinsurance
All these meet the definition of practices within the industry as opposed to activities involving entities outside insurance.
Until now, such practices could be carried out without fear of federal antitrust challenges. States could, if they chose, intervene. But mostly, they did not.
From a “let’s make health care more transparent” standpoint, any cooperative efforts among insurers involving the above list could be seen through the lenses of collusion, exclusion, price-fixing, and worse.
But the new rules apply to such a technical area that even those intimately involved in health care reform were unprepared to forecast what the fallout may be. Typical was the response of Dave Chase, co-founder, The Health Rosetta: “My opinion is that it’s too early to know, The final rules on how it’s scoped and how it will be enforced will make all the difference. That’s all coming. It could be quite a big deal (or not).”
Nonetheless, insurers and their trade groups painted a dark picture of administrative nightmares for themselves and fewer choices for the consumer as the industry is rocked by assaults on time-honored practices designed to serve the insured’s best interests.
Meantime, the bill’s backers look to a future of true pricing and decision-making transparency. But exactly how either (or both) of these forecasts will take shape, no one could offer details. Will it be the disaster predicted by Matt Eyles, president, America’s Health Insurance Plans? To wit: “Removal of this exemption adds tremendous administrative costs while delivering absolutely no value for patients and consumers,” explained Eyles. “It will unnecessarily add layers of bureaucracy, destabilize markets, create conflicting federal and state oversight requirements, and lead to costly litigation.”
Or the victory for the common policyholder, as laid out by the bill’s sponsors?
“It makes little sense that these powerful actors should also benefit from an antiquated exemption allowing them to evade all scrutiny and oversight by our federal antitrust authorities. Our overwhelmingly bipartisan bill would simply subject health insurance providers to our federal antitrust laws – just like every other sector of the American economy,” said cosponsor Senators Steve Daines (R-MT).
Jones Day, and other legal minds reviewing the elimination of said exemptions, agreed that the one certain outcome of CHIFRA will be antitrust litigation.
“… Past expansions of antitrust liability in an industry, including health care, have led to more litigation, attracted by the prospect of automatic treble damages. Even if other antitrust exemptions apply, or the activity is procompetitive, it may take years of litigation before those are settled issues.”
So in part, the fears of insurers will be realized, as they are forced to defend the once-protected practices in costly legal jousts. But only as the litigation plays out will we know the results that this shoot-out will produce.
By the way, CHIFRA did not eliminate exemptions for the following industry practices:
- Collection, compilation, or dissemination of historical loss data;
- Determination of a loss development factor applicable to historical loss data;
- Performing actuarial services if such contract, combination, or conspiracy does not involve a restraint of trade; and
- Developing or disseminating a standard insurance policy form (including a standard addendum to an insurance policy form and standard terminology in an insurance policy form), so long as parties do not agree to adhere to a standard form. (Emphases added.)
Fine lines aplenty for antitrust lawyers to contemplate in the months ahead.
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