On December 22, 2020, the American Senate passed HR 1418 — a bill sponsored by Representative DeFazio Peter and Senators Patrick Leahy and Steve Daines — into law to annul the McCarran-Ferguson antitrust exemption for health insurance providers. The United States President at the time, Donald J. Trump, finally signed the Competitive Health Insurance Reform Act of 2020 into law on January 13, 2021.
The McCarran-Ferguson Act of 1945 was the response to a 1944 Supreme Court decision in a case between the United States and the South-Eastern Underwriters Association. The Court stated that insurance business conducted across various states falls under interstate commerce, meaning that only the Commerce Clause could regulate it. To this effect, insurers became subject to a federal antitrust law known as the Sherman act.
After this event, the National Association of Insurance Commissioners (NAIC) persuaded Congress to adopt the McCarran-Ferguson Act in a bid to counteract the Supreme Court's decision. The law asserted that state officials regulated the insurance industry, preventing federal laws from overriding state laws in matters associated with insurance businesses.
Furthermore, the McCarran-Ferguson Act absolved insurance companies from federal antitrust laws, including the Clayton Act, the Sherman Act, and the Federal Trade Commission Act, as long as state officials remain responsible for regulating the insurance business.
The new Competitive Health Insurance Reform Act results from multi-year advocacy by numerous organizations to convince the US Congress to subject health care insurance, including dental plans, to federal antitrust policies. They suggested that this legislative reform will lead to a more transparent and competitive health insurance industry.
What Does the New Law do?
The new Competitive Health Insurance Reform Act retains the McCarran-Ferguson Act; however, it puts an end to the federal antitrust limited exemption for health and dental insurance providers. This reform amends Title 15, Section 1013 of the Commerce and Trade Act, affirming that no part of the McCarran-Ferguson Act restrains federal antitrust laws from regulating the health insurance business.
The advocates of this bill maintain that the legislation will not wholly override state regulation; however, it will only give room for federal supervision regarding abusive and antitrust misconducts. In many cases, the antitrust exemption has been misinterpreted by courts, thereby allowing numerous anticompetitive conducts in the health insurance industry. This latest reform has addressed this problem by stating that most health insurers' conduct is subject to federal antitrust laws.
With the elimination of this exemption, the Federal Trade Commission and the Department of Justice can easily investigate antitrust-related issues and enforce federal policies. This change will enable them to look into the anticompetitive activities of health insurance companies. The new law affirms that health insurers, including non-profit organizations, are subject to certain aspects of the Federal Trade Commission Act.
The reformed bill is specific on this matter because the Federal Trade Commission Act refers to corporations as profit-generating organizations. It states that both profit and non-profit health insurance companies are subject to the Federal Trade Commission Act, regardless of how "corporation" is defined.
There is also limited freedom that permits trade associations and health insurance providers to gather and exchange data and information for regulatory purposes without going against the federal antitrust policies. This means that health insurers can collaborate or make a contract to figure out a loss development factor and collect and share historical loss data. It also allows them to create and share insurance policy forms (if the use of the forms is not mandatory) and perform statistical calculations jointly.
What does this Law mean for Dental Practitioners?
The new Competitive Health Insurance Reform Act should improve transparency and competition in the health and dental insurance industry. It will also bring gradual changes that will benefit both dental practitioners and patients in the long run.
Over the years, analysts believed that the McCarran-Ferguson antitrust exemption had hindered the health insurance industry's growth. If there is a transparent and level playing field for dental insurance providers to compete, the marketplace will witness increased innovation, offering providers and consumers various choices.
With the evolution of the dental insurance industry, companies can develop strategies to stay ahead of their competitors by providing expanded networks and services, better coverage, and other unique advantages.
The Consumer Federation of America, Consumer Reports, and Consumer Action wrote letters to the House and Senate Judiciary Committee, lauding this bill's passage. The letters pointed out that the reform will benefit consumers and providers of health care services immensely.
Initially, the antitrust exemption gave health insurance providers the leeway to monopolize the service, unanimously making decisions on the terms to offer healthcare providers and consumers. In turn, this forced healthcare providers to provide substandard services in a bid to generate profits for the insurance companies.
The implementation of this law will ease the pressure on healthcare providers and create more opportunities for nascent insurance companies to establish themselves in the industry. It will also enable them to offer better terms to providers, hospitals, and physicians and provide competitive and affordable coverage for customers.
Furthermore, existing health insurance companies will need to buckle up and match the emerging companies' offers. In the long run, consumers will enjoy better products while dentists and other health care providers will work under reasonable terms.
When there is a competitive, transparent and regulated ecosystem, insurers will have no other option but to compete amongst themselves. They will have to offer plans with affordable premiums, reducing or eliminating deductibles, lowering copayments, improving drug coverage, lowering yearly out-of-pocket spending, and making their network attractive to prospective members.
This legislative amendment has also received criticisms from the National Association of Insurance Commissioner (NAIC) and America's Health Insurance Plans (AHIP). They believe that the reform will weaken state regulation, increase administrative costs, trigger litigation and create conflicts between federal and state authorities.
With the enactment of the Competitive Health Insurance Reform Act, health insurance companies will be careful about their future business practices to avoid sanctions. This will eventually lead to better working terms for dentists and other health care providers in the future.