89–006 

111TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 111–322 

HEALTH INSURANCE INDUSTRY ANTITRUST 

ENFORCEMENT ACT OF 2009 

NOVEMBER 2, 2009.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. CONYERS, from the Committee on the Judiciary, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL VIEWS 

[To accompany H.R. 3596] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on the Judiciary, to whom was referred the bill 

(H.R. 3596) to ensure that health insurance issuers and medical 

malpractice insurance issuers cannot engage in price fixing, bid rigging, or market allocations to the detriment of competition and consumers, having considered the same, reports favorably thereon 

with an amendment and recommends that the bill as amended do 

pass. 

CONTENTS 

Page 

The Amendment ...................................................................................................... 2 

Purpose and Summary ............................................................................................ 2 

Background and Need for the Legislation ............................................................. 3 

Hearings ................................................................................................................... 7 

Committee Consideration ........................................................................................ 7 

Committee Votes ...................................................................................................... 8 

Committee Oversight Findings ............................................................................... 8 

New Budget Authority and Tax Expenditures ...................................................... 9 

Congressional Budget Office Cost Estimate .......................................................... 9 

Performance Goals and Objectives ......................................................................... 10 

Constitutional Authority Statement ...................................................................... 11 

Advisory on Earmarks ............................................................................................. 11 

Section-by-Section Analysis .................................................................................... 11 

Additional Views ...................................................................................................... 11 


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1 15 U.S.C. §§ 1011–1015. 

THE AMENDMENT

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Health Insurance Industry Antitrust Enforcement 

Act of 2009’’. 

SEC. 2. PURPOSE. 

It is the purpose of this Act to ensure that health insurance issuers and medical 

malpractice insurance issuers cannot engage in price fixing, bid rigging, or market 

allocations to the detriment of competition and consumers. 

SEC. 3. PROHIBITION OF ANTI-COMPETITIVE ACTIVITIES. 

Notwithstanding any other provision of law, nothing in the Act of March 9, 1945 

(15 U.S.C. 1011 et seq., commonly known as the ‘‘McCarran-Ferguson Act’’), shall 

be construed to permit health insurance issuers (as defined in section 2791 of the 

Public Health Service Act (42 U.S.C. 300gg–91)) 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 (as defined in such section) or coverage for medical malpractice claims or actions. 

SEC. 4. APPLICATION TO ACTIVITIES OF STATE COMMISSIONS OF INSURANCE AND OTHER 

STATE INSURANCE REGULATORY BODIES. 

Nothing in this Act shall apply to the information gathering and rate setting 

activities of any State commission of insurance, or any other State regulatory entity 

with authority to set insurance rates. 

SEC. 5. EXCLUSIONS. 

(a) EXCLUDED CONDUCT.—This Act shall not apply to making a contract, or engaging in a combination or conspiracy— 

(1) to collect, compile, or disseminate historical loss data; 

(2) to determine a loss development factor applicable to historical loss data; 

or 

(3) to perform actuarial services if such contract, combination, or conspiracy 

does not involve a restraint of trade. 

(b) DEFINITIONS.—For purposes of this section— 

(1) the term ‘‘historical loss data’’ means information respecting claims 

paid, or reserves held for claims reported, by any person engaged in the business of insurance; and 

(2) the term ‘‘loss development factor’’ means an adjustment to be made to 

reserves held for losses incurred for claims reported by any person engaged in 

the business of insurance, for the purpose of bringing such reserves to an ultimate paid basis. 

PURPOSE AND SUMMARY

H.R. 3596, the Health Insurance Industry Antitrust Enforcement 

Act of 2009, will remove the antitrust immunity currently provided 

to the insurance industry under the McCarran-Ferguson Act 1 in 

instances of price fixing, bid rigging, and market allocation by 

health or medical malpractice insurers. The amended bill leaves 

unchanged the current treatment under McCarran for informationgathering and rate-setting activities of State regulatory entities 

with authority to set insurance rates, for certain practices involving 

the collection, dissemination, and analysis of historical loss data, 

and for the performance of certain actuarial services. 

Price fixing (including bid rigging and other forms) and market 

allocation are part of a limited class of so-called per se violations 

of the antitrust laws, practices so poisonous to competition that 

they have long been deemed to have no redeeming justification. 


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2 H.R. Rep. No. 103–853 (1994). 

3 322 U.S. 533 (1944). 

4 8 Wall. 168 (1868). 

They invariably result in fewer choices, higher prices, and lower 

quality products and services for consumers. 

BACKGROUND AND NEED FOR THE LEGISLATION

The Committee began seriously considering legislation to repeal 

or scale back the McCarran-Ferguson antitrust exemption in the 

late 1980’s. The history of the insurance business, the developments leading to enactment of the McCarran-Ferguson Act, and 

prior legislative efforts to repeal or scale back the exemption are 

discussed in some detail in the Committee’s report on the Insurance Competitive Pricing Act of 1994, H.R. 9 (103rd Cong.).2 A 

short summary of this history follows. 

MCCARRAN-FERGUSON ACT

The McCarran-Ferguson Act was enacted in 1945 in response to 

a 1944 Supreme Court decision, U.S. v. South-Eastern Underwriters Association,3 declaring for the first time that insurance contracts are interstate commerce, and therefore subject to the antitrust laws. McCarran-Ferguson prevents the application of the 

antitrust laws to the business of insurance—except as to boycott, 

coercion, or intimidation—to the extent that the business of insurance is regulated by State law. 

Prior to that Supreme Court decision, insurance had been regulated for more than 75 years solely by the States. An 1868 Supreme Court decision, Paul v. Virginia,4 had turned aside an insurance company challenge to Virginia’s licensing and bonding requirements, holding that issuing a policy of insurance was not commerce. When the Sherman Act was enacted 22 years later, there 

was an assumption, based on Paul, that its prohibitions did not 

reach insurance contracts. 

In response to South-Eastern Underwriters, the insurance industry expressed concern that the decision would jeopardize the system of joint rate-making and other collective practices that had developed in the wake of Paul. For their part, the States expressed 

concern that State authority to regulate and tax the business of insurance—insurance premium taxes were an important source of 

revenue in many States—might be in question, especially after insurers began refusing to pay those taxes, as well as refusing to 

abide by State licensing and other regulatory requirements. 

To address these concerns, in January 1945, the U.S. Senate introduced legislation to reaffirm State authority to regulate the 

business of insurance, which would eventually become the 

McCarran-Ferguson Act. 

The Senate bill included a 2-3 year moratorium on application of 

the antitrust laws. Both the House and the Senate passed the bill 

essentially unchanged. The Senate made a minor clarifying amendment, however, which the House rejected, sending the bill to conference. 

The conference committee added an entirely new phrase, providing that after the moratorium expired, the antitrust laws would 

apply to the business of insurance only ‘‘to the extent such business 


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5 Union Labor Life Insurance Co. v. Pireno, 458 U.S. 119, 129 (1982); Hahn v. Oregon Physicians Service, 689 F.2d 840 (C.A.9 (Or.) 1982), cert. denied, 462 U.S. 1133. 6McIlhenny v. American Title Ins. Co., 418 F.Supp. 364 (E.D.Pa. 1976). 

7 Jay Angoff, Insurance Against Competition: How the McCarran-Ferguson Act Raises Prices 

and Profits in the Property-Casualty Insurance Industry, 5 Yale J. on Reg. 397, 402 (1988). 8 374 F. Supp. 564 (E.D. Pa. 1974). 

9 366 F. Supp. 790 (S.D.N.Y. 1973). 

10See also Ohio AFL-CIO v. Insurance Rating Bd., 451 F.2d 1178 (6th Cir. 1971); Fleming 

v. Travelers Indem. Co., 324 F. Supp. 1404 (D. Mass. 1971); and California League of Indep. 

Ins. Producers v. Aetna Casualty & Sur. Co., 175 F. Supp. 857 (N.D. Cal. 1959). 11 542 F. Supp. 457 (M.D. Pa. 1982). 12See also Dexter v. Equitable Life Assurance Soc’y, 527 F.2d 233 (2d. Cir. 1975) (McCarranFerguson required dismissal of allegations of a tying violation against an insurance company 

that required the purchase of unrelated life insurance policies in order to secure a mortgage 

loan); Lawyers Title Co. v. St. Paul Title Ins. Corp., 526 F.2d 795 (8th Cir. 1975) (McCarranFerguson required dismissal of alleged predatory pricing tactics by a title insurance company). 13 692 F. Supp. 52 (D.R.I.1988), aff’d, 883 F.2d 1101 (1st Cir. 1989). 14 714 F.2d 928 (9th Cir. 1983). 

is not regulated by State law.’’ The courts have interpreted this 

proviso as triggering antitrust immunity with something far short 

of the active State regulatory supervision that is ordinarily needed 

under the judicially-created ‘‘state action doctrine.’’ 

While the courts have limited the scope of what constitutes the 

business of insurance for purposes of the exemption to the risktransferring function of the insurer-insured relationship,5 they 

have held that rates, coverage, and other key policy terms are all 

covered by it.6

The McCarran-Ferguson exemption has been invoked by insurers 

to shield from legal scrutiny alleged price fixing, market division, 

and other anticompetitive behavior.7 For example: 

In Schwartz v. Commonwealth Land Title Insurance. Co.8 the 

court dismissed a price fixing claim brought by title insurance vendors alleging that insurance companies had used a rating bureau 

as an intermediary to fix the price of the closing fees charged to 

sellers of real estate at inflated levels. 

In Steingart v. Equitable Life Assurance Society,9 the court dismissed a suit by policyholders alleging price fixing by mutual life 

insurance companies.10

In Grant v. Erie Insurance Exchange,11 the court dismissed a 

claim alleging conspiracy among insurance companies to deny work 

loss benefits to individuals killed in motor vehicle accidents.12

In Ocean State Physicians Health Plan, Inc. v. Blue Cross & Blue 

Shield of Rhode Island,13 the court overturned a jury verdict 

against the dominant health insurer for using its monopoly power 

to put financial pressure on area employers to refuse to do business 

with a competing HMO. 

In Feinstein v. Nettleship Co. of Los Angeles,14 the court affirmed 

the dismissal of a claim by physicians that an insurer had monopolized the market for medical malpractice insurance by forcing the 

local medical association to deal with it exclusively in order for the 

association’s members to obtain coverage. 

RECONSIDERATION OF THE MCCARRAN-FERGUSON

ANTITRUST EXEMPTION

Criticism of the antitrust exemption and concerns about its 

harmful effects began to arise even before the McCarran-Ferguson 

Act became law. During the final Senate debates, Senator Claude 

Pepper of Florida expressing concern that the conferees had quietly 

transformed a temporary moratorium into a permanent exemption, 


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15 91 Cong. Rec. 1443 (1945). 16 U.S. Department of Justice, The Pricing and Marketing of Insurance (1977). 17 Report to the President and the Attorney General of the National Commission for the Review of Antitrust Laws and Procedures 225 (1979). 18The AMC was a bipartisan commission created by Congress in Pub. L. No. 107–273 to identify and study significant issues of antitrust law. 19 Antitrust Modernization Commission, Report and Recommendations 422 (2007). 20 Id. at 442. 21 E.g., National Association of Attorneys General, Policy Positions: A Compilation of Actions 

Taken on Legislative and Other Issues Through Adopted Resolutions 17 (1993). This position 

has been reaffirmed repeatedly, as recently as 2007. 22 American Medical Association, Competition in Health Insurance: A Comprehensive Study 

of U.S. Markets 2007 Update 1 (2007), available at http://www.ama-assn.org/ama1/pub/upload/ 

mm/368/compstudyl52006.pdf. 23 Common Dreams.org, Study: Health Insurers Are Near Monopolies, April 18. 2006, available at http://www.commondreams.org/headlines06/0418-09.htm. See also Health Care for America NOW!, Premiums Soaring in Consolidate Health Insurance Market, available at http:// 

hcfan.3cdn.net/5d6e7f78cc5132f791ldem6bxw84.pdf. 

giving ‘‘the States the privilege of enacting some mild form of legislation, which they may call regulatory, thereby defeating the purpose of the [South-Eastern Underwriters] decision,’’ 15 and struggled 

in vain to persuade his colleagues to send the bill back to conference to remove the newly added phrase. 

Reconsideration of the exemption began in earnest in the mid1970’s. A Department of Justice study issued in early 1977 advocated a move toward increasing reliance on price competition, 

pointedly questioning whether the exemption was in the public interest.16 Two years later, a Presidentially-appointed National Commission for the Review of Antitrust Laws and Procedures issued a 

report calling, with near unanimity, for legislation repealing the 

exemption while affirming the lawfulness of a limited number of 

essential collective activities that did not raise competitive concerns—chief among them the collection and use of historical loss 

data.17

More recently, in the 2007 report of the Congressionally-created 

Antitrust Modernization Commission 18 (AMC), AMC Commissioner 

Jonathan Jacobson, joined by Commissioners Debra Valentine and 

John Warden, elaborating on the AMC’s recommendation that all 

antitrust exemptions be revisited with a strong presumption of disfavor, called special attention to the McCarran-Ferguson exemption. They stated that it has ‘‘outlived any utility [it] may have had 

and should be repealed.’’ 19 In a separate statement, Commissioner 

John Shenefield called it ‘‘among the most ill-conceived and egregious examples’’ of antitrust exemptions and said its repeal ‘‘should 

not be delayed.’’ 20

The National Association of Attorneys General has long urged 

Congress to ‘‘repeal the special immunity from the antitrust laws 

granted under the McCarran-Ferguson Act to the insurance industry and to subject insurance companies to the rules of the competitive marketplace applicable to other firms.’’ 21

Reconsideration of the exemption as it applies to health insurers 

and medical malpractice insurers is particularly timely now, as 

Congress considers other measures to reform the health insurance 

marketplace. According to a recent study by the American Medical 

Association, there have been more than 400 mergers among health 

care insurers in the past 14 years.22 Fully 96 percent of all health 

insurance markets are ‘‘highly concentrated,’’ at levels often far exceeding the thresholds that trigger antitrust concerns.23 MeanVerDate Nov 24 2008 01:42 Nov 03, 2009 Jkt 089006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6601 E:\HR\OC\HR322.XXX HR322

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24 Id. 25S. 618, 110th (2007); H.R. 1081, 110th (2007) 26 H.R. 1583 (2009). 27Sens. Cantwell, Durbin, Feingold, Feinstein, Reid, Schumer, and Specter. 28The original co-sponsors of H.R. 1583 were Representatives Baird, Kaptur, Nadler, Taylor, 

Hare, Massa, and Slaughter. In addition to Judiciary, the bill has secondary referrals to the 

Committees on Energy and Commerce and Financial Services. 

while, the cost of health insurance premiums has increased almost 

87% in just the last 6 years.24

PREVIOUS JUDICIARY COMMITTEE EFFORTS TO SCALE BACK THE

INSURERS’ EXEMPTION

In the 100th Congress, the Committee on the Judiciary’s Subcommittee on Monopolies and Commercial Law favorably reported 

H.R. 2727, the Fairness in Insurance Act of 1987. As reported, the 

bill would have removed insurers’ antitrust immunity with respect 

to price-fixing, monopolization, allocation of territories, and unlawful tying arrangements. It also created safe harbors for the joint 

collection of historical loss data and loss development data. 

In the next two Congresses, the full Committee favorably reported similar versions of the bill, H.R. 1663 in the 101st Congress 

and H.R. 9 in the 102d. 

In the 103d Congress, a version of the bill was reported favorably 

by the Judiciary Committee and incorporated into the draft of H.R. 

3600, the ‘‘Health Security Act,’’ being prepared for consideration 

by the full House. The 103d Congress adjourned before H.R. 3600 

could be considered. 

Other bills to repeal or scale back the exemption have been introduced in subsequent Congresses, including more recently the Insurance Industry Competition Act of 2007 25 and the Insurance Industry Competition Act of 2009.26 Like the earlier bills reported by the 

Judiciary Committee, these bills addressed the exemption in all 

sectors of the insurance industry, not just health care sectors. 

Chairman Conyers and two cosponsors, Representatives Hank 

Johnson and Diana DeGette, introduced H.R. 3596 on September 

17, 2009, the same day that identical legislation, S. 1681, was introduced by Senator Patrick Leahy and seven others.27 As introduced, the bill would eliminate the antitrust immunity provided 

under the McCarran-Ferguson Act as to price fixing, bid rigging, 

and market allocation by health or medical malpractice insurers, 

while leaving unchanged the antitrust immunity for informationgathering and rate-setting activities by State insurance commissions and other State regulatory entities with authority to set insurance rates. 

On March 18, 2009, Representative Peter DeFazio, along with 

seven co-sponsors,28 introduced the Insurance Industry Competition Act, H.R. 1583, which would repeal the antitrust exemption 

completely for all sectors of insurance industry. 

On September 16 and 17, 2009, Representative Dennis Kucinich 

chaired a two-day hearing of the Domestic Policy Subcommittee of 

the Committee on Oversight and Government reform related to this 

issue. On the first day, the Subcommittee heard from a number of 

doctors, patients, and health policy experts about their treatment 

and experiences with State-regulated health insurance companies 

and about the policies and actions of State-regulated health insurers that interfere with Americans’ ability to obtain affordable 


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29Oct. 14, 2007, Prepared Testimony of Assistant Attorney General Christine Varney before 

the Senate Judiciary Committee. 30Peter Baker, Obama Threatens Insurers’ Anti-Trust Exemption, N.Y. Times, Oct. 18, 2009. 

health care—even Americans with insurance coverage. Wendell 

Potter, a former Cigna executive who has become a leading critic 

of health insurance industry practices, also testified. On the second 

day, executives from a number of the Nation’s largest insurers— 

United Healthcare, Wellpoint, Aetna, Humana, Cigna, and 

Healthcare Service Corp.—testified regarding their practices. 

On October 8, 2009, the House Judiciary Committee held a legislative hearing on H.R. 3596. Testimony was heard from James D. 

Hurley, with the American Academy of Actuaries; Dr. Peter 

Mandell, of the California Orthopaedic Association; Ilene Knable 

Gotts, chair of the American Bar Association (ABA) Section on 

Antitrust Law; and David Balto, with the Center for American 

Progress. Ms. Gotts reiterated the ABA’s long-held view that the 

insurance industry should not be the beneficiary of an antitrust exemption. 

On October 14, 2009, the Senate Judiciary Committee held a 

hearing titled ‘‘Prohibiting Price Fixing and Other Anticompetitive 

Conduct in the Health Insurance Industry.’’ Senate Majority Leader Harry Reid and the Assistant Attorney General for the Department of Justice’s Antitrust Division, Christine Varney, testified, as 

well as consumer advocate Robert Hunter and law professor Lawrence Powell. Assistant Attorney General Varney testified that the 

rationale for McCarran-Ferguson had eroded—‘‘There are strong 

indications that possible justifications for the broad insurance antitrust exemption in the McCarran-Ferguson Act when it was enacted in 1945 are no longer valid today’’—and noted that ‘‘the Department of Justice generally supports the idea of repealing antitrust exemptions.’’ 29 Senator Reid urged support for the Senate 

bill, of which he is a cosponsor. 

In his October 17, 2009, radio address, President Barack Obama 

criticized health insurance companies for ‘‘earning [large] profits 

and bonuses while enjoying a privileged exemption from our antitrust laws, a matter that Congress is rightfully reviewing.’’ 30

HEARINGS

The Subcommittee on Courts and Competition Policy, Committee 

on the Judiciary, held one day of hearings on H.R. 3596 on October 

8, 2009. Testimony was received from James D. Hurley, a member 

of the Medical Professional Liability Subcommittee of the American 

Academy of Actuaries, Peter J. Mandell, former President of the 

California Orthopaedic Association, Ilene Knable Gotts, Chair of 

the Section of Antitrust Law, American Bar Association, and David 

Balto, Senior Fellow at the Center for American Progress. 

COMMITTEE CONSIDERATION

On October 21, 2009, the Committee met in open session to consider the bill H.R. 3596. Representative Dan Lungren offered an 

amendment to add safe harbors for collecting and distributing historical loss data, developing a loss development factor, and performing actuarial services that do not involve a restraint of trade. 

These safe harbors were an integral part of the bills the Judiciary 


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Committee considered in the 100th–103d Congresses. The amendment was agreed to by voice vote. The Committee ordered the bill 

favorably reported, as amended by the Lungren amendment, by a 

roll call vote of 20 to 9, a quorum being present. 

COMMITTEE VOTES

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the following 

recorded vote occurred during Committee consideration of H.R. 

3596: 

1. Motion to report H.R. 3596 favorably as amended. Passed 20 

to 9. 

ROLLCALL NO. 1 

Ayes Nays Present 

Mr. Conyers, Jr., Chairman ............................................................................... X 

Mr. Berman .......................................................................................................

Mr. Boucher .......................................................................................................

Mr. Nadler ......................................................................................................... X 

Mr. Scott ........................................................................................................... X 

Mr. Watt ............................................................................................................ X 

Ms. Lofgren .......................................................................................................

Ms. Jackson Lee ................................................................................................

Ms. Waters ........................................................................................................ X 

Mr. Delahunt .....................................................................................................

Mr. Wexler ......................................................................................................... X 

Mr. Cohen .......................................................................................................... X 

Mr. Johnson ....................................................................................................... X 

Mr. Pierluisi ....................................................................................................... X 

Mr. Quigley ........................................................................................................ X 

Ms. Chu ............................................................................................................. X 

Mr. Gutierrez .....................................................................................................

Ms. Baldwin ...................................................................................................... X 

Mr. Gonzalez ...................................................................................................... X 

Mr. Weiner .........................................................................................................

Mr. Schiff .......................................................................................................... X 

Ms. Sa ́nchez ...................................................................................................... X 

Ms. Wasserman Schultz .................................................................................... X 

Mr. Maffei ......................................................................................................... X 

Mr. Smith, Ranking Member ............................................................................. X 

Mr. Sensenbrenner, Jr. ......................................................................................

Mr. Coble ........................................................................................................... X 

Mr. Gallegly .......................................................................................................

Mr. Goodlatte .................................................................................................... X 

Mr. Lungren ....................................................................................................... X 

Mr. Issa .............................................................................................................

Mr. Forbes ......................................................................................................... X 

Mr. King ............................................................................................................ X 

Mr. Franks ......................................................................................................... X 

Mr. Gohmert ...................................................................................................... X 

Mr. Jordan ......................................................................................................... X 

Mr. Poe ..............................................................................................................

Mr. Chaffetz ...................................................................................................... X 

Mr. Rooney ........................................................................................................ X 

Mr. Harper ......................................................................................................... X 

Total ................................................................................................ 20 9 

COMMITTEE OVERSIGHT FINDINGS

In compliance with clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the findings 


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and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report. 

NEW BUDGET AUTHORITY AND TAX EXPENDITURES

Clause 3(c)(2) of rule XIII of the Rules of the House of Representatives is inapplicable because this legislation does not provide new 

budgetary authority or increased tax expenditures. 

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, the Committee sets forth, with respect to 

the bill, H.R. 985, the following estimate and comparison prepared 

by the Director of the Congressional Budget Office under section 

402 of the Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, October 23, 2009. 

Hon. JOHN CONYERS, Jr., Chairman, 

Committee on the Judiciary, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3596, the Health Insurance Industry Antitrust Enforcement Act of 2009. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Mark Grabowicz, who 

can be reached at 226–2860. 

Sincerely, 

DOUGLAS W. ELMENDORF, 

DIRECTOR. 

Enclosure 

cc: Honorable Lamar S. Smith. 

Ranking Member 

H.R. 3596—Health Insurance Industry Antitrust Enforcement Act of 

2009. 

CBO estimates that implementing H.R. 3596 would have no significant cost to the Federal Government. Enacting the bill could affect direct spending and revenues, but any such effects would not 

be significant. 

Companies that provide health and medical malpractice insurance are currently exempt from the Federal antitrust laws insofar 

as they are engaging in the business of insurance. H.R. 3596 would 

prohibit such companies from price fixing, bid rigging, or allocating 

markets while providing coverage for health insurance or medical 

malpractice claims. The bill’s restrictions would not apply to certain collaborative activities involving actuarial services. 

Because the bill would establish a new offense, the government 

would be able to pursue cases that it otherwise would not be able 

to prosecute. Based on information from the Department of Justice 

and insurance industry experts, CBO expects that H.R. 3596 would 

apply to a small number of offenders, however, so any increase in 


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costs for law enforcement, court proceedings, or prison operations 

would not be significant. Any such costs would be subject to the 

availability of appropriated funds. 

Because those prosecuted and convicted under H.R. 3596 could 

be subject to criminal fines, the Federal Government might collect 

additional amounts if the legislation is enacted. Criminal fines are 

recorded as revenues, deposited in the Crime Victims Fund, and 

later spent. CBO estimates that any additional revenues and direct 

spending would not be significant because of the small number of 

cases likely to be affected. 

H.R. 3596 could affect the costs of and premiums charged by private health insurance companies; whether premiums would increase or decrease as a result is difficult to determine, but in either 

case the magnitude of the effects is likely to be quite small. To the 

extent that insurers would otherwise engage in the prohibited practices and be prevented from doing so by enactment of this bill, premiums might be lower. (That effect is likely to be small because 

State laws already bar the activities that would be prohibited 

under Federal law if this bill was enacted.) To the extent that insurers would become subject to additional litigation, their costs and 

thus their premiums might increase. Based on information from 

the Justice Department, the Federal Trade Commission, the National Association of Insurance Commissioners, consumer groups, 

and private attorneys, CBO estimates that both of those effects 

would be very small, and thus that enacting the legislation would 

have no significant effect on the premiums that private insurers 

would charge for health insurance. Changes in those premiums can 

affect Federal revenues because of the favorable tax treatment that 

is accorded to employment-based coverage under current law, but 

any such effects of the legislation would be negligible in CBO’s estimation. 

H.R. 3596 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act and would not affect the budgets of State, local, or tribal governments. 

H.R. 3596 would impose a private-sector mandate, as defined in 

UMRA, on issuers of health insurance and medical malpractice insurance by partially repealing their exemptions from Federal antitrust laws. According to State insurance regulators, State laws already prohibit issuers of health insurance and medical malpractice 

insurance from engaging in practices such as price fixing, bid rigging, and market allocations. CBO estimates the cost of this mandate would not exceed the annual threshold established in UMRA 

for private-sector mandates ($139 million in 2009, adjusted annually for inflation). 

The CBO staff contacts for this estimate are Mark Grabowicz (for 

Federal costs) and Patrick Bernhardt (for the private-sector impact). The estimate was approved by Peter H. Fontaine, Assistant 

Director for Budget Analysis. 

PERFORMANCE GOALS AND OBJECTIVES

The Committee states that pursuant to clause 3(c)(4) of rule XIII 

of the Rules of the House of Representatives, H.R. 3596 is intended 

to eliminate the antitrust immunity provided to the insurance industry under the McCarran-Ferguson Act in instances of price fixing, bid rigging, and market allocation by health or medical malVerDate Nov 24 2008 02:58 Nov 03, 2009 Jkt 089006 PO 00000 Frm 00010 Fmt 6659 Sfmt 6601 E:\HR\OC\HR322.XXX HR322

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practice insurance issuers, and to allow appropriate antitrust enforcement and private actions to deter, arrest, and remedy such 

practices. 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds the authority for this legislation in article I, section 8, clauses 3 and 18 of the Constitution. 

ADVISORY ON EARMARKS

In accordance with clause 9 of rule XXI of the Rules of the House 

of Representatives, H.R. 2102 does not contain any congressional 

earmarks, limited tax benefits, or limited tariff benefits as defined 

in clause 9(e), 9(f), or 9(g) of Rule XXI. 

SECTION-BY-SECTION ANALYSIS

The following discussion describes the bill as reported by the 

Committee: 

Sec. 1. Short Title. This section designates the short title of the 

bill as the ‘‘Health Insurance Industry Antitrust Enforcement Act 

of 2009.’’ 

Sec. 2. Purpose. This section states that the purpose of the bill 

is to prohibit price fixing, bid rigging, or market allocation by 

issuers of health and medical malpractice insurance and to allow 

government enforcement and private civil actions to prevent and 

deter such conduct. 

Sec. 3. Prohibition on Anti-Competitive Activities. This section removes acts of price fixing, bid rigging, and market allocation by 

health insurance issuers or medical malpractice insurance issuers 

from the broad antitrust immunity provided to the insurance industry under the McCarran-Ferguson Act. 

Sec. 4. Application to Activities of State Commissions of Insurance and Other State Insurance Regulatory Bodies. This section 

preserves current antitrust treatment under McCarran of information-gathering and rate-setting activities by any State regulatory 

entity with authority to set insurance rates, such as State insurance commissions. 

Sec. 5. Exclusions. This section makes clear that the current 

antitrust treatment under McCarran remains unchanged for specified conduct involving compilation and dissemination of historical 

loss data and development of a loss development factor, as well as 

performance of actuarial services that do not involve a restraint of 

trade. 

ADDITIONAL VIEWS

We did not oppose H.R. 3596, the ‘‘Health Insurance Industry 

Antitrust Enforcement Act of 2009,’’ because we think that health 

insurers and medical malpractice insurers should be allowed to fix 

prices, rig bids, or allocate markets. No industry in America—including the insurance industry—should be able to engage in those 

practices. 

Rather, we opposed H.R. 3596 because we are concerned about 

the unintended consequences of a federal ban on conduct that existing state regulatory and antitrust law already prohibits. We are 


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12 

also concerned about why this bill singles out a narrow subset of 

insurers for McCarran-Ferguson repeal and what that says for the 

future of state insurance regulation. 

The McCarran-Ferguson Act’s federal antitrust exemption allows 

small and medium-sized insurers to aggregate information for underwriting purposes so they can compete effectively against larger 

national companies. In other words, McCarran-Ferguson promotes 

competition by making small and medium-sized underwriters viable. 

McCarran-Ferguson is not intended to reduce competition 

through price-fixing, bid-rigging, or market allocation. Instead, the 

Act clarifies that insurers are regulated by the states, which ensure 

that firms do not engage in these per se antitrust violations, either 

through regulation or through their own laws. 

Antitrust exemptions should be rarely granted or created, and if 

they are necessary, should be written in as limited a way as necessary to meet a compelling public policy goal. That said, when repealing an existing antitrust exemption, we must be very careful 

of the unintended consequences of our actions. 

This is a real concern. For more than 60 years, the states have 

regulated the business of insurance and built a record that provides guidance about permissible activity. In fact, the National Association of Insurance Commissioners submitted a letter for the 

record in which they stated, ‘‘bid rigging, price fixing and market 

allocation is of great concern to state insurance regulators and . . . 

such practices are harmful to consumers and cannot be tolerated. 

However, we want to assure you that these activities are not permitted under the McCarran-Ferguson Act and are not tolerated 

under state law. Indeed, state insurance regulators actively enforce 

prohibitions in these areas.’’ By inviting federal intervention, this 

bill creates a dual regulatory system that only confuses the health 

insurance and medical malpractice industry. 

That is particularly true given that many key terms in the legislation, including ‘‘issuers of medical malpractice insurance,’’ ‘‘price 

fixing,’’ ‘‘bid rigging,’’ and ‘‘market allocations’’ are undefined. 

While the latter three phrases are used as terms of art in antitrust 

litigation, there will be significant litigation to define what they 

mean as a part of this legislation. The amendment that the Committee adopted goes some way toward addressing these concerns. 

However, other legitimate activities may be punished or otherwise 

deterred in the trial attorneys’ efforts to collect treble damage 

awards from the health insurance and medical malpractice insurance companies. 

According to news reports, Speaker Pelosi plans to fold H.R. 3596 

into a larger health care bill to be considered by the House of Representatives next month. One hearing on the subject and no subcommittee markup was not an adequate basis on which to bring 

this bill to a Full Committee markup, much less to the Floor as 

part of a larger package. In fact, what little record has been established on this bill has shown that medical malpractice should perhaps not be covered by it at all. That is because many doctors 

choose to either self-insure or buy their medical liability insurance 

through mutual companies made up of other doctors. Why would 

these doctors try to fix prices, rig bids, or allocate territories if the 

only impact of those practices would be to pay higher medical malVerDate Nov 24 2008 01:42 Nov 03, 2009 Jkt 089006 PO 00000 Frm 00012 Fmt 6659 Sfmt 6601 E:\HR\OC\HR322.XXX HR322

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practice premiums? The short answer is that they would not, since 

they would only be stealing from themselves. That was, in essence, 

the testimony of the Majority’s own witness, Dr. Peter J. Mandell, 

who advocated eliminating medical malpractice insurers from the 

bill. 

It is unclear whether health insurers should be subject to the bill 

either, given that no health insurance organization testified at the 

lone hearing on the subject. What is clear is that this legislation 

targets an industry that is highly unpopular, both with the American people, but particularly with this Administration. During his 

weekly radio address, President Obama strongly chastised the 

health insurers for criticizing his health reform plans and suggested that Congress was right to consider repealing McCarranFerguson for health insurers. But picking on an industry because 

they are unpopular or because they disagree with you should not 

be the basis of making laws that could affect not just the unpopular business, but, ultimately, all insurers. 

Health care reform is an important issue and the House Judiciary Committee does have an important role to play in that discussion. The better focus for our attention is on the frivolous lawsuits 

against medical personnel that create real problems and real costs. 

According to a study by the Harvard School of Public Health, 40 

percent of medical malpractice suits filed in the United States are 

‘‘without merit.’’ So every doctor must purchase malpractice insurance at great expense to protect against frivolous lawsuits. 

A Department of Health and Human Services study found that 

unlimited excessive damages add $70 billion to $126 billion annually to health care costs. Doctors are so concerned about frivolous 

lawsuits that they order unnecessary tests and procedures that do 

not benefit the patient. HHS estimates the national cost of defensive medicine is now more than $60 billion. 

All these costs are then passed on to patients in the price of 

health care. 

A report released by the Congressional Budget Office just a week 

before the Committee’s consideration of H.R. 3596 found that tort 

reforms would reduce health care spending by an estimated $11 

billion in 2009. The CBO also found that a national tort reform 

package would reduce federal budget deficits by roughly $54 billion 

over the next 10 years. Among the reforms reviewed in the study, 

CBO considered a cap on pain and suffering damages first on its 

list of tort reforms that would lead to significant cost savings. 

The Committee is rushing consideration of H.R. 3596. This Committee has not established the record for the need for this legislation. Nor has it adequately addressed its potential unintended consequences. The Committee could have spent its limited time investigating a more pressing problem in health care: runaway medical 

malpractice costs caused by excessive damage claims in often frivolous lawsuits. But it did not. The American people deserve better. 

LAMAR SMITH. F. JAMES SENSENBRENNER, JR. HOWARD COBLE. BOB GOODLATTE. GREGG HARPER. 

Æ 


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