Source: http://www.chanrobles.com/usa/us_supremecourt/440/205/case.php
Timestamp: 2020-01-25 20:18:06
Document Index: 725795096

Matched Legal Cases: ['§ 1', '§ 1', '§ 2', '§ 1012', '§ 3', '§ 1013', '§ 2', '§ 2', '§ 1', '§ 1', '§ 2', '§ 2', '§ 1', '§ 2', '§ 3', '§ 1011', '§ 1013', '§ 1011', '§ 4', '§ 1012', '§ 1013']

(b) A primary element of an insurance contract is the underwriting or spreading of risk, SEC v. Variable Annuity Life Ins. Co., 359 U. S. 65, but that element is not involved in the Pharmacy Agreements, which are merely arrangements for the purchase of goods and services by Blue Shield, enabling it to effect cost savings. Pp. 440 U. S. 211-215. chanrobles.com-red
STEWART, J., delivered the opinion of the Court, in which WHITE, BLACKMUN, REHNQUIST, and STEVENS, JJ., joined. BRENNAN, J., filed a dissenting opinion, in which BURGER, C.J.,and MARSHALL and POWELL, JJ., joined, post, p. 440 U. S. 233. chanrobles.com-red
The respondents, 18 owners of independent pharmacies in San Antonio, Tex., brought an antitrust action in a Federal District Court against the petitioners, Group Life and Health Insurance Co., known as Blue Shield of Texas (Blue Shield), and three pharmacies also doing business in San Antonio. The complaint alleged that the petitioners had violated § 1 of the Sherman Act, 15 U.S.C. § 1, by entering agreements to fix the retail prices of drugs and pharmaceuticals, and that the activities of the petitioners had caused Blue Shield's policyholders not to deal with certain of the respondents, thereby constituting an unlawful group boycott. The trial court granted summary judgment to the petitioners on the ground that the challenged agreements are exempt from the antitrust laws under § 2(b) of the McCarran-Ferguson Act, 59 Stat. 34, as amended, 61 Stat. 448, 15 U.S.C. § 1012(b), because the agreements are the "business of insurance," are "regulated by [Texas] law," and are not "boycott" within the meaning of § 3(b) of the Act, 59 Stat. 34, 15 U.S.C. chanrobles.com-red
§ 1013(b). [Footnote 1] 415 F.Supp. 343 (WD Tex.). The Court of Appeals for the Fifth Circuit reversed the judgment. Holding that the agreements in question are not the "business of insurance" within the meaning of § 2(b), the appellate court did not reach the other questions decided by the trial court. 556 F.2d 1375. We granted certiorari because of inter-circuit conflicts as to the meaning of the phrase "business of insurance" in § 2(b) of the Act. [Footnote 2] 435 U.S. 903. chanrobles.com-red
Blue Shield offered to enter into a Pharmacy Agreement with each licensed pharmacy in Texas. Under the Agreement, a participating pharmacy agrees to furnish prescription drugs to Blue Shield's policyholders at $2 for each prescription, and Blue Shield agrees to reimburse the pharmacy for the pharmacy's cost of acquiring the amount of the drug prescribed. Thus, only pharmacies that can afford to distribute prescription drugs for less than this $2 markup can profitably participate in the plan. [Footnote 3] chanrobles.com-red
As the Court stated last Term in St. Paul Fire & Marine Ins. Co. v. Barry, 438 U. S. 531, 438 U. S. 541, [Footnote 6] the starting point in a case involving construction of the McCarran-Ferguson Act, like the starting point in any case involving the meaning of a statute, is the language of the statute itself. See also Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 421 U. S. 756 (POWELL, J., concurring). It is important, therefore, to observe at the outset that the statutory language in question chanrobles.com-red
1 G. Couch, Cyclopedia of Insurance Law § 1:3 (2d ed.1959). See also R. Keeton, Insurance Law § 1.2(a) (1971) ("Insurance is an arrangement for transferring and distributing risk"); 1 G. Richards, The Law of Insurance § 2 (W. Freedman 5th ed.1952). [Footnote 7] chanrobles.com-red
The significance of underwriting or spreading of risk as an indispensable characteristic of insurance was recognized by this Court in SEC v. Variable Annuity Life Ins. Co., 359 U. S. 65. That case involved several corporations, representing themselves as "life insurance" companies, that offered variable annuity contracts for sale in interstate commerce. The companies were regulated by the insurance commissioners of several States. Purchasers of the contracts were not entitled to any fixed return, but only to a pro rata participation in the investment portfolios of the companies. Thus, a policyholder could receive substantial sums if investment decisions were successful, but very little if they were not. One of the questions presented was whether these variable annuity contracts were the "business of insurance" under § 2(b) of the McCarran-Ferguson Act. [Footnote 8] The Court held that the annuity contracts were not insurance, even though they were regulated as such under state law and involved actuarial prognostications of mortality. Central to the Court's holding was the premise that "the concept of 'insurance' involves some investment risk-taking on the part of the company." 359 U.S. at 359 U. S. 71. Since the variable annuity contracts offered no guarantee of fixed income, they placed all the investment risk on the annuitant, and none on the company. Ibid. The Court concluded, therefore, that the annuities involved "no true underwriting of risks, the one earmark of insurance as it has commonly been conceived of in popular understanding and usage." Id. at 359 U. S. 73 (footnote omitted). Cf. German Alliance Ins. Co. v. Lewis, 233 U. S. 389, 233 U. S. 412 ("The effect of insurance -- indeed, chanrobles.com-red
The fallacy of the petitioners' position is that they confuse the obligations of Blue Shield under its insurance policies, which insure against the risk that policyholders will be unable to pay for prescription drugs during the period of coverage, and the agreements between Blue Shield and the participating pharmacies, which serve only to minimize the costs Blue Shield incurs in fulfilling its underwriting obligations. [Footnote 9] The chanrobles.com-red
The Pharmacy Agreements thus do not involve any underwriting or spreading of risk, but are merely arrangements for the purchase of goods and services by Blue Shield. By agreeing with pharmacies on the maximum prices it will pay for drugs, Blue Shield effectively reduces the total amount it must pay to its policyholders. The Agreements thus enable Blue Shield to minimize costs and maximize profits. Such cost-savings arrangements may well be sound business practice, and may well inure ultimately to the benefit of policyholders in the form of lower premiums, but they are not the "business of insurance." [Footnote 12] chanrobles.com-red
At the most, the petitioners have demonstrated that the Pharmacy Agreements result in cost savings to Blue Shield which may be reflected in lower premiums if the cost savings are passed on to policyholders. But, in that sense, every business decision made by an insurance company has some impact on its reliability, its ratemaking, and its status as a chanrobles.com-red
The primary concern of Congress in the wake of that decision was in enacting legislation that would ensure that chanrobles.com-red
the States would continue to have the ability to tax and regulate the business of insurance. [Footnote 16] This concern is reflected in §§ 1 and 2(a) of the Act, [Footnote 17] neither of which is involved in this case. A secondary concern was the applicability of the antitrust laws to the insurance industry. [Footnote 18] Months before chanrobles.com-red
Congress, however, rejected this approach. [Footnote 21] Instead of a total exemption, Congress provided in § 2(b) that the antitrust laws "shall be applicable" unless the activities of insurance companies are the business of insurance and regulated by state law. Moreover, under § 3(b), the Sherman Act was made applicable in any event to acts of boycott, coercion, or intimidation. To allow the States time to adjust to the applicability of the antitrust laws to the insurance industry, chanrobles.com-red
References to the meaning of the "business of insurance" in the legislative history of the McCarran-Ferguson Act chanrobles.com-red
The bill proposed by the NAIC enumerated seven specific practices to which the Sherman Act was not to apply. [Footnote 28] Each of the specific practices involved intra-industry cooperative or concerted activities. None involved contractual arrangements that insurance companies might make with providers of goods or services to reduce the costs to the companies of meeting their underwriting obligations to their policyholders. [Footnote 29] chanrobles.com-red
91 Cong.Rec. 1481 (1945). The consistent theme of the remarks of other Senators also indicated a primary concern that cooperative ratemaking would be protected from the antitrust laws. Id. at 1444 and 1485 (remarks of Sen. O'Mahoney); 485 (remarks of Sen. Taft). [Footnote 30] President Roosevelt, in signing the bill, also emphasized chanrobles.com-red
S. Rosenman, The Public Papers and Addresses of Franklin D. Roosevelt, 1944-1945 Vol., p. 587 (1950). [Footnote 31] There is not the slightest suggestion in the legislative history that Congress in any way contemplated that arrangements such as the Pharmacy Agreements in this case, which involve the mass purchase of goods and services from entities outside the insurance industry, are the "business of insurance." [Footnote 32] chanrobles.com-red
At the time of the enactment of the McCarran-Ferguson Act, corporations organized for the purpose of providing their chanrobles.com-red
members with medical services and hospitalization were not considered to be engaged in the insurance business at all, and thus were not subject to state insurance laws. E.g., Jordan v. Group Health Assn., 71 App.D.C. 38, 107 F.2d 239 (1939); California Physicians' Service v. Garrison, 155 P.2d 885 (Cal.App. 1945), aff'd., 28 Cal.2d 790, 172 P.2d 4 (1946); Commissioner of Banking Insurance v. Community Health Service, 129 N.J.L. 427, 30 A.2d 44 (1943); State ex rel. Fishback v. Universal Service Agency, 87 Wash. 413, 151 P. 768 (1915). [Footnote 33] Similarly, States which regulated prepaid health service plans at the time the Act was enacted either exempted them from the requirements of the state insurance code or provided that they "shall not be construed as being engaged in the business of insurance" under state law. Rorem, Enabling Legislation for Non-Profit Hospital Service Plans, 6 Law & Contemp.Prob. 528, 534 (1939). [Footnote 34] Since the legislative chanrobles.com-red
The Jordan v. Group Health Assn. case, supra, is illustrative of the contemporary view of health care plans. Group Health was organized as a nonprofit corporation to provide various medical services and supplies to members who paid a fixed annual premium. To implement the plan, Group Health contracted with physicians, hospitals, and others, to provide medical services. These groups were compensated exclusively by Group Health. By contracting with the various medical groups directly, Group Health was able to obtain chanrobles.com-red
71 App.D.C. at 44, 46, 107 F.2d 245, 247. (Emphasis supplied in part; footnotes omitted.) [Footnote 35] chanrobles.com-red
Indeed, Blue Cross and Blue Shield organizations themselves have historically taken the position that they are not insurance companies in seeking to avoid state regulation and taxation. [Footnote 36] It is thus difficult to assume that, contrary to this historical position and a majority of court decisions, Congress in 1945 understood that advance-payment medical chanrobles.com-red
benefits plans are the "business of insurance." [Footnote 37] It is next to impossible to assume that Congress could have thought that agreements (even by insurance companies) which provide for the purchase of goods and services from third parties at a set price are within the meaning of that phrase. [Footnote 38] chanrobles.com-red
Application of this principle is particularly appropriate in this case because the Pharmacy Agreements involve parties wholly outside the insurance industry. In analogous contexts, the Court has held that an exempt entity forfeits antitrust exemption by acting in concert with nonexempt parties. The Court has held, for example, that an exempt agricultural cooperative under the Capper-Volstead Act loses its exemption if it conspires with nonexempt parties. Case-Swayne Co. v. Sunkist Growers, Inc., 389 U. S. 384; United States v. Borden Co., 308 U. S. 188. Similarly, the Court has consistently stated that a union forfeits its exemption from the antitrust laws if it agrees with one set of employers to impose a wage scale on other bargaining units. 401 U. S. 313; Mine Workers v. Pennington,@ 381 U. S. 657, 381 U. S. 665-666. [Footnote 39]
If agreements between an insurer and retail pharmacists are the "business of insurance" because they reduce the insurer's costs, then so are all other agreements insurers may make to keep their costs under control -- whether with automobile body repair shops or landlords. [Footnote 40] Such agreements chanrobles.com-red
Since the leading case of @ 75 U. S. 183, it had been understood that "[i]ssuing a policy of insurance is not a transaction of commerce."
The McCarran-Ferguson Act, 59 Stat. 33, as amended, 15 U.S.C. §§ 1011-1015, renders the federal antitrust laws inapplicable to the "business of insurance" to the extent such business is regulated by state law and is not subject to the "boycott" exception stated in § 1013(b). [Footnote 2/1] The single question presented by this case is whether the "business of insurance" chanrobles.com-red
SEC v. National Securities, Inc., 393 U. S. 453, 393 U. S. 459 (1969), recognized that the legislative history of the McCarran-Ferguson Act sheds little light on the meaning of the words "business of insurance." See S.Rep. No. 20, 79th Cong., 1st Sess. (1945); H.R.Rep. No. 143, 79th Cong., 1st Sess. (1945). But while the legislative history is largely silent on the matter, [Footnote 2/2] it does indicate that Congress deliberately chose chanrobles.com-red
to phrase the exemption broadly. Congress had draft bills before it which would have limited the "business of insurance" to a narrow range of specified insurance company practices, but chose instead the more general language which ultimately became law. [Footnote 2/3] chanrobles.com-red
"The McCarran-Ferguson Act was passed in reaction to this Court's decision in United States v. South-Eastern Underwriters Assn., 322 U. S. 533 (1944). Prior to that decision, it had been assumed, in the language of the leading case, that '[i]ssuing a policy of insurance is not a transaction of commerce.' 75 U. S. 183 (1869). Consequently, regulation of insurance transactions was thought to rest exclusively with the States. In South-Eastern Underwriters, this Court held that insurance transactions were subject to federal regulation under the Commerce Clause, and that the antitrust laws, in particular, were applicable to them. Congress reacted quickly . . . [, being] concerned about the inroads the Court's decision might make on the tradition of state regulation of insurance. The McCarran-Ferguson Act was the product of this concern. Its purpose was stated quite clearly in its first section; Congress declared that 'the continued regulation and taxation by the several States of the business of insurance is in the public interest.' 59 Stat. 33 (1945), 15 U.S.C. § 1011. As this Court said shortly afterward, '[o]bviously Congress' purpose was broadly to give support to the existing and future state systems for regulating and taxing the business of insurance.' Prudential Insurance Co. v. Benjamin,@ 328 U. S. 408, 328 U. S. 429 (1946)."
393 U.S. at 393 U. S. 458-459. See also St. Paul Fire Marine Ins. Co. v. Barry, 438 U. S. 531, 438 U. S. 538-539 (1978); 90 Cong.Rec. 6524 (1944) (Cong. Walter) chanrobles.com-red
Since continuation of state regulation as it existed before South-Eastern was Congress' goal, [Footnote 2/4] evidence of what States chanrobles.com-red
SEC v. Variable Annuity Life Ins. Co., 359 U. S. 65, 359 U. S. 71 (1959). It is thus logical to suppose that, if elements common to the ordinary understanding of "insurance" are present, new forms of the business should constitute the "business of insurance" for purposes of the McCarran-Ferguson Act. The determination of the scope of the Act, therefore, involves both an analysis of the proximity between the challenged transactions and those well recognized as elements of "insurance," and an examination of the historical setting of the Act. On both counts, Blue Shield's Pharmacy Agreements constitute the "business of insurance." chanrobles.com-red
The hospital service benefit concept originated in Texas in chanrobles.com-red
Moreover, regulation of the service benefit plans was a part of the system of state regulation of insurance that the McCarran-Ferguson Act was designed to preserve. Led by New York in 1934, 24 States passed enabling Acts by 1939 which, while relieving the plans of certain reserve requirements and tax obligations, specifically subjected service benefit plans to the supervision and control of state departments of insurance. [Footnote 2/6] See Rorem, Enabling Legislation for Non-Profit Hospital Service Plans 6 Law & Contemp.Prob. 528, 531, 534 (1939) (hereinafter Rorem II); N. Sinai, O. Anderson, & M. Dollar, Health Insurance in the United States chanrobles.com-red
48-49 (1946) (hereinafter Sinai); Comment, Group Health Plans: Some Legal and Economic Aspects, 53 Yale L.J. 162, 174 (1943). Another 16 States apparently limited the issuance of hospitalization insurance to stock and mutual insurance companies. Nine acted on the premise that the plans were not "insurance," and authorized operation under general corporation laws, exempt from reserve requirements. Rorem II, p. 532. By the time the McCarran-Ferguson Act was passed, 35 States had enabling legislation. [Footnote 2/7] During this period, the National Association of Insurance Commissioners (NAIC), the organization of state insurance directors which played a major role in drafting the McCarran-Ferguson Act, [Footnote 2/8] was also drafting model state enabling legislation to govern service benefit health plans. Proceedings of the NAIC, 75th Sess., 226 (1944); id. 76th Sess., 250 (1945). [Footnote 2/9] chanrobles.com-red
Thus, when the McCarran-Ferguson Act became law, service benefit plans similar to the Blue Shield plan at issue here were a widespread and well recognized form of insurance, subject to regulation in most of the States. Congress itself treated these important programs as insurance. In 1939, Congress adopted an enabling Act incorporating a hospitalization benefits plan in the District of Columbia, with supervisory chanrobles.com-red
The next question is whether at least some contracts with third parties to procure delivery of benefits to Blue Shield's insureds would also constitute the "business of insurance." Such contracts, like those between Blue Shield and the druggists in this case, are known as "provider agreements." The Court, adopting the view of the Solicitor General, today holds that no provider agreements can be considered part of the "business of insurance." [Footnote 2/11] It contends that the "underwriting or spreading of risk [is] an indispensable characteristic of chanrobles.com-red
But the Court's attempt to limit its concession to horizontal transactions still conflicts with the legislative history. Compelling evidence is the fact that Congress actually rejected a proposed bill to limit the exemption to agreements between chanrobles.com-red
insurance companies. S. 12, 79th Cong., 1st Sess. (1945). See 440 U. S. 535 (1944), were the object of discussion in the House, 90 Cong.Rec. 6538 (1944) (remarks of Cong. Celler), and were expressly included as part of the "business of insurance" in an early draft of the Act, id. at A4406 (NAIC bill, § 4(b)(5)). Again, the Court concedes that such transactions, between insurers and agents, might fall within the "business of insurance," despite the inconsistency with the Court's own theory. Ante at 440 U. S. 224-225, n. 32. [Footnote 2/13]
Id. The Association also proposed, in the year McCarran-Ferguson passed, a model state enabling Act requiring "full approval of . . . contracts with hospitals . . . by the insurance commissioner." Proceedings of the NAIC, 76th Sess., 250 chanrobles.com-red
Logic compels the same conclusion. Some kind of provider agreement becomes a necessity if a service benefits insurer is to meet its obligations to the insureds. The policy before us in this case, for example, promises payment of benefits in drugs. Thus, some arrangement must be made to provide those drugs for subscribers. [Footnote 2/15] Such an arrangement obtains chanrobles.com-red
The Congress that passed McCarran-Ferguson was composed of neither insurance experts nor dictionary editors. Rather than use the technical term "underwriting" to express its meaning, Congress chose "the business of insurance," a common sense term connoting not only risk underwriting but contracts closely related thereto. [Footnote 2/16] Since Congress knew of service benefit policies, and viewed them as insurance, it would strain common sense to suppose Congress viewed contracts chanrobles.com-red
Respondents' argument is directly contradicted by history. The service benefit plans available when the McCarran-Ferguson Act was passed actually "fixed" more of the payment to their participating providers than does the plan here, which "fixes" only the markup. Those early plans usually paid established and equal amounts to their participating hospitals, rather than paying whatever each hospital charged. Rorem I, p. 64. Moreover, under the typical state enabling Act, those chanrobles.com-red
While this reason for excluding the Pharmacy Agreements from the circle of exempt provider agreements is unconvincing, there are substantial reasons, in addition to history, for including them within that circle. First, it is clear that the contractual arrangement utilized by Blue Shield affects its chanrobles.com-red
costs, and thus affects both the setting of rates and the insurer's reliability. This is definitely a factor relevant to the determination of whether a transaction is within the "business of insurance." See SEC v. National Securities, Inc., 393 U.S. at 393 U. S. 460. See also Proctor v. State Farm Mutual Automobile Ins. Co., 182 U.S.App.D.C. 264, 561 F.2d 262 (1977). True, that factor alone is not determinative, for, as argued by the Court, innumerable agreements, including the lease on the insurance company's offices, affect cost. This contract, however, has more than a mere incidental connection to the policy and premium. It is a direct arrangement to provide the very goods and services whose purchase is the risk assumed in the insurance policy. It is therefore integral to the insurer's rate-setting process, as the correlation between rates and drug prices in a drug benefits policy is necessarily high. Moreover, the ability of state insurance commissioners to regulate rates, an important concern of the Act, is measurably enhanced by their ability to control the formulas by which insurers reimburse providers. [Footnote 2/18] The same is true of state efforts to ensure that plans are financially reliable. See Travelers Ins. Co. v. Blue Cross of Western Pennsylvania, 481 F.2d 80, 83 n. 9 (CA3 1973) (quoting the Pennsylvania Insurance Commissioner). This close nexus between the Pharmacy Agreements and both the rates and fiscal reliability of Blue Shield's plan speaks strongly for their inclusion within the "business of insurance." See generally Proctor v. State chanrobles.com-red
Farm Mutual Automobile Ins. Co., supra, at 271-272, 561 F.2d 269-270.
Another reason, in addition to this nexus to basic insurance elements, also supports the conclusion that fixed-price provider agreements are the "business of insurance." Such agreements themselves perform an important insurance function. It may be true, as the Court contends, that conventional notions of insurance focus on the underwriting of risk. But they also include efforts to reduce the unpredictable aspects of the risks assumed. Traditional plans achieve this end by setting ceilings on cash payments or utilizing large deductibles. R. Mehr & E. Cammack, Principles of Insurance 222 (6th ed. 1976). Even if the insurer cannot know how often a policyholder might become ill, it can know the extent of its exposure in the event of illness. The actuarial uncertainty, therefore, is greatly reduced. A fixed-price provider agreement attempts to reach the same result by contracting in advance for a price, rather than agreeing to pay as the market fluctuates. The agreement on price at least minimizes the variance of the "payoff" variable, even if the probability of its occurrence remains an unknown. Indeed, if examined carefully, this function comes within the latter half of the definition of "underwriting" offered by the Solicitor General: "spread[ing] risk more widely or reduc[ing] the role of chance events." See 440 U. S. 12, supra. Of course, the Pharmacy Agreements in this case do not totally control "the role of chance" in drug prices, since acquisition costs may fluctuate even if "markup" is fixed, but they are at least an attempt to reduce the role of chance to manageable proportions. [Footnote 2/19]
Moreover, a service benefit plan which "pay[s] the cost . . . whatever it might be," as hypothesized by the Court of chanrobles.com-red
Appeals, 556 F.2d 1381, would run grave risks of bankruptcy. Since it would expose the insurer to unknown liability, it would measurably increase the probability that an incorrect assessment of exposure would occur. This could lead to a failure to cover actual losses with premiums. Respondents argue that this fiscal reliability problem could be solved by placing a dollar limit. on benefits. But such a plan would be almost indistinguishable from a cash indemnity policy. It would not be the "full service regardless of price" plan for which the policyholders bargained. [Footnote 2/20] The Pharmacy Agreements are thus "other activities of insurance companies relate[d] so closely to their status as reliable insurers that they too must be placed in the same class." SEC v. National Securities, Inc., supra at 393 U. S. 460.
The process of deciding what is and is not the "business of insurance" is inherently a case-by-case problem. It is true that the conclusion advocated here carries with it line-drawing problems. That is necessarily so once the provider agreement line is crossed by holding some to be within the "business." But that is a line which history and logic compel me to cross. I would hold that the concept of a provider agreement for benefits promised in the policy is within the "business of insurance" because some form of provider agreement is necessary to fulfill the obligations of a service benefit policy. I would hold that these provider agreements, Blue Shield's Pharmacy Agreements, are protected because they (1) directly obtain the very benefits promised in the policy, [Footnote 2/21] and therefore chanrobles.com-red
I would not suggest, however, that all provider agreements come within the McCarran-Ferguson Act proviso. Given the facts found by the District Court upon summary judgment, this is not a case where the petitioner pharmacies themselves conspired to exclude others from the market, and either pressured Blue Shield to go along or were voluntarily joined by the insurer. See also Government Brief 13 n. 6. Such an agreement among pharmacies, itself neither necessary nor related to the insurer's effort to satisfy its obligations to its policyholders, would be outside the "business of insurance." An insurance company cannot immunize an illegal conspiracy by joining it. Cf. Parker v. Brown, 317 U. S. 341, 317 U. S. 351-352 chanrobles.com-red
(1943). Moreover, since, in this case, the Blue Shield plan was offered to all San Antonio pharmacies, and was, in fact, agreed to by at least 12, I am not called upon to decide whether an exclusive arrangement with a single provider would be so tenuously related to providing policyholder benefits as to be beyond the exemption's protection. See generally Proctor v. State Farm Mutual Automobile Ins. Co., 182 U.S.App.D.C. at 270 n. 10, 561 F.2d 268 n. 10. [Footnote 2/24]
Finally, the conclusion that Blue Shield's Pharmacy Agreements should be held within the "business of insurance" [Footnote 2/25] chanrobles.com-red
does not, alone, establish whether the agreements enjoy an exemption from the antitrust laws. To be entitled to an exemption, petitioners still would have to demonstrate that the transactions are, in fact, truly regulated by the State, 15 U.S.C. § 1012(b), and that they do not fall within the "boycott" exception of 15 U.S.C. § 1013(b). The District Court held for petitioners on both issues. Neither issue was reached by the Court of Appeals, however, in light of its holding that the contracts were not the "business of insurance." Accordingly, chanrobles.com-red
See Proctor v. State Farm Mutual Automobile Ins. Co., 182 U.S.App.D.C. 264, 561 F.2d 262 (1977), aff'g 406 F.Supp. 27 (DC 1975), cert. pending, No. 77-580; Doctors, Inc. v. Blue Cross of Greater Philadelphia, 557 F.2d 1001 (CA3 1976), aff'g 431 F.Supp. 5 (ED Pa.1975); Frankford Hospital v. Blue Cross of Greater Philadelphia, 554 F.2d 1253 (CA3 1976), aff'g 417 F.Supp. 1104 (ED Pa.), cert. denied, 434 U.S. 860 (1977); Anderson v. Medical Service of District of Columbia, 551 F.2d 304 (CA4 1977), aff'g 1976-1 Trade Cases ¦ 60,884 (ED Va); Travelers Ins. Co. v. Blue Cross of Western Pennsylvania, 481 F.2d 80 (CA3), aff'g 361 F.Supp. 774 (WD Pa.1972), cert. denied, 414 U.S. 1093 (1973).
The Court argues, ante at 440 U. S. 232 n. 40, that provider agreements may have anticompetitive consequences which could lead to escalation of health care costs. The argument is not without force, but I must note that the very purpose of an antitrust exemption is to protect anticompetitive conduct. The argument, therefore, is better directed to the legislature, which has the power to modify or repeal McCarran-Ferguson, rather than to this Court. Referral to the legislators is particularly appropriate in this case, as the policy aspects may not be as one-sided as those painted by the Court. There is authority for the proposition that provider agreements, far from increasing costs, constitute an effective means for reduction in health care prices and premiums. Council on Wage and Price Stability, Employee Health Care Benefits: Labor and Management Sponsored Innovations in Controlling Cost, 41 Fed.Reg. 40298, 40305 (1976). And the argument that "there is little incentive on the part of Blue Shield to minimize costs, since it is in the interest of the providers to set fee schedules at the highest possible level" overlooks the vital consideration that many, if not most, of these plans originate in collective bargaining agreements where "the consumer power and negotiating expertise of organized labor" combine to "reduce the unit price of health services." Ibid. Control over provider agreements by state insurance commissioners constitutes a second "incentive" operating in the same direction. See 440 U. S. 18, supra. Whether or not the potential anticompetitive impact of McCarran-Ferguson outweighs these positive effects on health care costs is a judgment properly to be made by Congress.