Congressman Lamar Smith, Twenty First Congressional
District of Texas
Ranking Member Smith: 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. By inviting federal intervention, this bill might create a dual regulatory system that only confuses the health insurance and medical malpractice industry.
It’s doubtful that this legislation will do anything beneficial for the customer. And I certainly do not believe one hearing on the subject and no subcommittee markup is an adequate basis on which to make judgments about the effects of this bill on such an important topic.
It’s possible that H.R. 3596 will be folded into a larger health care bill. To address that subject, and one under our jurisdiction, it’s better that we focus our attention on frivolous lawsuits against medical personnel, which 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.
That’s why some states—including my home state of Texas—enacted tort reform to limit the amount of excessive damages awarded in frivolous suits. The result? Insurance premiums have fallen 30 to 40% and the availability of medical care has expanded. That means Texans pay less to have more options and better health care.
In closing, I believe we are rushing consideration of H.R. 3596.
