What is McCarran-Ferguson

This bill will likely get all sorts of media attention in the next week and month. That's because Democrats are now thinking about repealing it.

The exemption, known as McCarran-Ferguson, cedes regulatory control of the industry, on the business side, to individual states. Since health insurers are already heavily regulated at the state level, its repeal would have a much broader impact on property and casualty insurers — a group that has also found itself in Congress’s cross-hairs recently.

Schumer isn’t the first member of his party to push for this repeal. Chairmen of the Senate and House Judiciary committees both introduced legislation already this year to eliminate the exemption or gut it substantially.

McCarran/Ferguson is something I have referenced from time to time but never mentioned by name before and that's my oversight. Whenever I have mentioned that health insurance providers enjoy "regional monopolies" that comes about in part because of this law.

The McCarran-Ferguson Act, 15 U.S.C. § 1011, is a United States federal law that allows state law to regulate the business of insurance without federal government interference. The McCarran-Ferguson Act was passed by Congress in 1945 after the Supreme Court ruled in United States v. South-Eastern Underwriters Association that insurance could be regulated by the federal government via the Commerce Clause (the overturned case stated that the federal government had this power), or, in other words, that insurance was interstate commerce.

The act did a few things: 1)it left regulation of insurance to the states and 2)it exempted insurance from anti trust in most cases. As a result, states regulate health insurance within their borders AND in most states one insurance company dominates.

I have often referenced this act as one of the problems in health care and health insurance specifically. In fact, its repeal was one of my pillars for health care reform. Now, the cynical view, the view that Politico (in the article linked) implies, is that the repeal of McCarran/Ferguson is only being discussed because of the report that was put out by AHIP written by Price Waterhouse Coopers earlier in the week. That report said that the Baucus plan would actually add even more to health insurance premiums. I don't know if this is true and I don't care.

Everyone agrees that health insurance premiums are rising out of control. It's also true that health insurance is unique in three ways 1)health insurance companies can be monopolistic 2)it can't be sold across state lines and 3)it's bought through the employer mostly. Simple logic says that maybe the problem are the three things that make it unique.

Now, both Republicans and Democrats have paid lip service to choice and competition. So, I have a suggestion for bi partisan health insurance reform. How about if Republicans and Democrats come together and pass health insurance reform that 1) repeals McCarran/Ferguson and 2) allows insurance to be sold across state lines. That would increase choice and competition and its price tag is a big fat zero.

It's important to note that repealing McCarran/Ferguson isn't without unintended consequences. By repealing McCarran/Ferguson what it really does is allow the federal government to regulate insurance along with state governments. You can see the potential regulatory nightmare of that scenario. So, in order for such a compromise to work it must be implemented to create competition and not merely to punish the insurance companies. One way is to allow the federal government to regulate anti trust and give the states the power to regulate all other aspects of insurance. Either way, a debate on McCarran/Ferguson could lead to real and bipartisan reform that benefits society if both parties are really trying to fix the system.