Another Perspective on the Antitrust Exemption for the Insurance Industry
Health economist Austin Frakt and antitrust lawyer Ian Crosby argue in favor of the antitrust exemption for the insurance industry. In short, repealing it doesn't simply make insurers weaker. It makes them weaker vis-a-vis providers, and that may not be a good thing:
How to balance the power of insurers and providers is far from simple. Many have pointed to the alleged dominant market position of insurers as a substantial source of high health care costs. However, the health economics literature supports the notion that recent increased market power of insurers does not lead toward monopolistic pricing, but rather it provides a counter-balance to the power held by hospitals and provider groups.
Moreover, insurance companies are partially exempt from federal antitrust law for an important reason: so they can share rate-making data. This function actually benefits small insurers who would not otherwise have sufficient data to properly adjust premiums. Paradoxically, removing the legal cover for data sharing would harm small insurers more than large ones.
All this suggests that repealing the federal antitrust exemption for insurers may be misguided. Though the insurance antitrust exemption is a popular whipping boy for Democratic politicians, it is by no means clear that repealing it is practical or beneficial to consumers. Instead, antitrust law might better aid the cause of health care reform by first focusing on providers. While a few proposed hospital mergers have been blocked recently, it follows a long period of hospital consolidation. ...
All this suggests a confused focus in Washington, though one consistent with populist sentiment. Insurers, rightly or wrongly, are the scapegoat and providers (with the exception of the drug industry) are viewed more favorably. There are clearly insurance reforms worth implementing, but weakening insurers’ market power while strengthening that of providers may not be one of them.
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