Antitrust Modernization Commission Holds McCarran-Ferguson Act Hearing
By Robert L. Redding, Jr.
The 110th Congress will begin in January 2007. Insurance reform efforts will continue, but it will be a long process.
The Antitrust Modernization Commission held a hearing to review the McCarran-Ferguson Act in its effort to evaluate antitrust immunities and exemptions. This follows an active two years on Capitol Hill of hearings addressing insurance reform. The U.S. House of Representatives Financial Services Committee has been the most aggressive in trying to address concerns with the current state of insurance regulation.
The current chairman of the House Committee is U.S. Rep. Michael Oxley, R-Ohio. If the Republicans hold the House, it is anticipated that either U.S. Rep. Richard Baker, R-La., or U.S. Rep. Spencer Bachus, R-Ala., will chair the committee. Oxley is retiring from the Congress. U.S. Rep. Barney Frank, D-Mass., is the ranking Democrat on the committee. Baker chairs the Capital Markets, Insurance Subcommittee and led the early insurance reform effort.
U.S. Senate Banking Committee Chairman Richard Shelby, R-Ala., held hearings on insurance reform and U.S. Senate Judiciary Chair Arlen Specter, R-Penn., held the first hearing on the McCarran-Ferguson Act for his committee since 1989 during the 109th Congress. The ranking Democrat on the Senate Judiciary Committee, U.S. Sen. Patrick Leahy, D-Vt., issued a statement this past summer regarding McCarran. Leahy said, "As far back as 1945, the insurance industry has operated largely beyond the reach of federal antitrust laws. The McCarran-Ferguson Act created this exemption, and so long as the insurance business is regulated by the states, there is no room for federal oversight. Perhaps this was well-advised legislation at the time, and perhaps it served worthwhile policy. But times have changed."
The Antitrust Modernization Commission (AMC) was created by an act of Congress in 2002. The Commission consists of 12 members, four appointed by the president, four by the leadership in the Senate and four by the leadership in the House of Representatives. The Commission's charge is to:
- Examine whether the need exists to modernize the antitrust laws and to identify and study related issues;
- Solicit views of all parties concerned with the operation of the antitrust laws;
- Evaluate the advisability of proposals and current arrangements with respect to issues so identified;
- Prepare and submit to Congress and the president a report.
Witnesses for the Oct. 18 hearing included Michael McRaith, National Association of Insurance Commissioners (NAIC); J. Stephen Zielezienski, American Insurance Association (AIA); Julie Gackenbach, National Association of Mutual Insurance Companies; Jay Angoff, of counsel, Roger Brown & Associates; and Theodore Voorhees Jr., Section of Antitrust Law, American Bar Association. Testimony for these AMC witnesses can be found on the ASA legislative Web site, www.TakingThe Hill.com.
The American Bar Association's (ABA) witness outlined a number of "safe harbor" exemptions that the ABA states are "shown not to restrain competition." In addition, the ABA proposed that the safe harbor provisions make clear that much of the state insurance regulatory process is maintained. The Automotive Service Association (ASA) and its coalition partners faced many of these same arguments in the McCarran-Ferguson Act reform debate in 1994. Then U.S. House Judiciary Committee Chairman Jack Brooks, D-Texas, sought a repeal and later, reform of McCarran-Ferguson. Then U.S. Sen. Howard Metzenbaum, D-Ohio, was also an advocate of insurance reform during this same period. As the repeal effort began to weaken, exemptions were inserted in the legislation.
The AIA testified that it had supported the safe harbor exemptions in the past but "reject that option now unless accompanied by fundamental changes in state regulation." AIA opposes a repeal of the McCarran-Ferguson Act. In its AMC testimony, AIA representatives said: "Market-driven optional federal charter legislation is the best tool to eliminate these dysfunctional elements of the current regulatory system. The National Insurance Act of 2006, now introduced in both the Senate and the House of Representatives, would allow both life insurers, property-casualty insurers, and reinsurers - as well as insurance agents and brokers - to opt into a federal regulatory system."
Collision repairers should note the discussion of "safe harbor" exemptions in both the ABA testimony and that of the American Insurance Association. These and other proposed exemptions to any repeal of McCarran-Ferguson certainly limit the benefits of insurance reform for consumers and repairers. The November elections will have a tremendous impact on the degree of insurance reform once Congress returns.
The National Association of Insurance Commissioners continued its support for the status quo, testifying: "The NAIC believes that the limited federal antitrust exemption for the 'business of insurance' has worked well for decades to maintain a vigorous and competitive marketplace."
The 110th Congress will begin in January 2007. Insurance reform will be a long process. Much of the hearing work has been done with several legislative proposals in play. The elections will determine if the number of serious reform alternatives increases. Whatever the election outcome, there will be efforts to expand reform beyond a limited, voluntary federal charter for insurers.
ASA supports repeal of the McCarran-Ferguson Act.
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