Senate Judiciary Committee Reviews Insurance Antitrust RepealPosted 4/4/2007
By Robert L. Redding, Jr.
In a U.S. Senate Judiciary Committee hearing where the title of the hearing questions whether insurance companies' antitrust immunity is "good for consumers," Sen. Patrick Leahy, D-Vt., committee chairman, opened the hearing with this comment: "The antitrust immunity for the insurance industry, contained in the 1945 McCarran-Ferguson Act, raises serious concerns with me. Insurance practices affect all of us. If the antitrust immunity is used in a way that distorts the market - that leads to higher prices and poorer service - consumers throughout the country can be harmed."
A group of senators that included Leahy, Arlen Specter, R-Pa.; Trent Lott, R-Miss.; Harry Reid, D-Nev.; and Mary Landrieu, D-La.,; introduced S. 618, the Insurance Industry Competition Act, last month. This group should not be taken lightly. Specter is the ranking Republican on the Judiciary Committee, Lott is the Senate minority whip, and Reid is the Senate majority leader. Landrieu brings firsthand experience with insurance companies because of her home state of Louisiana and hometown of New Orleans and its ongoing Hurricane Katrina problems. The bill has been referred to the Senate Judiciary Committee for jurisdictional purposes.
S. 618 has companion legislation in the U.S. House of Representatives, H.R. 1081. The House bill was introduced by Reps. Peter DeFazio, D-Ore., and Gene Taylor, D-Miss. This bill has been referred to the House Judiciary Committee, Energy and Commerce Committee and the Financial Services Committee. Despite multiple insurance reform hearings in the 109th Congress in both the House and Senate, the process begins again with new committee chairmen. It is important to note that to date, committees other than the Senate Judiciary Committee have not begun hearings. In the last Congress, the Senate Banking Committee and the House Financial Services Committee held prominent positions in the insurance reform debate. Insurers will most likely try to obtain additional committee jurisdiction for S. 618, such as the Senate Banking Committee. This would be a friendlier forum and an additional burden to the legislation moving forward.
The House Financial Services Committee has focused much of its efforts this year on housing issues. In the 109th Congress, Reps. Mike Oxley, R-Ohio, then chairman of the committee, and Richard Baker, R-La., chairman of the Insurance Subcommittee, spent a great deal of the committee's time on insurance reform.
The Senate McCarran-Ferguson hearing held last month heard from Lott and Landrieu in addition to these other individuals:
Testimony from the Consumer Federation, insurers and the insurance commissioners was similar to the hearings from the last Congress. Homan's testimony focused on the specific issues relative to the insured's experiences as a result of Katrina and how insurers handled their customers.
Voss continued to protect the rights of state insurance commissioners to regulate the insurance industry. Highlighting federal options for regulation already in place, she fell short with federal policymakers supporting the legislation who are very familiar with how much the states failed in regulating insurers.
During the hearing, Voss said, "Let me be direct: the NAIC is concerned that outright repeal risks ending certain pro-competitive practices when the real culprits are bad actors who engage in alleged unscrupulous anti-competitive practices. NAIC respectfully asks Congress to carefully evaluate the unintended consequences for consumers and markets from outright repeal of the limited antitrust exemption for the business of insurance."
Voss's references to federal regulation options already in place was interesting considering the separate hearing on antitrust regulation held by the Senate Judiciary Committee's Antitrust, Competition Policy and Consumer Rights Subcommittee. Hearing testimony from the chairman of the Federal Trade Commission and the U.S. Justice Department showed it was quite evident that the insurance industry is not on the radar for the federal regulators. The FTC highlighted consumer-friendly tools in place to protect consumers and small businesses including mini FTC Web sites for specific industry sectors. Property and casualty insurance was not one of the sectors discussed. The Justice Department also demonstrated a dearth of interest in the insurance arena. The Automotive Service Association (ASA) has met both with the FTC and the Justice Department on multiple occasions in an exhaustive attempt to find non-legislative, federal regulatory solutions without success.
It is important for repairers to understand the continued role the fallout from Hurricane Katrina is having on the insurance reform process. When Congress last considered insurance reform in the mid-1990s, the stimulus for reform at the level of Katrina was not in place. Like the 1990s, the Democrats control both the House and Senate but the insurance reform legislation was not successful in the last decade. With the Katrina issues still in the public arena, there may be enough energy to move repeal legislation.
What happens next? The congressional mandate for the federal Antitrust Modernization Commission requires a report in April. Some speculate this could impact the McCarran-Ferguson repeal debate. ASA is skeptical of the long-term impact of the Commission's report on this specific legislation. The small amount of time the Commission spent on this specific piece may be indicative of the McCarran role in the final document.
ASA does anticipate the Senate Judiciary Committee moving forward with the legislation. Barring additional committee referrals in the Senate, one can fairly anticipate a full blown insurance reform debate on the floor of the Senate in 2007.
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