How Ending Health Insurance Antitrust Law Should Help Consumers


The U.S. House of Representatives first passed the Competitive Health Insurance Reform Act (CHIRA) back in 2017 but failed to convince the Senate that take up the bill. Now they have passed it again, and chances are the Senate will look at it this time. If it passes and the president signs the bill, the legislation should help consumers quite a bit.

Congress acting to pass CHIRA is just the latest in a slew of government actions that could have a significant impact on health insurance moving forward. Earlier in 2020, a U.S. district judge put a halt to an HHS rule that would have allowed insurance companies and healthcare providers to define a patient’s sex based exclusively on biology. Now the HHS is working on revamping that rule to satisfy the court ruling.

What does this all mean for insurance companies and consumers? The impacts of the HHS rule should be minimal for all practical purposes. However, the CHIRA’s potential is huge. If it is signed into law, nearly every consumer will directly feel its impact.

The Impetus for CHIRA

Congress took up the CHIRA due to a 70+-year-old law passed by Congress in 1945. During the prior year, the U.S. Supreme Court ruled that health insurance qualified as interstate commerce subject to antitrust laws according to the Sherman Act. The insurance industry quickly got together and convinced Congress to pass the McCarron-Ferguson Act of 1945, which carved out an exemption for health insurance.

The net effect of McCarron-Ferguson is that health insurance companies have been shielded from antitrust laws for more than 70 years. The CHIRA strips that exemption, thus forcing health insurers to follow the same antitrust laws every other company must follow.

Its Impact on the Market

BenefitMall, a Dallas-based general agency through which brokers obtain insurance benefits for employers, says that ending the insurance industry exemption will prevent carriers for working together to set rates across the board. It will force them to compete for both provider networks and consumers.

Assuming everything goes as Congress expects, here are some of the changes that are likely to occur:

  1. Better Reimbursement Rates for Providers

Under the current system, healthcare providers are held hostage to insurance company reimbursement rates. For example, let us say a doctor needs to charge $100 for an office visit to pay his expenses and cover his profit. An insurance carrier might only offer a reimbursement rate of 75%. In order to get that full $100, the doctor has to raise his rate so that the insurance company’s reimbursement pays enough.

Competition will give healthcare providers the option to drop an insurance provider who doesn’t offer high enough reimbursements. It will also invite insurance carriers to compete against one another by offering higher reimbursements in order to grab a larger market share.

  1. Better Rates for Consumers

Eliminating the antitrust exemption will open the door to insurance carriers trying to beat one another on price. All it will take is one carrier to drop premiums and the rest will follow in due course. Consumers should see the same kind of competition in health insurance as they see in auto insurance.

  1. Lower Costs Across the Board

Perhaps most important is the likelihood that the natural competition between carriers will reduce healthcare costs across the board. Once providers are no longer held prisoner by reimbursement rates, they will be able to adjust up and down in accordance with market conditions. The end result should be cheaper visits, cheaper diagnostic tests, cheaper prescriptions, and so on down the line.