The recent nationwide battle over passing a national health care bill raises an important question. What will happen to the McCarran-Ferguson Act, the federal antitrust exemption for the business of insurance?
The McCarran-Ferguson Act is very important to the residents of each state. In 1945, Congress passed the act because of a United States Supreme Court case one year prior that ruled ”insurance was interstate commerce.” This legislation restored and protected the power to tax and regulate the insurance industry to the respective states. There is a provision in the legislation that describes the issues where state insurance statutes may clash with and take precedence over federal law.
What does this mean for you? It keeps the federal government from imposing insurance regulation and rulemaking for our state’s insurance industry. Insurers are regulated by a state Department of Insurance. The state regulatory supervision entails financial solvency of insurance companies. I shudder to think of the federal government doing this job with its track record. Each state has the authority to investigate, correct or punish wrongdoers for unfair and illegal practices related to the insurance industry. I would much rather deal with a local state agency than a federal bureaucrat any day.
The McCarran-Ferguson Act serves to make the insurance industry more competitive, not less. If it is repealed, the following issues will be in jeopardy and threatened by federal government takeover.
1. Exchange of critical data between insurance companies for rating purposes.
2. Allowing market participation by small insurance companies.
3. Operation of assigned risk plan and guarantee funds within states.
4. Standardization of policy language and forms.
There have been recent attacks by the Congress to repeal the act. This would cause great danger to the insurance industry and states. The revenues to the states from license fees, premium taxes and fines are substantial and could be at risk. Repeal would give the Department of Justice and Federal Trade Commission the power to enforce federal antitrust laws and regulations within our state relating to the business of insurance. Each state has enjoyed more than 64 years of regulating insurance within their borders and has done a reasonably good job in my opinion.
The pending health-care bills in the House and Senate have prompted another attempt to repeal or amend this act. Several insurance industry groups along with the National Association of Insurance Commissioners have jointly sent a letter to Congress in strong opposition to any such legislation.
Robert “Bob” Fowinkle, the president of Moore, Fowinkle, & Schroer Agency in Bradenton, can be reached at (941) 755-2628 or mofoscho.com.