Health Insurance Monopolies Are Legal

Merriam-Webster's Dictionary of Law defines antitrust as:

“of, relating to, or being legislation against or opposition to business trusts or combinations; specifically : consisting of laws to protect trade and commerce from unlawful restraints and monopolies or unfair business practices.”

What few people realize is that health insurance companies are exempt from federal antitrust laws. Not surprisingly, they have become near monopolies. (See my blog post, True Competition a Myth in the Private Health Insurance Marketplace.)

As Phillip Cryan noted:

“[I]n nearly every local market in the country a very small number of insurers exercise what economists call ‘oligopoly’ power (the ability to charge prices higher than their costs, because of the absence of robust competition).”

A report by Health Care for America Now, Premiums Soaring in Consolidated Health Insurance Market (PDF), details this oligopoly power and its consequences:

“In the past 13 years more than 400 corporate mergers have involved health insurers, and a small number of companies now dominate local markets. The American Medical Association reports that 94 percent of insurance markets in the United States are now highly concentrated. Contrary to industry assertions, these mergers have undermined market efficiency; premiums have skyrocketed, increasing more than 87 percent, on average, over the past six years. Families and employers—and the U.S. economy as a whole—cannot sustain that kind of cost growth.” [Emphasis added]

The problem is finally being discussed on Capitol Hill. Congressional Quarterly Today reported this month that:

“Leading congressional Democrats want to partially repeal a 60-year-old exemption from antitrust law enjoyed by health insurers... Under the bills, the federal government would be authorized to prosecute insurers for violations of antitrust law if they are found to be engaged in ‘price-fixing, bid-rigging or market allocations.’ Democrats backing the bills say they aim to prevent behaviors that could drive up health care costs.”

However, even if health insurance companies’ exemption from federal antitrust laws was removed and the federal government moved to enforce those laws, the break up of these oligopolies could take years.

The best way to quickly infuse competition into health insurance markets is by adding a strong, national public health insurance plan option.

Sign the petition! Help get as many signatures as possible supporting health insurance reform with a public option in the Senate.

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future