Democrats' Insurance Industry Payback Is an Empty Gesture

President Barack Obama has every right to be irritated with the insurance industry and its no-holds-barred effort to derail his administration's broad health care reform initiative.

The president has called industry tactics "bogus" and "smoke and mirrors" and "all too familiar." He noted that "every time we get close to passing reform, the insurance companies produce these phony studies as a prescription and say, 'Take one of these, and call us in a decade.'"

Mr. Obama is entirely correct. But the president and congressional leaders are wrong to threaten to retaliate against the insurance industry by stripping health care insurers of a long-held exemption from federal antitrust laws. The exemption is not a very big deal; ending it would amount to a slap on the wrist. The insurance industry, Mr. Obama argued, has been "earning these profits and bonuses while enjoying a privileged exception from our antitrust laws, a matter that Congress is rightfully reviewing."

Within the week, a House committee approved the Health Insurance Industry Antitrust Enforcement Act of 2009, which would make health and medical malpractice insurers subject to federal laws that prohibit "price fixing, bid rigging" and other anti-competitive behavior.

In fact, the entire insurance industry, not just health care insurers, benefits from the McCarran-Ferguson Act, 1945 legislation that preserves the historic role that states have played as principal regulators of insurance companies doing business within their borders.

Ending the exemption, at least as it concerns health care insurers, may seem like a tough-minded measure. But, in reality, it amounts to little.

The exemption already is riddled with limitations and exemptions.

It applies only to those parts of insurers' operations that relate specifically to the "business of insurance" and that already are subject to state regulation.

As things now stand, in other words, insurance companies don't get a walk on their far-flung financial services enterprises, and their mergers are subject to antitrust review.

Eliminating the exemption might be a good idea, but it is not all that urgent. The Antitrust Division of the Justice Department told the Senate Judiciary Committee earlier this month that it "generally supports the idea of repealing antitrust exemptions" but "take(s) no position as to how and when Congress should address the issue."

Congressional leaders and Mr. Obama may have good reasons to be concerned that insurance laws in some states are too lax or their commissioners too permissive. But state regulators hardly could be more out of touch — or in the tank — than the federal regulators responsible for protecting the public interest in the years preceding the near collapse of our national financial system.

To the extent that insurance companies have failed in recent times, it's been because of the financial services parts of their businesses overseen by federal agencies that failed. The financial soundness and insurance matters regulated by the states haven't had major problems.

If Mr. Obama and Congress want to prevent or rein in insurance industry abuses, they should get serious. That means examining the entire industry, not just health care insurers.

It also means demonstrating that federal regulators are capable of protecting the public and not becoming captive to the industries they're supposed to regulate.

A lot of Americans don't have time to wait for the benefits to trickle down to them. When middle America figures out how much they paid so the Dow could return to 10,000, they're going to be very angry.

REPRINTED FROM THE ST. LOUIS POST-DISPATCH.

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