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The PPACA, Health Insurance and Antitrust Policy

The PPACA, Health Insurance and Antitrust Policy. Professor Herbert Hovenkamp Univ. of Iowa College of Law Innovation, Business and Law Center September 30, 2010. Sherman Act, 15 U.S.C. § 1.

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The PPACA, Health Insurance and Antitrust Policy

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  1. The PPACA, Health Insurance and Antitrust Policy Professor Herbert Hovenkamp Univ. of Iowa College of Law Innovation, Business and Law Center September 30, 2010

  2. Sherman Act, 15 U.S.C. §1 • Every contract, combination … or conspiracy in restraint of trade or commerce among the several States … is declared to be illegal…..

  3. Sherman Act, 15 U.S.C. §2 • Every person who shall monopolize, or attempt to monopolize… any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty….

  4. MCCARRAN-FERGUSON ACT (1945) • 15 U.S.C. §1012 • (a): The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business.

  5. Mccarran-Ferguson Antitrust Immunity • (b) No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance … unless such Act specifically relates to the business of insurance: Provided, that [the antitrust laws] shall be applicable to the business of insurance to the extent that such business is not regulated by State Law.

  6. McCarran-Ferguson Boycott Exception • 15 U.S.C. §1013: • (b) Nothing contained in this chapter shall render the Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation.

  7. “The Business of Insurance” • Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982), drawing from Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 219-20 (1979)) • “first, whether the practice has the effect of transferring or spreading a policyholder's risk; • second, whether the practice is an integral part of the policy relationship between the insurer and the insured; • third, whether the practice is limited to entities within the insurance industry.”  

  8. “Business of Insurance” - Examples • Rate fixing (“Rate Bureaus”) • Product Standardization (“Forms Development”) • Vertical Integration and Tying (Provider Agreements: Royal Drug vs. Customer Supply Agreements: Ocean State) • Market Division (Forms Development vs. Customer Allocation (Insur. Brokerage case)

  9. Exchanges • Number of Sellers; Easy Entry • Informational Balance; Knowledgeable Buyers’ Agents • “Unilateral” Conduct • No excessive Limitations on Product Offering or Pricing Discretion

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