    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

                COMPETITIVE HEALTH INSURANCE REFORM ACT OF 2017

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                               REGULATORY REFORM,
                          COMMERCIAL AND ANTITRUST LAW

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    H.R. 372

                                   __________

                               FEBRUARY 16, 2017

                                   __________

                                Serial No. 115-3

                                   __________

             Printed for the use of the Committee on the Judiciary

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Available via the World Wide Web: http://judiciary.house.gov
                                       ______

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                           COMMITTEE ON THE JUDICIARY

                       BOB GOODLATTE, Virginia, Chairman
    F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan,
        Wisconsin                            Ranking Member
    LAMAR S. SMITH, Texas                JERROLD NADLER, New York
    STEVE CHABOT, Ohio                   ZOE LOFGREN, California
    DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
    STEVE KING, Iowa                     STEVE COHEN, Tennessee
    TRENT FRANKS, Arizona                HENRY C. ``HANK'' JOHNSON, Jr.,
    LOUIE GOHMERT, Texas                   Georgia
    JIM JORDAN, Ohio                     TED DEUTCH, Florida
    TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
    JASON CHAFFETZ, Utah                 KAREN BASS, California
    TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
    TREY GOWDY, South Carolina           HAKEEM JEFFRIES, New York
    RAUL LABRADOR, Idaho                 DAVID N. CICILLINE, Rhode Island
    BLAKE FARENTHOLD, Texas              ERIC SWALWELL, California
    DOUG COLLINS, Georgia                TED LIEU, California
    RON DeSANTIS, Florida                JAMIE RASKIN, Maryland
    KEN BUCK, Colorado                   PRAMILA JAYAPAL, Washington
    JOHN RATCLIFFE, Texas                BRADLEY SCHNEIDER, Illinois
    MARTHA ROBY, Alabama
    MATT GAETZ, Florida
    MIKE JOHNSON, Louisiana
    ANDY BIGGS, Arizona

               Shelley Husband, Chief of Staff & General Counsel
            Perry Apelbaum, Minority Staff Director & Chief Counsel
                                     ------

        Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                       TOM MARINO, Pennsylvania, Chairman

                     BLAKE FARENTHOLD, Texas, Vice-Chairman

    DARRELL E. ISSA, California          DAVID N. CICILLINE, Rhode Island
    DOUG COLLINS, Georgia                HENRY C. ``HANK'' JOHNSON, Jr.,
    KEN BUCK, Colorado                     Georgia
    JOHN RATCLIFFE, Texas                ERIC SWALWELL, California
    MATT GAETZ, Florida                  PRAMILA JAYAPAL, Washington
                                         BRADLEY SCHNEIDER, Illinois

                          Daniel Flores, Chief Counsel

                          Slade Bond, Minority Counsel

                                C O N T E N T S

                                  ----------

                               FEBRUARY 16, 2017

                                                                       Page

                                    THE BILL

    H.R. 372, the ``Competitive Health Insurance Reform Act of 2017''     3

                               OPENING STATEMENTS

    The Honorable Tom Marino, a Representative in Congress from the
      State of Pennsylvania, and Chairman, Subcommittee on Regulatory
      Reform, Commercial and Antitrust Law...........................     1
    The Honorable David N. Cicilline, a Representative in Congress
      from the State of Rhode Island, and Ranking Member,
      Subcommittee on Regulatory Reform, Commercial and Antitrust Law     7
    The Honorable John Conyers, Jr., a Representative in Congress
      from the State of Michigan, and Ranking Member, Committee on
      the Judiciary..................................................     8

                                   WITNESSES

    Honorable Paul Gosar, a Representative in Congress from the State
      of Arizona
      Oral Testimony.................................................    10
      Prepared Statement.............................................    13
    Honorable Austin Scott, a Representative in Congress from the
      State of Georgia
      Oral Testimony.................................................    19
      Prepared Statement.............................................    21
    Thomas P. Miller, Esq., Resident Fellow, American Enterprise
      Institute
      Oral Testimony.................................................    35
      Prepared Statement.............................................    37
    David Balto, Esq., Principal, David A. Balto Law Offices
      Oral Testimony.................................................    53
      Prepared Statement.............................................    55
    Robert W. Woody, Esq., Vice President, Policy Property Casualty
      Insurers Association of0 America (PCI)
      Oral Testimony.................................................    77
      Prepared Statement.............................................    79
    George Slover, Esq., Senior Policy Counsel, Consumer Union
      Oral Testimony.................................................    87
      Prepared Statement.............................................    89

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Material submitted by the Honorable David N. Cicilline, a
      Representative in Congress from the State of Rhode Island, and
      Ranking Member, Subcommittee on Regulatory Reform, Commercial
      and Antitrust Law..............................................    27
    Material submitted by the Honorable Eric Swalwell, a
      Representative in Congress from the State of California, and
      Member, Subcommittee on Regulatory Reform, Commercial and
      Antitrust Law..................................................    33
    Material submitted by the Honorable David N. Cicilline, a
      Representative in Congress from the State of Rhode Island, and
      Ranking Member, Subcommittee on Regulatory Reform, Commercial
      and Antitrust Law..............................................   100
                            OFFICIAL HEARING RECORD
              Unprinted Material Submitted for the Hearing Record

    Submissions for the Record. These submissions are available at the
        Subcommittee and can also be accessed at:

        http://docs.house.gov/Committee/Calendar/
    ByEvent.aspx?EventID=105573

                COMPETITIVE HEALTH INSURANCE REFORM ACT OF 2017

                                  ----------

                          THURSDAY, FEBRUARY 16, 2017

                           House of Representatives,

                      Subcommittee on Regulatory Reform,
                          Commercial and Antitrust Law

                          Committee on the Judiciary,

                                Washington, DC.

        The Subcommittee met, pursuant to call, at 10:06 a.m., in
    room 2141, Rayburn House Office Building, the Honorable Blake
    Farenthold (Vice-Chairman of the Subcommittee) presiding.
        Present: Representatives Marino, Goodlatte, Farenthold,
    Issa, Collins, Buck, Ratcliffe, Gaetz, Cicilline, Conyers,
    Johnson, Swalwell, Jayapal, and Schneider.
        Staff Present: (Majority) Ryan Datilo, Counsel; Andrea
    Woodard, Clerk; and (Minority) Slade Bond, Minority Counsel.
        Mr. Farenthold. The Subcommittee on Regulatory Reform,
    Commercial and Antitrust Law will come to order.
        Without objection, the Chair is authorized to declare a
    recess of the Committee at any time. We welcome everyone to
    today's hearing on H.R. 372, the ``Competitive Health Insurance
    Reform Act of 2017.''
        We will start with my opening statement. This morning, the
    Subcommittee meets to examine H.R. 372, the ``Competitive
    Health Insurance Reform Act of 2017.'' Historically, the
    business of insurance was viewed as not falling within
    interstate commerce and, thus, subject to State, not Federal
    regulation.
        In 1944, the Supreme Court effectively reversed itself on
    this question, holding that Federal antitrust laws were
    applicable to an insurance association's interstate activities
    and restrain of trade. Both States and insurers were not happy
    with that change.
        Congress responded with the McCarran-Ferguson Act, which
    exempts insurers from certain Federal antitrust laws. As we
    have seen in the recent rejection of both the Anthem-Cigna and
    Aetna-Humana mergers, Federal antitrust laws regarding mergers
    still clearly apply. The Competitive Health Insurance Reform
    Act would repeal the McCarran-Ferguson Act's Federal antitrust
    exemption, so that it no longer applies to the business of
    health insurance. The McCarran-Ferguson Act would remain in
    effect for other types of insurance, such as property,
    casualty, and automobile insurance.
        The issue of repeal has been discussed by the House
    Judiciary Committee on several occasions, and various
    iterations of legislation to repeal it have been offered for
    decades. Within the broader ongoing discussions regarding
    efforts to repeal and replace ObamaCare, Affordable Care Act,
    the question of the continued necessity and viability of the
    McCarran-Ferguson Act has, once again, arisen.
        In his planned outline for reforming ObamaCare, newly
    appointed Health and Human Services Secretary, Tom Price has
    called for permitting the sale of insurance across State lines.
    Similar thinking has been echoed by President Trump and is
    included in House Republicans' ``A Better Way'' plan. Opening
    up the market to cross-border of sales would increase both
    competition in insurance markets, and the choice of insurance
    products offered to consumers. The ability to sell insurance
    across State lines is often tied to discussions about the
    McCarran-Ferguson Act. In fact, interstate insurance sales are
    already legal under certain conditions.
        A provision in the Affordable Care Act allows the states to
    establish what are called ``healthcare choice compacts,'' which
    permit insurers to sell policies to individuals and small
    business in any State that participates in the compact. State
    regulatory agencies set rules and minimums insurers must meet
    to sell plans in their State.
        Instances of cross-state sales to date, however, have been
    relatively limited. We have an excellent panel of witnesses
    before us today who will help update us to evaluate the issues
    more effectively, and place this litigation into the larger
    context of the looming healthcare discussion. I look forward to
    our witnesses' testimony on the merits of H.R. 372.
        [The bill, H.R. 372, follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Farenthold. And I now recognize the Ranking Member, the
    gentleman from Rhode Island, Mr. Cicilline, for his opening
    statement.
        Mr. Cicilline. Thank you, Mr. Chairman. Before I begin my
    remarks, I would like to take a moment to thank Chairman
    Marino, who was detained on other matters this morning, for his
    gracious welcome to this new position. I want to recognize my
    immediate predecessor, Mr. Johnson, and thank him for being
    here, as well as the Ranking Member of the full Committee, Mr.
    Conyers, for being here as well.
        As Ranking Member of the Subcommittee, it is my foremost
    priority to work with the majority wherever possible to be find
    pathways to lowering prices for consumers, promoting innovation
    in existing new markets, and ensuring that every business has a
    fair opportunity to compete on an even playing field. Free
    markets only work for consumers to improve standards of living
    where there are sufficient competition. As the Council of
    Economic Advisers under the Obama administration reported last
    year, robust enforcement of the antitrust laws is an important
    way in which the government makes sure the market provides the
    best outcomes for society with respect to choice, innovation,
    and price as well as fair labor and business markets.
        This Subcommittee plays a vital role in ensuring this
    outcome through oversight of the antitrust agencies'
    competition policy and the antitrust laws. Just this month, the
    Justice Department has won two important civil antitrust
    lawsuits initiated under the Obama administration to prevent
    unprecedented consolidation in the health insurance market.
    According to the Justice Department, these transactions would
    have stifled competition, harming consumers by increasing
    health insurance prices, and slowing innovation aimed at
    lowering the cost of health care.
        But long before the Justice Department filed a lawsuit to
    enjoin these transactions, this Subcommittee held an important
    oversight hearing of these mergers, providing the public with
    insight into the matter and underscoring the importance of
    hearings and other oversight activity conducted by the
    Subcommittee.
        In terms of the immediate topic of today's hearing, there
    are few better examples of entrenched market power resulting in
    higher consumer costs than those found in the healthcare
    market. The McCarran-Ferguson Act was enacted more than 70
    years ago in response to the Supreme Court's ruling in South-
    Eastern Underwriters Association. That insurance activity
    across State lines is commerce within the meaning of Article I
    of the Constitution and, therefore, subject to the antitrust
    laws.
        To qualify for this exemption, an insurer must be engaged
    in the business of insurance that is not designed to boycott,
    coerce, and intimidate, and is regulated within the State.
    While these requirements somewhat constrain anticompetitive
    conduct by insurers, it has long been clear that they do not
    preclude the most egregious forms of anticompetitive conduct,
    such as price fixing, bid rigging and market allocation by
    health and medical malpractice insurance insurers.
        Indeed, as then-Assistant Attorney General Christine Varney
    testified in 2009, decades of case law suggests that the
    McCarran-Ferguson Act exempts many forms of anticompetitive
    conduct that occur within State regulation, no matter how
    toothless State regulatory schemes may be. It is, therefore,
    critical that we use every tool to preserve and promote
    competition in these markets. I believe that proposals to
    repeal McCarran-Ferguson Act, such as H.R. 372 and H.R. 182,
    Ranking Member Conyers' proposal, are important to achieving
    this result. But make no mistake, promoting competition in the
    State markets must not occur at the expense of strong
    regulatory protections that establish health insurance
    exchanges, make health markets more efficient, and ensure
    baseline protections against discrimination. Far from it.
        As Professor Tom Greaney, a leading expert of competition
    in healthcare markets testified last year, the Affordable Care
    Act vastly improves conditions necessary for competition to
    take hold and flourish in these markets.
        Lastly, I would be remiss if I did not renew my call for a
    hearing on drug price competition. There are few other issues
    that so directly affect the lives of working American families
    as the price and availability of prescription drugs. While this
    Subcommittee has held a hearing on competition in the market
    for opioid treatment medicine, we have not considered the
    broader issue of drug price competition, and it is my hope that
    we will.
        With that, I thank the Chairman for holding today's
    hearing. I very much look forward to the testimony of our
    witnesses. And I want to particularly welcome our colleagues,
    Mr. Gosar, Mr. Scott, and I look forward to hearing your
    testimony.
        And I yield back the balance of my time.
        Mr. Farenthold. Thank you very much, Mr. Cicilline.
        We will now go to the Ranking Member of the full Committee,
    Mr. Conyers of Michigan, for his opening statement.
        Mr. Conyers. Thank you, Mr. Chairman. Welcome to our
    distinguished witnesses this morning. I am pleased that the
    Subcommittee's first hearing of this new Congress is on H.R.
    372, the ``Competitive Health Insurance Reform Act of 2017,''
    which repeals the antitrust exemption in the McCarran-Ferguson
    Act for the health insurance business.
        For many years, I have advocated for such a repeal, so I am
    heartened to see the bipartisan nature of the support for this
    position.
        My own bill, H.R. 143, would similarly repeal the McCarran-
    Ferguson antitrust exemption from the health insurance
    business, and it does so for price fixing, bid rigging, and
    market allocation, the most egregious kinds of anticompetitive
    conduct there is.
        Additionally, my legislation would repeal the exemption for
    the business of medical malpractice insurance, as this would be
    another key component ensuring competition in healthcare
    markets.
        There are several important reasons why Congress should
    repeal this antitrust exemption. To begin with, there is no
    justification for continuing such a broad antitrust exemption
    for health insurance insurers.
        Congress passed the McCarran-Ferguson Act in response to a
    1944 Supreme Court decision finding that antitrust laws applied
    to the business of insurance, like everything else. Both
    insurance companies and the States express concern about that
    decision.
        Insurance companies worry that it would jeopardize certain
    collective practices like joint rig setting and the pooling of
    historical data. And the States were concerned about losing
    their authority to regulate and tax the business of insurance.
        To address this concerns, McCarran-Ferguson provided that
    Federal antitrust laws apply to the business of insurance only
    to the extent that it is not regulated by State law, which has
    resulted in a broad antitrust exemption. Industry and State
    revenue concerns rather than the key goals of protecting
    competition in consumers were the primary drivers of the Act.
        In passing, McCarran-Ferguson, Congress, however, initially
    intended to provide only a temporary exemption and,
    unfortunately, gave little consideration to ensuring
    competition. Not surprisingly, three commissioners observed in
    the 2000 Southern Antitrust Modernization Commission report
    that McCarran-Ferguson should be repealed because it has
    outlived any utility it may have had and should be repealed.
        And another commissioner stated that the Act is among the
    most ill-conceived and egregious examples of antitrust
    exemptions, that its repeal should not be delayed.
        In addition, repeal would be timely, given that the health
    insurance industry is highly concentrated, the situation that
    exacerbates harms against consumers.
        Although Federal courts have recently blocked two mergers
    among four of the Nation's largest health insurance companies,
    the situation before these proposed mergers look bleak.
        The American Medical Association has warned that the health
    insurance markets are highly concentrated with mere total
    collapse of competition among health insurers. The blocking of
    these mergers in the already high level of market concentration
    further suggests that for the good of consumers and the
    economy, the business of health insurance should not continue
    to enjoy an antitrust exemption.
        And, finally, repeal of the McCarran-Ferguson antitrust
    exemption where the business of health insurance is a
    complement, not an alternative, to the affordable health care
    act. Some may be think that appealing McCarran-Ferguson alone
    would be sufficient to help patients and other healthcare
    consumers obtain affordable health insurance, but we should
    remember that the House included language almost identical to
    H.R. 372 in its version of the Affordable Care Act.
        This is not an either/or situation. We need both measures
    to be in place to maximize benefits, improve quality, and lower
    price for consumers. And so I look forward to the testimony of
    our witnesses today.
        I yield back my time. Thank you, Mr. Chairman.
        Mr. Farenthold. Thank you. Without objection, other
    Members' opening statements will be made part of the record.
        Now, we now turn to our first panel of witnesses. Dr. Paul
    Gosar represents the Fourth District of Arizona and is a
    sponsor of the legislation that is the subject of this hearing
    today. Dr. Gosar serves on two Committees, the House Committee
    on Oversight and Government Reform, and the House Natural
    Resources Committee. Before being elected to Congress in 2010,
    Dr. Gosar owned his own dental practice and was a small
    business man in Flagstaff for 25 years.
        Mr. Austin Scott represents the Eighth District of Georgia.
    Mr. Scott serves as Chairman of the House Agriculture
    Committee, Subcommittee on Commodity Exchanges, Energy and
    Credit. Additionally, he is an active Member on the House Armed
    Services Committee.
        Prior to joining us in Congress in 2010, he spent 14 years
    in the Georgia State House, and has owned and operated an
    insurance brokerage firm for nearly 20 years.
        Each of the witnesses' written statements will be entered
    into the record in its entirety. I would ask you to summarize
    your thoughts within 5 minutes and you understand how the
    signal system works, so let's get going.
        Dr. Gosar.

      TESTIMONY OF THE HONORABLE PAUL GOSAR, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF ARIZONA

        Mr. Gosar. Thank you, Chairman Farenthold, Ranking Member
    Cicilline, and the full Chairman Goodlatte, and Ranking Member
    Conyers. I appreciate it.
        I thank you for having this hearing on our bill, the
    Competitive Health Insurance Reform Act, and for the time you
    devoted to studying the issue of McCarran-Ferguson, the
    antitrust exemption for health insurance.
        As Congress once again faces the preeminent test of
    repairing our Nation's healthcare system, first and foremost,
    we must establish the proper foundation for a competitive and
    consumer-driven health insurance marketplace. The Competitive
    Health Insurance Reform Act of 2017 will restore the
    application of Federal antitrust and competition laws through
    the health insurance industry. Ending the special interest
    exemption is the essential first step to broader healthcare
    reform. Popular cost-reducing reform priority, such as selling
    insurance across State lines and developing diverse consumer-
    driven plans, are predicated on the robust competition
    marketplaces this bill would ensure.
        As a healthcare provider for more than 25 years, I
    understand firsthand the importance of a competitive and
    dynamic health insurance market. Patients, doctors, and
    hospitals alike benefit when health insurers compete to provide
    a variety of quality coverage policies.
        As a dentist, I have a unique perspective of the power a
    truly competitive marketplace could have on price control.
    Staying far away as possible from government-run health care
    and utilizing doctor-led insurance practices, industry has been
    able to deliver care at cost that closely matches inflation,
    unlike general medicine, whose costs have risen more than 20
    times that.
        The McCarran-Ferguson Act of 1945 exempted the insurance
    industry from the Sherman Act and the Clayton Act, acts that
    have a purpose of ensuring fair competition. This broad
    exemption was intended to assist the newly developing business
    of insurance, so that those companies could set sustainable
    premiums by permitting data sharing between insurance
    companies. It is important to note that this industry-specific
    exemption was created and built around antiquated rudimentary
    practices for data collection and information processing. The
    health insurance industry of 1945 was far different than that
    of today. Today's health industry is concentrated into
    vertically integrated behemoths, with immense computing power
    able to access and process more information than the quaint
    insurers of the 1940s could ever dream of. It seems the only
    thing that hasn't changed is the special interest antitrust
    exemption that only this market enjoys.
        However, after 70 years, it is apparent that the broad
    stroke exemption created by Congress in the 1940's was not
    wise. Over the decades, and expeditiously since the passage of
    ObamaCare since 2009, the health insurance market has devolved
    into one of the least transparent and more anticompetitive
    industries in the United States. These antiquated exemptions
    are no longer necessary. There is no reason in law, policy, or
    logic for the insurance industry to have special exemptions
    that are different from all other businesses in the United
    States.
        The interpretation of antitrust law has narrowed
    dramatically over the decades. Many of the practices which
    insurers say they need this exemption to do, such as analyzing
    historical loss data, have proven to be permissible by the FTC
    and courts over the decades since McCarran-Ferguson was passed.
        This narrowing of the scope has resulted in the zombie law,
    whose efficacy and usefulness has long since expired; yet, it
    looks to scare off potential legitimate legal challenges from
    States, patients, and providers. These entities do not have the
    tools, money, or manpower to challenge these monopolies in
    court or head on in the current market. Only the Federal
    Government with its resources can enforce the laws which
    rebalance the playing field fairly. Repeal of the specific
    section of the McCarran-Ferguson Act, which applies only to
    health insurance, has strong bipartisan support. As we saw in
    the 2009, 111th Congress, a vote of 406-19 passed the
    democratically held Congress. In the 112th Congress, it passed
    by a voice vote. Similar legislation has been introduced by
    multiple Democratic Members of the House, and attached to my
    bill has been included in the Republican Study Committee's
    healthcare reform bill for the last 4. In fact, they even
    appeared in the Republican Party platform in the convention in
    Cleveland last year.
        As a dentist, I know how important robust competition is to
    dynamic and effective health insurance. It should protect the
    patient as well as the healthcare provider.
        It should provide uniformly applied associated checks and
    balances that incentivize competition and prevent monopolies.
    Today, in the healthcare market, those equally applied
    antitrust predictions don't exist.
        Now, I don't have a crystal ball that will tell you what
    the future of health care would look like. I don't think
    anybody knows. But I can tell you that history is an important
    guide. The 70-year antitrust exemption for the health insurance
    industry has resulted in a consolidated, anticompetitive, and
    nontransparent scheme controlled by five mega corporations.
    That is not what we want for the future. Instead, let's
    liberate the market by removing this antitrust exemption.
    Imagine what could exist when we put the patient first and
    demand that health insurance companies compete for their
    business. This market should be patient centric, provide a
    variety of affordable, quality options, and empower patients'
    involvement and accountability. I thank everybody for their
    time today in considering this bill. I look forward to its
    passage, and thank you for considering it today. Thank you very
    much.
        [The prepared statement of Mr. Gosar follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________
        Mr. Farenthold. Thank you.
        Mr. Scott, you are recognized for 5 minutes.

     TESTIMONY OF THE HONORABLE AUSTIN SCOTT, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF GEORGIA

        Mr. Scott. Chairman Farenthold, Ranking Member Cicilline,
    Chairman Goodlatte, Chairman Conyers, and Members of the
    Subcommittee, thank you for allowing me to submit my testimony
    in support of H.R. 372, the ``Competitive Health Insurance
    Reform Act of 2017.''
        Many of you have law degrees from very distinguished
    schools, none quite as distinguished as the University of
    Georgia, where I received my degree in risk management and
    insurance in the early 1990's. This is when I was first
    licensed to sell life and health insurance during an internship
    in the summer of 1991. All in all, I spent approximately 20
    years as an employee benefits broker, licensed in multiple
    States representing approximately 40 carriers. I was designated
    by the American College as a charter life underwriter, charter
    financial consultant, registered health underwriter, and a
    registered employee benefits consultant. I might also mention
    that my father is a surgeon in a small town, so I have seen
    this situation from the rural provider's side as well. I have
    actually read the contracts.
        Before I go any further, I want to be clear that I believe
    there were a number of problems in the health insurance market
    before the Affordable Care Act passed. I think most brokers
    would tell you that. I also think that patients, physicians,
    pharmacists, people who work in the hospitals, would tell you
    that many of the problems that existed have been made worse by
    the lack of competition in the health insurance industry today.
    If I may be so bold as to ask you a few questions.
        Do you think that pharmacies should be exempt from the
    antitrust laws of the country? Do you think that physicians
    should be exempt from the antitrust laws of the country? What
    about hospitals? Nobody in this room has or would put forward a
    bill that exempted any of these people who actually provide
    health care to patients from the antitrust laws of the country.
    So why would we allow the health insurance industry, who
    controls, through their contracts, who our doctor is, who our
    pharmacist is, which medicine we can get, and which hospital we
    can go through to being exempt from the antitrust laws of our
    country?
        No doubt, their lawyers will tell you they are exempt
    because they are regulated by the States. Nothing in this
    legislation changes the fact that they are regulated by the
    States.
        The groups that I just mentioned are also regulated by the
    States: Physicians, pharmacists, hospitals, and insurance
    brokers, all licensed and regulated by the States, not by the
    Federal Government. None of that changes with this legislation.
    All of those are subject to the antitrust laws of our country
    just as they should be.
        The only thing that would change is that the health
    insurance industry would no longer be exempt. I very distinctly
    remember a renewal letter that a client received with a choice
    of sign here and accept the new preexisting acceptance clause,
    and your renewal will be a certain dollar amount, or don't sign
    and your renewal would be significantly higher.
        The people who argue that the health insurance industry
    should be exempt from the antitrust laws will also defend this
    pricing as just good business. This was from one of the biggest
    of the big carriers, and they are bigger and more controlling
    today than ever before. They are, in fact, the only carrier
    available to many of my constituents today.
        The dominance of the market that these large carriers enjoy
    has forced many providers to move, close, merge, or sell to
    larger regional hospitals. The end results of this is that in
    the 24 counties that I represent, patients have fewer
    healthcare providers left. How is the antitrust issue relevant
    here? By definition, health care and health insurance are not
    the same thing.
        But when one insurance company controls such significant
    portions of the cash flow of all of the providers in a region,
    no provider can stay in business without a contract with that
    carrier. Therefore, the insurance company gets to determine who
    is and who is not able to provide health care. Sign a contract
    with the competing carrier, we will cancel your contract.
    Accept the lower reimbursement, or we will cancel your
    contract. It is closer to extortion than negotiation.
        I don't believe that all of this anticompetitive conduct is
    technically exempt from the antitrust laws. I have no doubt
    that in this room, the insurance industry would say the most
    reprehensible of these conducts is not. But in the courtroom
    down the street, they know that no provider has the resources
    to challenge them. The fact is most States don't have the
    resources to challenge them. The insurance company will simply
    cancel the provider's contract, and the provider would be
    broke, and that is the end of the case. A few brief comments to
    finish. This exemption is not only damaging to the consumer
    when they purchase health insurance, it damages the healthcare
    providers and, therefore, further limits access to health care.
        I don't think this issue alone solves all of the problems
    in the health care industry, but I don't think that any of the
    problems in the insurance market will be solved if this
    exemption stays in place. Just as Mr. Conyers spoke to, I think
    it is noteworthy that on February 24th of 2010, the Health
    Insurance Industry Fair Competition Act passed the House with a
    vote of 406-19, yet, it was not included in the Affordable Care
    Act. The sharing of historical loss data primarily benefits
    small carriers. I think it would be wise to consider
    specifically allowing historical loss data to be shared to
    prevent costly, unnecessary litigation.
        And I want to thank you for your time and the opportunity
    to provide testimony this morning. And with that, I yield back
    the 29 seconds that I don't have.
        [The prepared statement of Mr. Scott follows:]

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                                   __________

        Mr. Farenthold. And we appreciate your testimony here today
    on this important issue.
        I think this concludes our first panel. Thank you, again,
    for sharing your insights with us.
        I believe Mr. Cicilline----
        Mr. Cicilline. Yes. Mr. Chairman, I would ask unanimous
    consent that written testimony of the Honorable Tom Perriello,
    our former colleague from Virginia, be entered into the record.
    Tom was the lead sponsor of the Health Insurance Industry Fair
    Competition Act, which passed by a vote of 406-19 in the 111th
    Congress and has long supported competitive health insurance
    markets.
        Mr. Farenthold. Without objection, so ordered.
        [The prepared statement of Mr. Perriello follows:]

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                                   __________

        Mr. Farenthold. We will take a short break here while they
    set up. But as soon as they get set up, we are going to get
    going. We have a busy day in Washington today.
        Mr. Swalwell. Would the gentleman yield just briefly?
        Mr. Farenthold. Sure.
        Mr. Swalwell. Thank you. Also, I will also be going between
    hearings. I was hoping I could enter into the record an
    American Association of Oral and Maxillofacial Surgeons' letter
    dated February 16, 2017, from their president, Douglas Fame.
        Mr. Farenthold. Without objection, so ordered.
        Mr. Swalwell. Thank you.

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                                   __________

        Mr. Farenthold. I see the usual efficiency of our Judiciary
    Committee staff as they have gotten you guys ready to go in no
    time at all. So we will get going on panel two.
        We will begin by swearing in our witnesses before I
    introduce them.
        Gentlemen, would you all please rise and raise your right
    hand.
        Do you swear the testimony you are about to give before
    this Committee is the truth, the whole truth, and nothing but
    the truth, so help you God?
        Let the record reflect that all witnesses answered in the
    affirmative.
        You all may be seated.
        Or distinguished panel today includes Mr. Thomas Miller, a
    resident fellow at the American Enterprise Institute, AEI,
    where he studies healthcare policy, including health insurance
    and market based-alternatives to the Affordable Care Act. Prior
    to joining AEI, Mr. Miller served as a senior health economist
    for the Joint Economic Committee, JEC, in Congress. He's
    testified before Congress on issues such as the uninsured
    healthcare cost, Medicare, prescription drug benefit, health
    insurance tax and credits, generic information, Social
    Security, Federal reinsurance of catastrophic events, among
    others. Mr. Miller also practiced as a trial attorney for the
    firm of Powell Goldstein Frazer & Murphy in Atlanta, Georgia,
    where he served as a lead attorney in a lawsuit challenging the
    State of Georgia's proposed Medicaid regulations. Mr. Miller
    received his bachelor's degree in political science from New
    York University, and his JD from Duke University School of Law.
        Mr. David Balto is an antitrust attorney with over 15 years
    of government antitrust experience. Mr. Balto has worked as a
    trial attorney in the Antitrust Division at the Department of
    Justice, and several senior level positions in the Federal
    Trade Commission during the Clinton administration. He received
    his bachelor's degree from the University of Minnesota and his
    JD from the Northeastern University School of Law.
        Mr. Robert Woody is Vice President for policy at PCI with a
    primary focus on the development of PCI's policy position on
    Federal issues. He was deeply involved in the PCT's efforts to
    educate Congress on the impact of the Dodd-Frank Act, as it was
    considered in Congress, and continues to be involved in the
    implementation and reform issues. He is also responsible for
    reinsurance and guaranteed fund issues at the State and Federal
    level.
        Prior to joining PCI, Mr. Woody practiced law for 16 years
    at an international law firm. He advised both U.S. and non-U.S.
    citizens on insurance regulatory matters from the firm's
    Washington and London office. He was active in lobbying the
    Congress on the enactment of the Terrorism Risk Insurance Act
    in 2002, and its subsequent reauthorizations and continues to
    advise insurance on compliance with what that statute does and
    its implementing regulations. He is the author of several
    published articles on various insurance law topics including
    privacy compliance.
        Prior to joining the firm, he was a legislative assistant
    to Representative Bill Emerson, and previously worked in
    several capacities in the Virginia General Assembly. He got a
    bachelor's degree from James Madison University and a JD from
    the Catholic University of America.
        Mr. George Slover is a senior policy counsel at Consumers
    Union, where he helps develop and coordinate regulatory
    comments across a wide range of policy issues, focusing on
    antitrust and competition issues. Mr. Slover has three decades
    of Federal Government policy experience with service in all
    three branches, including 9 years in this Committee, 2 years at
    the Energy and Commerce Committee, and 11 years at the Justice
    Department's Antitrust Division. He also serves on the advisory
    board of the American Antitrust Institute, the Steering
    Committee of the D.C. Bar's antitrust and consumer law section,
    and is an elected member of the American Law Institute.
        Mr. Slover received his bachelor's degree from Vanderbilt,
    a master's degree in public affairs from the LBJ School of
    Public Affairs at the University of Texas, and his JD from the
    University of Texas Law School. Fellow Longhorn.
        All right. So each of your written statements has been
    provided to us, and will be entered into the record. I would
    like you to summarize your testimony in 5 minutes. You have got
    the timer in front of you. I think all of you are familiar with
    how that works as well. Much like a traffic stoplight, green
    means go, yellow means hurry up, and red means stop. So we will
    get going here, and we will start with Mr. Miller.

    TESTIMONY OF THOMAS P. MILLER, ESQ., RESIDENT FELLOW, AMERICAN
                          ENTERPRISE INSTITUTE

        Mr. Miller. Thank you, Vice Chairman Farenthold, Chairman
    Goodlatte, Ranking Member Conyers, Subcommittee Ranking Member
    Cicilline, and all the Members of the Subcommittee for the
    opportunity to testify today on this proposed legislation, and
    more generally, on competition policy considerations involving
    limited antitrust exemption for health insurers under the
    McCarran-Ferguson Act.
        Overall, the approach in this bill and similar ones in the
    recent past does not raise new or pressing issues. It appears
    to advocate at best the uncertain and limited remedy in search
    of problems that are hard to find and quantifying empirically,
    particularly within the health sector of the insurance
    industry. Many other existing tools already remain in place to
    police health insurance competition. The likely gains and
    reciprocal cost of removing the limited antitrust exemption in
    this sector may appear minor; however, the additional risks of
    adding new regulatory uncertainty, increasing boundary testing
    litigation, and distracting policymakers from more important
    ways to reduce healthcare costs and improve healthcare
    competition suggested further caution and delay on this front
    is advisable, at least until the post Affordable Care Act
    policy path is determined.
        Increasing the Federal Government's role in regulating
    health insurance even more through expanded antitrust
    enforcement would appear to conflict with proposed reforms to
    delegate more responsibility to State governments and
    individual consumers.
        The McCarran-Ferguson Act to reaffirm the basic policy
    against Federal Government regulation of insurance, and more
    particularly, antitrust regulation, but this rule would apply
    as long as State governments took on that responsibility.
        As interpreted and fleshed out by a long series of court
    decisions in later years, the Act's protection against Federal
    antitrust regulation applies only when the conduct of insurers
    constitutes the business of insurance, is regulated by State
    law, and does not constitute an agreement to act--an agreement
    or act to boycott, coerce, or intimidate.
        Over the decades, court interpretation of which activities
    meet a three-factor test for being within the business of
    insurance have become tighter in accordance with the general
    rule disfavoring expansive interpretations of exemptions to the
    Federal antitrust laws.
        My written testimony includes a long list of insurer
    practices that have been ruled to be outside the antitrust
    exemption. Moreover, the extent of State and Federal regulation
    of insurers remains broad and deep.
        McCarran-Ferguson provides no safe harbors under scrutiny
    under State antitrust laws, merger enforcement activity over
    insurers remains at both the State and Federal levels. States
    also have consumer protection laws and unfair claims practices
    statutes that further police health insurers' practices. The
    primary argument over time for establishing retaining--and
    retaining the antitrust exemption under McCarran-Ferguson has
    been to facilitate economically efficient sharing of
    information that helps insurers to evaluate risk and price
    accurately. However, those cooperative activities always have
    mattered far more to property casualty insurers than to health
    insurers. Health insurers have no similar history of utilizing
    advisory organizations for the joint estimation and projection
    of medical claims cost.
        One can make an argument that many, if not all, the
    remaining efficiency enhancing and pro-competitive aspects of
    advisory organization activities today might well pass muster
    under modern rule of reasoned applications of antitrust
    enforcement. However, the uncertain risk of litigation
    challenges and organizational change pressures would produce
    some offsetting costs. Another less anticipated counter
    reaction instead might be greater alliance on the State action
    doctrine, which might not just deflect antitrust concerns but,
    actually, further enshrine unwise and overaggressive State
    regulation.
        The Competitive Health Insurance Reform Act of 2017 really
    provides little, if any, evidence of absence of current
    antitrust and regulatory review of health insurance services,
    or court decisions allowing anticompetitive conduct under
    current law, or actual marketplace behavior by health insurers
    that was enabled by the limited antitrust exemption.
        This legislation lacks any real empirical basis for
    suggesting that health insurers have persistently achieved
    high, let alone abnormally high profits due to the antitrust
    exemption. When the congressional Budget Office last examined
    in 2009, similar legislation to remove the antitrust exemption
    for health insurers, and also medical liability insurers, it
    concluded that any effect on insurance premiums is likely to be
    quite small, because State laws already bar the activities that
    would be prohibited under the proposed Federal law if enacted.
        The larger problem in health policy today is that health
    care and health insurance is regulated too heavily, not too
    lightly, particularly after passage of the Affordable Care Act
    in 2010. In all likelihood, concentrating on this stale issue
    of the McCarran-Ferguson antitrust exemption, will merely
    distract our attention from more urgent tasks encouraging and
    adopting far more important market-oriented reforms that our
    health system definitely needs. Thank you.
        [The prepared statement of Mr. Miller follows:]

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                                   __________

        Mr. Farenthold. Thank you, Mr. Miller.
        Mr. Balto, you are up for 5 minutes.

              TESTIMONY OF DAVID BALTO, ESQ., PRINCIPAL,
                       DAVID A. BALTO LAW OFFICES

        Mr. Balto. Thank you, Chairman Farenthold, Ranking Member
    Cicilline, and the other Members of the Committee. I am David
    Balto. I am for--used to be the policy director of the Federal
    Trade Commission. This is actually the 15th time I have
    testified on healthcare competition issues before Congress, the
    sixth time before this Committee. I welcome returning to you. I
    also lead a consumer coalition on healthcare competition
    issues, the Coalition to Protect Patients' Rights.
        The question before you is simple, easy, and clear: Is the
    McCarran-Ferguson Act necessary--is it necessary to exemptions
    to the antitrust laws? The answer is clear. It is not. The
    antitrust modernization committee that this committee helped
    form says that for there to be an antitrust exemption, there
    has to be clear case that the conduct in question would subject
    the actors to antitrust liability, and there is no less
    restrictive way to solve the problem.
        The proponents of keeping the exemption cannot demonstrate
    a clear case. The law is crystal clear here that the conduct
    that they would like to engage in would not violate the
    antitrust laws.
        Mr. Miller, in his testimony, actually says they don't even
    need to engage in this kind of information sharing.
        Why are antitrust exemption disfavored? There has not been
    an industry-wide antitrust exemption passed since this one.
    That is because the anti--an antitrust exemption replaces the
    discipline of the free market with private regulation, not
    government regulation. Even worse, private regulation. Private
    parties get to determine the terms of competition. That is the
    worse result for consumers.
        Now, the two of us can engage in a debate. You can bring
    lots of lawyers in front of you debating about how bad the
    exemption is. But Herb Hovenkamp, Professor Herb Hovenkamp, who
    is sort of the Tom Brady of antitrust, when the Supreme Court
    makes a decision on antitrust, they open his treatise first. He
    says that this distracts a significant toll on competition and
    on consumers. And, in fact, in the worst ways possible.
        Sure, there are exceptions to the Act that the court has
    tried to form by--in sort of a Swiss-cheese approach, but when
    you look at a variety of egregious practices, those are
    permitted by the Act.
        Now, what--the proponents of the legislation want you to
    ask the wrong question. They want you to ask, is there any harm
    from the exemption? That is not the right question. The right
    question, according to the Antitrust Modernization Commission,
    is there an essential benefit that is necessary from this
    legislation?
        Now, they pose three myths, the proponents to the
    legislation: The first is sort of like, there is only a small
    pothole. There is a little bit of problem here, but it is, you
    know, not that big a deal. Well, according to Herb Hovenkamp,
    it is. And in any case, why do we want to permit potholes in
    any case? Why do we want to create--give the health insurance
    industry a get-out-of-jail card? Of all the industries to give
    a get-out-of-jail card, the health insurance industry is
    probably the last one.
        Second, they sort of say that there aren't costs imposed,
    but there are costs imposed. I'll just give the issue of,
    currently, Blue Cross has agreements that prevent Blue Cross
    subsidiaries from being able to effectively invade each other's
    territory. So CareFirst in northern Virginia can't makes its
    way down to Richmond, and the Blue Cross of Virginia can't make
    its way up into northern Virginia. That loss of competition
    costs consumers in higher premiums, and it costs healthcare
    providers, too.
        Third, they say State regulation is enough, but careful
    studies of State regulation that we cite in our report
    demonstrate that the vast majority of States do no consumer
    protection enforcement action. There is zero consumer
    protection enforcement actions in over 33 States. 80 percent of
    the actions are done by five States. We went back and searched
    the websites of all of the insurance commissioners and the NAD.
    Mr. Miller cites a 2009 case. Great. That was, you know, 8
    years ago. There haven't been any cases brought since then. So
    State regulation isn't enough. There is real harm, and it is no
    small pothole.
        This Committee should go further in its oversight. So
    illuminating the exemption, the exemption only causes harm.
    There is no benefit that it causes whatsoever. This Committee
    should continue, in its oversight function, to make sure that
    antitrust enforcement continues to be strong in the health
    insurance industry. That, and smart regulation, work hand-in-
    glove together to make sure that these markets begin to start
    to work effectively.
        Just to give an example, the Justice Department's challenge
    of the Aetna-Humana merger, would result in savings of over
    $500 million a year to American taxpayers and to American
    consumers, particularly over a million Medicare beneficiaries
    who would be vulnerable to anticompetitive conduct. This
    exemption has outlived its usefulness and should be abolished.
        [The prepared statement of Mr. Balto follows:]

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                                       __________

        Mr. Farenthold. Thank you very much, Mr. Balto.
        Mr. Woody, you are recognized for 5 minutes.

      TESTIMONY OF ROBERT W. WOODY, ESQ., VICE PRESIDENT, POLICY
        PROPERTY CASUALTY INSURERS ASSOCIATION OF AMERICA (PCI)

        Mr. Woody. Thank you, Chairman Farenthold, Ranking Member
    Cicilline, and Chairman Goodlatte, and Ranking Member Conyers.
    I am Robert Woody, the vice president for Policy and Property
    Casualty Insurers Association of America. PCI is composed of
    nearly 1,000-member companies representing the broadest cross-
    section of insurers of any national insurance trade
    association.
        PCI appreciates that the sponsors of H.R. 372 are genuinely
    concerned about the availability and affordability of health
    insurance, the consumers, and we share that concern.
        We also appreciate that the bill does not include property
    casualty insurers in the proposed repeal of the limited
    antitrust provisions of the McCarran-Ferguson Act. As such, PCI
    has no formal position on the bill. But I am here today because
    PCI is extremely concerned that supporters of this bill have
    misidentified McCarran as the source of the problems in the
    health insurance industry, and that misperception of how and
    why McCarran-Ferguson works as it does could ultimately cause
    significant harm to our industry and, more importantly, to our
    consumers and your constituents were the repeal ever expanded
    to cover the PC industry.
        The bill appears to be premised on the mistaken perception
    of McCarran's antitrust provisions leave insurers unfettered by
    antitrust laws, and free to engage in what would otherwise be
    illegal and anticompetitive activity, but this is not the case.
    The decision Congress made in enacting McCarran was not to
    excuse the industry from antitrust compliance completely, but,
    instead, to assign to the States the power to enforce certain
    limited antitrust functions with respect to the business of
    insurance.
        In particular, they recognize that some joint insurer
    activity is actually pro-competitive, and, thus, good for
    consumers. For example, small and medium-sized insurers don't
    have a base of loss experience large enough to be statistically
    significant. And, so, they must rely on historical loss costs,
    and industry loss costs data to be able to look into the future
    and to project loss costs and then price their products
    responsibly. If they can't do that, they are effectively driven
    from the market, leaving it only to their largest competitors.
        Those are all things that are part of the insurance pricing
    process. And so the Congress said, in 1945, why shouldn't the
    entire regulation process be overseen by the same regulators?
    And the result has been that the State insurance regulatory
    system has performed remarkably well, I think, especially as
    compared to the Federal regulators in other financial services
    sectors.
        I want to highlight several particular misperceptions about
    McCarran as it relates to health insurance. First, McCarran is
    being cited as a barrier to the ability of the health insurers
    to sell insurance across State lines. Now, PCI takes no
    position on that health industry issue, but it arises because
    of differences from State to State in the regulation of health
    insurance products, not from antitrust concerns.
        There is no connection between that issue and the antitrust
    provisions of McCarran. Moreover, when the Congress reserved to
    the States the right to regulate the business of insurance, it
    was also very careful, to preserve for itself, the right to
    preempt State regulation whenever it sees the need. All
    Congress must do is to be clear that the legislation it passes
    expressly applies to insurance. Congress has done that many
    times without seeing the need to amend McCarran.
        But some has suggested that McCarran is also responsible
    for the high level of market concentration in the health
    industry, which can result in a lack of competition. But
    McCarran also applies to the property casualty insurance
    industry, and yet, the PC industry is extremely competitive,
    has very low market concentration. If McCarran caused higher
    levels of concentration in the health insurance market,
    wouldn't it also be expected to have the same effect in the
    property casualty market? Clearly, it does not.
        Moreover, just this week, we have seen the power of the
    Federal Government at work to block not just one, but two major
    proposed mergers in the health insurance industry. The
    Department of Justice and the courts are actively blocking M&A
    activity in that industry. Again, McCarran-Ferguson has not
    stood in the way.
        And, finally, the Congressional Research Service has said
    that repealing McCarran could spur further consolidation in
    insurance markets. The Congressional Budget Office has said
    that repeal is not likely to reduce the cost of health
    insurance for consumers, and the National Association of
    Insurance Commissioners, our regulators, said that this bill
    could ``hinder competition, harm consumers, and weaken the
    health insurance market.''
        So listen to the nonpartisan organizations that serve
    Congress and listen to those who regulate insurers and protect
    consumers, your constituents. PCI urges the Subcommittee to
    investigate the true causes of the problems in the health
    insurance market and to recognize that the McCarran-Ferguson
    Act is not one of those causes.
        Thank you, again, for the opportunity to testify today.
        [The prepared statement of Mr. Woody follows:]

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                                   __________

        Mr. Farenthold. Thank you very much, Mr. Woody.
        Mr. Slover, 5 minutes is yours.

                   TESTIMONY OF GEORGE SLOVER, ESQ.,
                 SENIOR POLICY COUNSEL, CONSUMER UNION

        Mr. Slover. Thank you. Consumers Union supports this bill.
    We have long supported removing this antitrust exemption, so
    the rules of competition can apply as they do in the rest of
    the American free market economy. The antitrust laws help the
    free market work for consumers, and the insurance industry
    should not be left out.
        This antitrust exemption was created by accident. It was
    supposed to be a 3-year breathing spell so insurers could
    adjust to a Supreme Court decision. That was 70 years ago. We
    hope that, for health insurance, the stars have aligned. A
    similar bill passed the House with over 400 votes a few years
    ago, and there is bipartisan support in this Committee now.
        Since our founding more than 80 years ago, we have worked
    to make health care available and affordable for all Americans.
    We are strong supporters of the Affordable Care Act, which has
    significantly improved health care availability and
    affordability for many millions of Americans, including
    millions who previously had no health insurance.
        We would be very concerned by any move to repeal it without
    having an effective new plan already figured out and in place
    that maintains comparable coverages in consumer choices and
    protections.
        The healthcare marketplace is complex in how it operates,
    and an effective regulatory framework is needed to shape that
    complex environment to help safeguard consumers and keep costs
    under control, and make a full range of healthcare services
    widely available.
        Our country's long experience shows you can't expect a
    healthcare system to function effectively on competition alone.
    For example, making sure preexisting conditions are not
    excluded required a rule. The free market simply wasn't going
    to give us that key protection.
        But while the regulatory framework sets important
    requirements and safeguards, competition within--the bounds of
    that framework--adds a market-driven business incentive to
    improve service while holding down prices and providing better
    value. Regulation and competition both work best when they can
    work hand in hand. For these reasons, we support the bill the
    Subcommittee is considering today. The rest of the healthcare
    supply chain is already operating under the antitrust laws, and
    we would like to see health insurers join in.
        As the healthcare marketplace evolves, we want health
    insurers motivated to continue improving the way coverage is
    provided to consumers with higher quality, better choice, and
    more affordability. A key part of that motivation is knowing
    that if they don't, others likely will, and they could be left
    behind.
        But an antitrust exemption dampens that motivation,
    inviting insurers to make a pact to delay making improvements
    until everyone is ready to agree that no one will get out in
    front of the others and offer consumers a better deal. That
    harms consumers, and it blocks progress.
        For example, consumers like to have a choice about which
    doctors they can see, and which hospitals they can go to. But
    some insurers have been moving to narrower provider networks as
    a cost-cutting measure. If there is effective competition and
    transparency, consumers who don't like the narrower network can
    switch. But if insurers can make a pact that they will all move
    to narrower networks, consumers don't have the power of choice.
    Regulation can address the too-narrow-network problem by
    setting some minimum baselines for what qualifies as an
    adequate network. But we don't want health insurers all just
    doing the bare minimum, agreeing among themselves to treat the
    regulatory floor as also their ceiling. Competitive incentives
    can and should augment whatever minimum that regulation sets.
        Just to be clear, having a health insurance activity
    subject to the antitrust laws is not the same as automatically
    outlawing that activity. Passing this bill won't warp the
    antitrust laws into a straitjacket that keeps health insurers
    from engaging in activities that benefit consumers. To violate
    the antitrust laws, the activity would have to significantly
    harm competition and consumers, like a price-fixing conspiracy
    would, or the improvement stalling pact I just described, or
    restrictive deals to lock up providers blocking other insurers
    from getting fair access so they can offer consumers better
    choices.
        This bill won't be the cure-all for everything that ails
    health insurance, but it is a constructive step that is going
    to help give insurers better choices, and, as a result, help
    promote better value.
        Health insurers play a key role in our healthcare system.
    Adding a dose of competition would help focus their incentives
    in line with benefiting consumers. Healthcare markets, for all
    their complexities and special characteristics, are no
    exception to this economic fact of life. Thank you.
        [The prepared statement of Mr. Slover follows:]

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                                   __________

        Mr. Farenthold. Thank you very much.
        And we will get started with questions. And I will
    recognize myself for 5 minutes.
        Mr. Miller, I am a big fan of AEI. I tend to agree with
    them on most issues, but this one kind of issue I struggle
    with. By definition, antitrust laws were designed to promote
    competition. And by exempting them, the natural occurrence in,
    somebody who is not an expert in the field's mind is, if we
    exempt them from antitrust laws, you are going to get
    anticompetitive behavior. And that is what antitrust laws were
    designed to protect against.
        I understand the devolving things to this date. I know it
    is something AEI supports devolving as much as possible to the
    States. But one of the key features of the debate on the
    replacement of ObamaCare is creating competition across State
    lines. So all of a sudden, some of these regulations are going
    to be preempted just out of necessity by whatever provisions we
    choose to enact to enable sale across State lines.
        So I guess my question is, what is so special about the
    insurance industry when we create a more traditional market for
    it that would require this exemption to continue?
        Mr. Miller. Well, I am trying to put this in a little bit
    of a larger context to suggest you just might want to curb your
    enthusiasm on this. There is more than one school of antitrust
    thought and practice, and there is a mixed history as to what
    antitrust means beyond the pro-competitive wrapper. So we need
    to have the same skepticism about antitrust regulation, which
    is not uniform and always good, and from Administration to
    Administration, you will see how it changes,
        In the same way, we need to have some skepticism about the
    proclaimed virtues of independent, politically driven
    regulation. It is somewhat like, if you will, Forest Gump
    opening up a box of chocolates. You don't always know what you
    are going to get in antitrust regulation.
        Now, on the McCarran-Ferguson--or on the across-State-lines
    issue, you are talking to someone who probably wrote the first
    academic article in favor of that about 15 years ago. First,
    that issue has changed. There is less space to really do much
    on that front, but in this particular context, Congress can, at
    any time, write a new law that deals with that issue.
        McCarran-Ferguson is just a, you know, initial place
    setting, which Congress periodically changes in terms of--you
    mandated various benefits in health insurance, and have done
    other types of Federal moves into the healthcare space. So it
    is not an end-all/be-all. Also, there are interstate compacts
    which get around that issue as well. The magnitude, though, is
    a little bit exaggerated as to how much savings you get from--
    --
        Mr. Farenthold. I want to talk to Mr. Woody about across
    State lines and State regulatory issue as well. It would seem
    to me that, as just a cost of compliance, having to deal with
    50 different State regulations for an insurance company would
    be more expensive than trying to deal with just one Federal
    standard. Again, that--I am kind of loathe to say that, because
    I am opposed to Federal regulation, but we have got a real
    crisis right now on how to deal with the cost of health care.
    So what is your take on that?
        Mr. Woody. Mr. Chairman, PCI has over 1,000 members, and
    many of them are small- to medium-sized companies that don't do
    business on a 50-State basis. So to them, State regulators are
    closer to them, closer to their markets and closer to their
    consumers. I can certainly understand why an insurer who does
    business nationally might say, well, it might be more efficient
    to have one regulator instead of 50. And, indeed, over the
    years, we have seen some discussion within the industry, and in
    Congress, about an optional Federal charter. Even from those
    who, at one time, supported an optional Federal charter, we
    don't hear much talk about that now. And I think one of the
    main reasons is there is concern about the regulatory
    environment at the Federal level that they see with respect to
    other sectors of the financial services industry, and I think
    even those insurers are now saying, at least for the time
    being, we are happier at the State level than at the Federal
    level on balance.
        Mr. Farenthold. Finally, I just want to talk for a second
    about barriers to entry. One of the arguments for the exception
    was to make data more available.
        I will give Mr. Miller and Mr. Slover a chance to just give
    me about 15 seconds on this, since I am almost out of time.
        How do we effectively remove barriers of entry to bring
    more competition? I will give Mr. Balto 15 seconds, too.
        Mr. Miller?
        Mr. Miller. I will be simple. It is a different context in
    health insurance, since it is mostly actuarial consulting
    firms. Although, you never can tell where you may go with
    antitrust once you open them up to challenge, I suppose, they
    may have a lot of lawsuits.
        But the barriers, to answer you, are more a matter of
    lightening the load so that less conventional insurers or other
    people approaching this space can get in. We have made it so
    dense and difficult, only the largest operators can basically
    comply with the burden of regulation. We keep loading on, plus
    what we add from the ACA.
        Mr. Farenthold. I know, Mr. Balto, you wanted to weigh in
    on this. And I know I am running out of time.
        Mr. Balto. The simple message for this Committee is that
    McCarran-Ferguson could conceivably facilitate dominant
    insurers to engage in anticompetitive practices that would keep
    other insurance companies from entering.
        Example, in Michigan, Blue Cross of Michigan had a most-
    favored-nations provision that kept other insurers out. Aetna
    sued, and successfully challenged that provision. Aetna, not a
    small competitor----
        Mr. Farenthold. Again, I apologize. I will give you an
    extra minute, Mr. Cicilline.
        But, Mr. Slover, did you want to weigh in on that real
    quick?
        Mr. Slover. Yes, just briefly.
        Briefly, from an antitrust perspective, the--removing the
    exemption will make it harder for insurance companies to create
    barriers to entry across the board.
        Mr. Farenthold. Thank you very much.
        Mr. Cicilline.
        Mr. Cicilline. Thank you, Mr. Chairman.
        I want to start with Mr. Miller. I want to be sure I
    understand your argument. In your written testimony, and you
    repeated it again today, you say the primary argument over time
    for establishing and retaining the antitrust exception under
    McCarran-Ferguson has been to facilitate economically efficient
    sharing of information that helps insurers to evaluate risk and
    price accurately.
        You go on to argue in your written testimony that that
    really doesn't apply in the health insurance market. And that
    really----
        Mr. Miller [continuing]. A component of the historical
    background to this.
        Mr. Cicilline. Yeah. ``Meanwhile, health insurers have no
    similar history of utilizing advisory organizations for the
    joint estimation and projection of medical claim costs.''
        So it seems like you argue against your own position. You
    say, ``The primary reason for this is a sharing of information,
    which is much more present in the property casualty insurance
    market,'' to Mr. Woody's point, but you acknowledge it actually
    doesn't implicate the health insurance market. So the primary
    argument that's advanced is actually an argument that you don't
    think is credible.
        Mr. Miller. There's a larger argument involved in the
    overall testimony.
        Mr. Cicilline. No, I understand. Your other argument----
        Mr. Miller. That's one slice of it.
        Mr. Cicilline. Okay. But that's the primary, and you say
    it's not a good one. And then you say----
        Mr. Miller. Historically, that's been the primary argument.
    That's correct.
        Mr. Cicilline [continuing]. It's disruptive and you think
    the Committee and Congress should look at other things. That's
    the, sort of, gist of the argument.
        Mr. Miller. We are in the midst of re-sorting how we are
    approaching regulation in health care and health insurance. I
    would not change one thing in isolation without looking at the
    larger context.
        We have just gone through over the last 5 years a massive
    increase in regulation of health insurance. I could tick them
    off in my testimony.
        Mr. Cicilline. No, no.
        Mr. Miller. What could possibly have gone wrong?
        Mr. Cicilline. That's a different----
        Mr. Miller. Maybe lack of insurers in markets? Rising
    prices and problems in concentration?
        Mr. Cicilline. Right. That's a different question----
        Mr. Miller. We need to rethink it in a larger context.
        Mr. Cicilline.--Mr. Miller. That's a different question.
    What I'm asking you is----
        Mr. Miller. It's a more important question.
        Mr. Cicilline. No, what I'm asking you, though, is, if the
    presumption is--and I think the organization you work for has
    advanced this presumption many times over--that competition is
    advantageous to consumers, to choice, to spurring innovation,
    that this is an exemption which exists in this industry and no
    other, that there ought to be a justification. And fear of what
    it might bring, it seems to me--and we'll disagree--is not
    sufficient justification.
        But I'll turn now to Mr. Slover.
        Professor Herbert Hovenkamp, who is widely regarded as the
    dean of American antitrust law, has written that under the
    McCarran-Ferguson Act the presence of even minimal State
    regulation, even on an issue unrelated to the antitrust law, is
    generally sufficient to preserve the immunity.
        Can you respond to that?
        Mr. Slover. Yes, that's how the language has been
    interpreted. About the same time as the McCarran-Ferguson Act
    was enacted, the Supreme Court was deciding Parker v. Brown and
    establishing how State regulation and the antitrust laws work
    hand-in-hand. And there was a looking at the State regulation.
    This was later fleshed out, that there had to be a clear State
    regulation and there had to be active supervision in order to
    displace the antitrust laws.
        What you have, unfortunately, under the McCarran-Ferguson
    Act is a minimal requirement, where there doesn't have to be
    any State regulation; there just has to be the sense of
    regulation. And so it doesn't have to pass any grade. And so
    you have a situation in which there isn't a natural incentive
    to make State regulation effective, and you don't have either
    one.
        Mr. Cicilline. So there's been a lot of discussion, both in
    this hearing already but throughout the country, about this
    notion of allowing competition across State lines. There is
    nothing that prohibits that today in the ACA. In fact, it is
    expressly authorized, is it not?
        Mr. Slover. That's correct; it is expressly authorized in
    interstate compacts. It is also perfectly legal for an
    insurance company to sell in any State it wants to, as long as
    it abides by the rules of that State.
        The distinction here I think that's important is not can
    they, but will they? And there are natural impediments to the
    insurance companies wanting, having the incentive to enter into
    each other's territory that this would help fix.
        Mr. Cicilline. I think that's a very important point,
    because there's been a lot of discussion of, if only we would
    allow this to happen, this will solve the problem. There is
    nothing that prohibits this from happening, and I think you're
    exactly right.
        And I'd ask unanimous consent to introduce an article dated
    October 13 entitled ``Insurers Not Interested in Selling
    ObamaCare Across State Lines,'' which recounts that for the
    last 12 months States have been legally allowed to let insurers
    sell plans outside their borders. Despite the idea's enduring
    popularity, no States have signaled an interest in the policy.
        And I think this is really the question of whether or not
    insurance companies are interested in doing that, but there is
    no legal prohibition. And so we just sort of should view this
    issue in the context of the facts. And I'd ask unanimous
    consent that be included in the record.
        Mr. Farenthold. Without objection, so ordered.
        [The information referred to follows:]

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                                   __________

        Mr. Cicilline. And I yield back.
        Mr. Farenthold. Thank you very much.
        We'll now recognize the Chairman of the full Committee, the
    gentleman from Virginia, Mr. Bob Goodlatte.
        Mr. Goodlatte. Well, Mr. Chairman, thank you. And thank you
    for holding this hearing.
        And I want to commend all the witnesses. This has been an
    excellent discussion. I think it's very helpful.
        A couple of things that I think are a reality here that we
    all ought to focus on. One is that similar legislation passed a
    few years ago by 406 to 19. So the odds are we're going to pass
    it again. The question is what should it look like, so I'd like
    to get some of you to focus on that.
        But before I do that, I'd like to pick up where the
    Chairman left off, on the issue of what is causing this problem
    in terms of regulation.
        I happen to believe that competition is good. That's our
    objective. It will help to hold down costs. And McCarran-
    Ferguson may be an impediment to some of that competition. I
    will say that I think the largest problem here we have with
    choice and healthcare costs is related to overregulation by,
    first, the States--and this problem existed prior to the
    Affordable Care Act coming into being--and then, to some
    extent, the Federal Government stepped in and expanded upon
    that by dictating to virtually every insurance company in
    America what should be in every health insurance plan in
    America.
        So that's, in my opinion, why there's not a lot of
    competition across State lines, because there isn't any
    incentive to have that competition. If have you to go in and
    comply with the States' regulations and you have a homogenized
    Federal regulation, the net effect of that is that only the big
    guys are going to be able to succeed and continue in the
    marketplace.
        But here's my question for you, Mr. Woody. I think Mr.
    Balto gave an example for Virginia about Blue Cross Blue
    Shield, which I was very interested in since I represent
    Virginia. I don't represent the parts of Virginia that are
    affected here, so I feel very comfortable asking the question.
        But he said that Blue Shield Blue Shield has an agreement
    that they don't compete with each other, separate Blue Cross
    entities don't compete with each other. So the Blue Cross in
    Richmond doesn't do business in northern Virginia; the one in
    northern Virginia doesn't do business in Richmond.
        Wouldn't the elimination of McCarran-Ferguson enable State
    and Federal Governments to step in and say, why aren't you
    competing in these two separate marketplaces and providing at
    least some more choice for consumers?
        Mr. Woody. Well, I have a disadvantage over Mr. Balto in
    that I'm not an antitrust lawyer, and I'm certainly not an
    expert in the blues. But I'll tell you what I do think I know
    about it, and that is that the antitrust law has developed such
    that market allocation cases, instances where defendants have
    tried to assert a McCarran-Ferguson defense have generally not
    been very successful. And I understand that even in a recent
    case involving Blue Cross it wasn't successful.
        I saw a Law Review article just the other day that said
    that----
        Mr. Goodlatte. So do you think it's just Virginia's choice
    that they're not going to try to encourage this competition
    within their State?
        Mr. Woody. I don't know what Virginia's choice is, but what
    I do know is that McCarran-Ferguson does not, I think, present
    a barrier to going after these market allocation issues.
        Mr. Goodlatte. Let me ask Mr. Balto to respond.
        Mr. Balto. Well, you know, we could have a lengthy
    discussion of, you know, the nature----
        Mr. Goodlatte. Not too lengthy, because I've only got a
    minute and a half left.
        Mr. Balto. Yeah. So, no, the defense has applied in certain
    circumstances. The fact that there are some district court
    decisions that have narrowed the defense just shows the problem
    of the defense. Courts work actively to try to narrow it,
    whereas it should just be eliminated because it's not serving
    any purpose. There is, as my testimony documents, harmful
    conduct that does come about because----
        Mr. Goodlatte. Okay. Let's see what we can agree upon in
    terms of what we should preserve. If we are going to do this,
    we've talked about keeping the ability for loss histories to be
    preserved. Are we all in agreement that we should allow
    insurance companies to have that, or should it just be smaller
    insurance companies? If you're above a certain size, should you
    not be able to share that information, or should everybody
    share that information?
        Mr. Balto. The caselaw and the statements of the antitrust
    enforcement agencies are crystal-clear on this. That conduct is
    legal so long as it's properly structured. There is no
    antitrust risk from that kind of conduct.
        Mr. Miller. There's a line between the assembly of the
    historical loss data and then you get into trending and
    beginning to move toward signaling rates. And that's where I
    think there's a little bit of a barrier to it.
        Mr. Goodlatte. So build on that, Mr. Miller. And let me ask
    Mr. Woody, as well. Assuming we are going to take action here,
    what kind of things should be looked for to make sure we have
    in this measure that changes or repeals McCarran-Ferguson?
        Mr. Miller. Well, I'm not a fanatic about this in terms of
    the exemption is so wonderful you have to keep it. I'm saying--
    and you're only a Subcommittee of particular jurisdiction, but
    you need to see this in the larger context. Not all antitrust
    regulation is pro-competitive. It depends on the eye of the
    beholder and who's there. And so you're opening up a toolbox
    which could be used for other purposes as well.
        Mr. Goodlatte. I get that. But what kind of--you may want
    to write to us afterwards, but what kind of things--what kind
    of precautionary----
        Mr. Miller. I'm generally comfortable with the type of safe
    harbors--there's elements beyond historical loss data. There
    are some elements of building common forms, if they are not
    coercive, where they're put as options out on the table, where
    coordinated activity, whether it's advisory organizations, has
    some validity as well.
        Mr. Goodlatte. All right.
        Mr. Miller. There could be joint underwriting activities
    for high risks, which are a valid--and that's generally
    accepted under rule of reason. If you want to legislate it, you
    can do it, although the courts have handled that fairly well
    thus far.
        Mr. Goodlatte. Mr. Chairman, my time has expired. I just
    want to make one last point.
        And I think that when we talk about the difference between
    the disparate effect of McCarran-Ferguson that I think Mr.
    Woody pointed to in property and casualty insurance and in
    health insurance, I would say that the biggest explanation
    there is again going back to the regulations. While States do
    regulate property and casualty insurance, they don't get into
    the minute details of telling insurance companies what they
    have to cover and under what circumstances they have to cover.
    And I think that has both driven up cost and driven down
    competition and driven down choice for consumers, and we've got
    to find a way around that.
        I'm very interested in anything you submit to us following
    this in terms of how to frame this legislation as the Committee
    considers it.
        Mr. Farenthold. Thanks, Chairman Goodlatte.
        We'll now recognize the Ranking Member of the full
    Committee.
        Mr. Conyers. Thank you so much.
        George Slover, Consumers Union. Your testimony, to me,
    captured what I think is key here, and I've got a couple
    questions for you.
        Mr. Miller's testified that current enforcement tools and
    regulatory policies already address competition issues at the
    State and Federal level. How do you respond to that?
        Mr. Slover. Well, the health insurance marketplace is very
    complex, and there is a regulatory framework that has developed
    over many years to try to deal with some of that. It's
    developed in the absence of the antitrust laws being
    applicable. And there are parts of it that seek to set
    baselines to protect consumers. There are also some States who
    choose to enforce their competition laws, even though the
    Federal antitrust enforcement agencies can't do that.
        But there is no substitute for having the Federal antitrust
    laws apply, and for the industry and the people in the industry
    to take heed of that when they're making decisions about how
    they're going to structure their relationships with their
    competitors.
        Mr. Conyers. So we need a Federal involvement in this whole
    consideration?
        Mr. Slover. I believe that would be very helpful, yes, sir.
        Mr. Conyers. Uh-huh.
        Now, what about the suggestion that State insurance
    commissioners are in the best position to promote competition
    and other issues in the health insurance costs? How do you feel
    about that?
        Mr. Slover. Well, they are regulators; they are not
    competition enforcers. And they just come from a different
    background and have different goals. And I think you want to
    put the competition policy enforcers in charge of enforcing
    competition policy.
        Mr. Conyers. So you don't agree with this position.
        Mr. Slover. I think State regulation definitely has a role
    to play, and they can play that role alongside Federal
    antitrust enforcement.
        Mr. Conyers. Uh-huh.
        Now, do you think that McCarran-Ferguson's exemption no
    longer serves a legitimate purpose? I mean, that was back in
    1945. Have things developed since then that don't make this as
    important a consideration as it once was?
        Mr. Slover. I don't think it was really needed, even back
    in 1945. I think the practices that the insurance industry
    wanted to engage in that were legitimate, and didn't harm
    competition, they would've been able to engage anyway. I also
    think State regulatory authority was going to be fine. I think
    that's become clearer as the antitrust laws have evolved and
    the caselaw has evolved over the 70 years since then. But I
    don't think it was necessary then, and I certainly don't think
    it's necessary now.
        Mr. Conyers. Uh-huh. Well, thank you very much for your
    position as a leader in Consumers Union.
        And I yield back my time if there's any left.
        Mr. Farenthold. Thank you very much.
        We'll now recognize the gentleman from Georgia, Mr.
    Collins.
        Mr. Collins. Thank you, Mr. Chairman.
        I think one of the more telling points here--and I think it
    was a good point--is a concern here, but also from the Chairman
    just a few moments ago, that, you know, this is an idea that
    has seen in this Congress a very, I guess, positive vote,
    depending on which way you're going to look at it. And so the
    question is a little bit more of how do we make sure that this
    is, you know, properly done if this is the way we're
    continuing.
        So one of the questions I have--and just a few questions
    here. Because I think what we have seen--and I'm going to bring
    this up again in a moment. But I think one of the things we
    have seen in the healthcare market, especially in the pharmacy
    benefit manager perspective, is we have seen how monopolistic,
    terroristic kind of organizations can do to an independent
    community healthcare field.
        So, Mr. Miller, let me just--just a couple of quick things.
    With the exception of per se violations, would you agree that
    the Sherman Act only prohibits anticompetitive conduct that
    unreasonably restrains trade?
        Mr. Miller. That's how it's written. That's not always how
    it's enforced. Give me a period of time, and I'll give you
    different versions of antitrust.
        Mr. Collins. We'll give you who's interpreting on the
    Court. Great. I love that.
        Would you agree that the FTC Act only bans that and not all
    methods? It only bans that quote part but not all methods of
    competition, correct?
        Mr. Miller. All right, all right. I'll play along. Yeah.
        Mr. Collins. You'll play along with that one? Okay. Then
    why, then, would health insurers need to be able to engage in
    unreasonable restraints on trade or unfair competition?
        Mr. Miller. I'm not in favor of them doing that. We have
    other tools to handle that.
        Look, part of this argument, if you really want to boil it
    down politically, is a disagreement over whether--you know,
    different States may have different views as to the type of
    competition and type of regulation they want. There's an
    impulse to say, let's do it all at the Federal level and let's
    make it uniform, and let's go hunting for things and we'll
    figure out kind of what it is.
        So the question is whether there might be different
    political preferences and different degrees of regulation in
    different States. That goes back to the interstate proposal.
    It's not to enshrine the Affordable Care Act's menu in every
    State in the same way under a different wrapper. In a world in
    which you might have different brands of State insurance
    regulation, consumers could choose which regulation they want
    as part of their insurance package. We can't do that today
    because the marketplace has changed. That's the original
    concept and----
        Mr. Collins. And, you know, reclaiming my time, I think
    that's a great argument to have at another hearing, and I think
    that's a----
        Mr. Miller. Well, it came up at this hearing.
        Mr. Collins. And I agree with you. But I think that is one
    of the problems that we are dealing with. You're very right in
    that regard. I'm not--this, I think, is one of the--just before
    I move on, real quick, will the sky fall down if McCarran-
    Ferguson is repealed?
        Mr. Miller. I think I said in my written testimony the sky
    wouldn't fall down, but the sun, when it rises, is going to be
    clouded by a lot of other problems.
        Mr. Collins. Oh, okay. We can go on that.
        Mr. Balto, there is clearly a lack of competition in health
    insurance markets throughout the country. We're seeing that
    right now. One-third is basically represented by one or less,
    actually. Would eliminating this exemption make that worse?
        Mr. Balto. No. In fact, it would potentially lead to
    improvements here. Right now, dominant insurance companies can
    engage in anticompetitive practices to keep new entrants from
    the market, and they can claim that that's protected by the
    McCarran-Ferguson Act----
        Mr. Collins. Okay.
        Mr. Balto [continuing]. Or they can deliver inferior
    services to consumers.
        Mr. Collins. Well, and one of the things--and, again, not
    necessarily projected by the McCarran-Ferguson Act--is I
    think--and it's what I mentioned here just a minute ago--I
    think we're seeing how a monopolistic look at a health care--
    from a regulation standpoint or unregulated, however we look at
    it. And we're particularly dealing in the pharmacy benefit
    manager perspective--which is, you know, doing nothing but
    terroristic raids on independent community pharmacists. They're
    hijacking the price setup. They're trying to claim, you know,
    rebates and passing on the savings to others, which has been
    proved false on many occasions.
        And right now I do realize that there is a large generated
    money machine ready to try to rebuke everything that I've said
    over the past 2-1/2 years on this issue. The problem is you
    can, you know, smear all the makeup you want on that pig but it
    ain't going to look good.
        And so I think this is an area where we need to continue to
    look at, and I appreciate your concern on this.
        Mr. Balto. Yeah. If I could just reply to that, there is a
    fundamental problem in lax regulation of payors, such as PBMs
    and insurance companies. And the people who are on the front
    lines--the doctors, hospitals, and pharmacists--are being given
    take-it-or-leave-it reimbursement terms that ultimately result
    in poor health care for consumers.
        Mr. Collins. Exactly. And I think--and that's the one part
    of that. It's why I bring it up here, but I think that's one of
    the issues that we do need to address. But it shows what
    happens in this kind of a constricted market.
        So, again, with that, Mr. Chairman, I thank you, and I
    yield back.
        Mr. Farenthold. Thank you very much.
        And we'll stay with the great State of Georgia and
    recognize Mr. Johnson for 5 minutes.
        Mr. Johnson. Thank you, sir.
        Mr. Miller, would you agree that the insurance marketplace
    should be left free of government regulation?
        Mr. Miller. No. That's a little extreme. Left free of
    regulation? I mean, I like the First Amendment that says there
    should be no law, but we do go beyond that and suggest that
    maybe occasionally we should have a few other things--enforce
    fraud and property rights, steady rule of law. There's plenty
    of role for government regulation. It's not a, you know,
    absolutist, night watchman alternative.
        Mr. Johnson. But, basically, you would want the laws of the
    free market economy, so in other words supply and demand, to be
    able to dictate prices within the insurance marketplace.
        Mr. Miller. Well, generally, the role of government is to
    say it's our job to restrain competition rather than private
    parties to do it. And it's done a pretty good job of it in the
    healthcare space.
        Mr. Johnson. Yeah, but you would agree, though, that the
    health insurance marketplace should largely be free of
    government regulations so that the law of supply and demand is
    what determines prices.
        Mr. Miller. That's a simple construct and a starting point.
    Obviously, it's much more complicated than that alone.
        Mr. Johnson. I understand. Well, do you agree that
    monopolistic behavior distorts the free market force of supply
    and demand?
        Mr. Miller. There are practices that move toward monopoly
    which need to be policed.
        Mr. Johnson. Well, let me ask you----
        Mr. Miller. There are also monopolies that arise because
    someone else does a better job.
        Mr. Johnson. Let me ask you the question this way and ask
    you for a yes-or-no answer. Do you agree that monopolistic
    behavior distorts the free market force of supply and demand,
    yes or no?
        Mr. Miller. Yes, in those simple terms.
        Mr. Johnson. Now, would you agree that the antitrust laws
    protect against monopolistic behavior?
        Mr. Miller. I think they are written to do that. They have
    not always done that in practice.
        Mr. Johnson. Well, if we did not have any antitrust laws,
    do you believe that monopolistic behavior would go away, or
    would it predominate?
        Mr. Miller. We've had lots of monopolies supported by
    government policy. That's the historical record.
        Mr. Johnson. Well, are you saying that we don't need
    antimonopolistic legislation?
        Mr. Miller. We need better antitrust policy. Just enacting
    a law isn't the same as carrying it out in a market-competitive
    manner.
        Mr. Johnson. Well, let me ask you this. Is it your position
    that applying antitrust laws to the health insurance
    marketplace will result in higher insurance costs to consumers?
        Mr. Miller. It's an open question.
        Mr. Johnson. Well, shouldn't we try--after 70 years of
    exemptions from antimonopolistic conduct, shouldn't we try at
    this point to bring a little less monopolistic behavior into
    the healthcare marketplace?
        Mr. Miller. My testimony has indicated that we've already
    been applying a lot of antitrust and procompetitive----
        Mr. Johnson. How?
        Mr. Miller [continuing]. Policies.
        Mr. Johnson. How?
        Mr. Miller. States have a wide latitude to apply all of
    this. Merger enforcement activity goes on. There are a range of
    activities which are not within this exemption whatsoever----
        Mr. Johnson. Well, let me ask you this.
        Mr. Miller [continuing]. And they've been doing enforcement
    actions as a result of it.
        Mr. Johnson. Isn't it a fact that States have not done any
    antitrust enforcement solely on their own, without taking the
    lead from Federal enforcers over the years?
        Mr. Miller. Well, that's what Mr. Balto's testimony wants
    you to believe. I think that's a judgment from time to time
    depending on who the personnel are in place. They allocate the
    resources. There are different views as to what a particular
    State, you know, should or should not do. That's part of the
    diversity across 50 States, rather than saying, here's one
    single policy.
        Mr. Johnson. Well, let me ask you this question, Mr.
    Miller. The American Medical Association has studied the health
    insurance marketplace for the past 15 years, and they have
    found that there is ``a near-total collapse of competition
    among health insurers.'' Do you----
        Mr. Miller. I think that's overstated. Their methodology
    has been criticized by some people, including myself. There are
    ways in which you can draw lines. They have their particular
    point of view, and they want to magnify that. It's not that
    stark a situation.
        There are problems in doing statewide levels. Now, there
    are different ways to break it up in terms of metropolitan
    areas, but you can play a lot of games with statistics on that.
        Mr. Johnson. Gosh, Mr. Balto, you've got 6 seconds to
    respond to anything that has come before you.
        Mr. Balto. I disagree with everything Tom says.
        But, look, just on the higher cost issue, years ago we
    eliminated antitrust exemptions like in the airline industry
    and railroads, and there were tremendous cost savings. But the
    question here, is do you want to have private regulation, you
    know, private parties, competitors determining the terms of
    competition, or do you want to have the forces of the free
    market.
        Thurgood Marshall said that the antitrust laws are the
    Magna Carta of our free market system. Why should we cut them
    short when it comes to health insurance?
        Mr. Johnson. Thank you.
        Mr. Slover, it's good to see you.
        Thank you for coming, Mr. Woody.
        And, with that, I yield back.
        Mr. Farenthold. Thank you very much, Mr. Johnson.
        We'll now recognize the gentleman from Florida for 5
    minutes.
        Mr. Gaetz. Thank you, Mr. Chairman.
        My question is a simple one, Mr. Balto. And as I've spoken
    with a number of my Republican colleagues, they answer the
    question in almost diametrically different ways.
        Today, under current law, are health insurers allowed to
    functionally collude on price?
        Mr. Balto. That technically would not be exempt under--the
    exemption would not apply to that.
        Mr. Gaetz. When you say ``technically,'' so does that mean
    that the type of information that health insurers are allowed
    to share with one another facilitates outcomes that walk and
    quack like collusion?
        Mr. Balto. No. First of all, if they engaged in naked price
    fixing, that would be illegal under the Act. If they want to
    engage in the kinds of things that, you know, Mr. Woody is
    talking about, the black letter law at this point is that
    sharing information is legal under the law.
        Mr. Gaetz. So does the consequence of the sharing of that
    information result in monopolistic tendencies in the price
    space?
        Mr. Balto. No, I think everybody--in terms of sharing
    historical information, I think everybody sees that as being
    procompetitive. But Mr. Miller says that they don't even need
    to do that and they don't really do that in the health
    insurance industry.
        Mr. Gaetz. I guess my next question relates to the extent
    to which----
        Mr. Miller. Well, they do it in different ways. And the
    question would be whether----
        Mr. Gaetz. Right. I'm on to a different question.
        Mr. Miller. Okay.
        Mr. Gaetz. So, as we look at a potential for ACA reforms
    and replacement that would allow people to purchase insurance
    across State lines, in the absence of dealing with this
    McCarran-Ferguson question, would we see the choice impact of
    those reforms impaired?
        Mr. Balto. You might not, because the exemption provides a
    dominant insurance company to engage in anticompetitive conduct
    to keep new rivals from entering their markets. So the goals of
    ACA reform might be stifled if you permit this exemption to
    continue.
        Mr. Gaetz. Mr. Miller, would you agree that the goals of
    those reforms to enhance consumer choice would be stifled in
    that context?
        Mr. Miller. It's not going to have much of an effect, this
    particular reform. There's a lot of other reforms that would.
        Just in terms of the interstate thing, one of the biggest
    barriers to having interstate competition is individual State
    insurance commissioners who believe that their approach to
    regulation is perfect----
        Mr. Gaetz. Well, sure, but we're contemplating----
        Mr. Miller [continuing]. Anyone else.
        Mr. Gaetz. Right. I think it's pretty out there that we're
    contemplating some functional preemption of that, where we
    would not allow States to be able to bar people from being able
    to cross State lines for the purpose of purchasing insurance.
        The question is, if we do not enact reforms that Mr. Gosar
    and Mr. Scott were advocating this morning, do we limit the
    effect of those choice protocols?
        Mr. Miller. You can legislate right around it. Look,
    there's older bills, and you know a number of them, which have
    set up a template of primary State insurer and the secondary
    State, domicile-based choice by the insurer as to where they're
    going to be regulated. There are models for doing that which
    don't in any way get to the particulars of the antitrust
    exemption.
        Mr. Gaetz. Mr. Balto, I served in the Florida legislature,
    and, you know, I saw the interaction that we had between health
    insurers in our State.
        Do you have a fear that there are circumstances around the
    country where States have sort of wrapped their legislative
    apparatus around the business models of various health
    insurers, leading to anticompetitive outcomes?
        Mr. Balto. Yes. Oftentimes, there are relationships between
    the legislatures and the insurance commissioners and insurance
    commissioners doesn't effectively police the market.
        In your State, unfortunately, for example, in the Aetna-
    Humana merger, the insurance commissioner did a very cursory
    review of the merger. Ultimately, the Justice Department sued
    and blocked the merger because of the substantial harm to
    Florida consumers.
        Mr. Gaetz. Thank you, Mr. Chairman. I yield back.
        Mr. Farenthold. Thank you very much.
        We'll now recognize the gentlewoman from Washington, Ms.
    Jayapal.
        Ms. Jayapal. Thank you very much, Mr. Chair.
        Thank you for your testimony.
        And, Mr. Slover, thank you for all of your work at
    Consumers Union.
        I come from the State of Washington, and I want to direct a
    few questions to you so I can understand what the impacts of
    this would be on a State that, frankly, has embraced the
    Affordable Care Act, and has put in place a relatively strong
    insurance commissioner. We do have a fairly robust insurance
    set of plans and insurers in the State. And we also have had, I
    think, decent oversight on many of our plans to make sure that
    we have small insurers that are able to participate.
        Part of our success also is that we, in our strong market,
    is that we moved very early to expand access to the State's
    Apple Health Care Medicaid program and chose to run our own
    State exchange.
        At the same time, our premiums are still too high. They are
    much lower than they are for the midlevel plans compared to the
    Federal increases and premiums, but we have had two insurers
    drop out and two more that potentially might drop out in 2017.
    I'm trying to understand how a repeal would affect a State like
    Washington, where we've actually embraced regulation at the
    State level in a way that benefits consumers.
        Could you speak a little bit to those issues of a repeal
    and how we put in place protections so that we don't have a
    race to the bottom as we open up the marketplace but we
    actually protect the strong regulation that we already have in
    place in the State and strengthen it further?
        Mr. Slover. Sure. Well, we are supporters of the Affordable
    Care Act, and whatever happens in the future, there are a lot
    of specific protections that are in that Act that we think are
    very important.
        What this legislation that's before us does is to add a
    dose of competition to the mix, that's lacking right now. We
    don't want everything that we want an insurance company to do
    to have to be regulated, to have to be a regulatory
    requirement. We would like the free market incentives of
    competition to also come into play, so that whatever a State
    decides is a minimum floor that needs to be set for some
    protection doesn't become the ceiling because the insurance
    companies all agree, ``Well, we've got to follow whatever the
    State's telling us to do, but that's all we're going to do,
    right, guys? We're not going to see if we can cut consumers a
    better deal. We're going to stick together on this so the
    consumers don't take advantage of us.''
        We don't want businesses with that instinct. We want
    businesses with the instinct to say, ``Okay, we've got this
    requirement. What else can we do? We have a certain market
    share now. We'd like to get more consumers buying from us, so
    we're going to look for ways to make our service better.''
        Ms. Jayapal. If we did repeal this, are there particular
    protections that you would want to see put in place in the
    manner in which we repeal it?
        Mr. Slover. I don't think allowing competition to be added
    to the current mix is going to create any uncertainties or
    dangers that would need to be separately addressed. I think
    those still need to be considered, as they have been. And
    whatever those decisions are, they will be augmented, the
    benefits to consumers will be augmented by having competition.
        Ms. Jayapal. I did have a question for Mr. Miller.
        Mr. Slover had stated that regulation and competition both
    work best when they can work hand-in-hand. What is your
    response to that?
        Mr. Miller. I think if we had less health insurance
    regulation we might be able to accommodate more antitrust
    regulation as a backup move. And I signaled that in my
    testimony. I'd like to see that mix put on the table.
        Ms. Jayapal. So you would support strong regulation in
    conjunction with----
        Mr. Miller. A balanced regulation.
        Ms. Jayapal. And what does that----
        Mr. Miller. It's a matter of degree. What I'm saying we are
    regulating this space so heavily through so many tools that
    adding more on top of it is piling more on, not just
    redundancy, but actually adding to it.
        If instead you had freer competition at the baseline level
    in other areas of regulation of health insurance, then there is
    an argument that could be made, as a backup policing move, that
    the normal operations of better versions of antitrust may be
    more appropriate in that regard.
        Ms. Jayapal. I have just 20 seconds left, but can I push
    you a little bit on that? Just tell me, what balanced
    regulation would you support?
        Mr. Miller. Well, depends which Administration you're
    talking about. We improved antitrust regulation quite a bit in
    the late 1970's and the 1980's. It slipped backwards over the
    last decade in general.
        Ms. Jayapal. So no specific--go ahead.
        Mr. Miller. I can elaborate in some followup testimony. You
    asked for a quick answer.
        Ms. Jayapal. Go ahead. You've got a couple more seconds.
        Mr. Balto. Yeah, I can't think of anything worse than
    suggesting that we slip backwards in antitrust enforcement. In
    the Bush administration, there were over 400 health insurance
    mergers; they didn't challenge any. When they've gone back and
    done econometric studies, they found that consumers are paying
    a lot more for their health insurance. The Obama administration
    reversed that, and I hope those gains are retained in the new
    Administration.
        Ms. Jayapal. Thank you.
        I yield back.
        Mr. Farenthold. Thank you very much.
        We'll now recognize my colleague from Texas, Mr. Ratcliffe.
        Mr. Ratcliffe. Thank you, Mr. Chairman.
        Mr. Woody, I want to start with you because you've staked
    out kind of an interesting middle ground, it seems to me, as a
    property casualty insurer.
        The group that you represent doesn't appear to be directly
    impacted by the current legislation. I guess, first of all, am
    I correct with respect to that? And if that's the case, do you
    have a concern regarding the repeal of McCarran-Ferguson?
        Mr. Woody. It is correct that the bill as it's currently
    drafted does not apply to property casualty insurers. Our
    concern is that we rely on the McCarran exemption, though, I
    think, much more than the health insurance industry does. So
    we're looking down the road and saying, well, if they repeal it
    for the health industry, we might very well be next. And I
    think we have a bigger stake in it, actually, than the health
    insurers do.
        Mr. Ratcliffe. Okay.
        Well, so let me ask you a followup question. Data sharing
    is one of the key activities that insurers cite for maintaining
    McCarran-Ferguson. But one criticism of the exemption is that
    it doesn't distinguish between procompetitive and
    anticompetitive data sharing.
        Do you think that's a valid criticism?
        Mr. Woody. I don't. I actually think that the data sharing
    that goes on in the industry is largely procompetitive. And I
    think there may be some agreement on the panel about that. I
    think it's working fairly well, the State system is working
    fairly well to police activity, anticompetitive activity that
    shouldn't be allowed, and yet allow the procompetitive
    activities that are good for consumers.
        Mr. Ratcliffe. Well, I'm guessing maybe Mr. Miller agrees
    with that.
        Mr. Miller. Sure. I mean, that's pretty well-established.
        There's a little bit of an odd contradiction in some of the
    arguments here, which is that all these things antitrust
    currently would say is okay, that's why it's so vital that it
    be restored in order to police these things, which is already
    waving it ahead and saying is all right.
        Mr. Ratcliffe. I noted in your written testimony you said
    that we've seen a shift in tighter Federal regulation following
    the passage of ObamaCare. What impact has that increased
    regulation had on the current marketplace with respect to
    competition, pricing, product offerings?
        Mr. Miller. If you're asking me, a more narrow range of
    policies that people can choose from. That's why a number of
    people are upset in the outside market that they had to either
    change provider networks or the policies they previously had--
    well, there's been some grandmothering to paper that over.
        In addition, we've had in many areas--it's done more on a
    county basis than a population basis, that's a different
    measure, in terms of a single insurer in a lot of the
    marketplace exchanges, as the early rush in has been followed
    by an exit out as insurers find out it's not a good business to
    keep losing money based upon the prescribed formulas in which
    they have to operate.
        Mr. Ratcliffe. So how would repealing McCarran-Ferguson
    impact that further?
        Mr. Miller. No, what I've said is that it's not really an
    issue of repealing McCarran-Ferguson really helping it or not.
    It's reconsidering those policies as part of the broader
    regulatory mix.
        Mr. Ratcliffe. Okay.
        Mr. Balto, I want to give you an opportunity here. Your
    position was very clearly stated when you said you think that
    McCarran-Ferguson does nothing but bring uncertainty and
    confusion to the market.
        You've said that State insurance commissioners don't
    necessarily have the capacity to fully understand or to fully
    address the problems that their State residents are
    experiencing. But the National Association of Insurance
    Commissioners has submitted a letter, in this case, opposing
    repeal. So where do you see the lack of capacity playing out?
        Mr. Balto. So when we've studied this issue--and we went
    back and studied it again and will continue to study it--you've
    seen very sporadic actions by State insurance commissioners.
    And if you were to contrast that, Congressman, with other
    industries where we have a Federal consumer protection
    enforcer, the Federal Trade Commission, it's dramatically
    different. You have one enforcer which has sophistication, the
    resources to bring the kinds of nationwide cases we're looking
    for.
        By the way, going to a point you were making before, this
    whole debate about the regulations to protect consumers, one
    way McCarran causes harm is it keeps the FTC out of the game.
    And because we don't really have an effective Federal enforcer,
    we have to look more toward Federal regulation to protect
    consumers, whereas if you eliminate McCarran and the FTC
    becomes the Federal consumer protection enforcer here, you
    might not have to rely on regulations quite as much.
        Mr. Ratcliffe. I want to thank all the witnesses for being
    here. Mr. Slover, I'm sorry, my time's expired, but I
    appreciate you all being here.
        I yield back, Mr. Chairman.
        Mr. Farenthold. Thank you, Mr. Ratcliffe.
        We'll now recognize the gentleman from Illinois for 5
    minutes.
        Mr. Schneider. Thank you, Mr. Chairman.
        And I want to also thank the witnesses for being here, for
    sharing your perspectives on a debate that, as you have all
    touched on, has been going on since McCarran-Ferguson was
    introduced, let alone passed.
        I'd like to start with Mr. Slover, please.
        One school of thought holds that repeal of McCarran-
    Ferguson won't necessarily achieve the desired objectives of
    providing affordable, accessible, high-quality health care. How
    would you respond to that? And why do you get a sense that
    they're arguing it won't move the needle?
        Mr. Slover. Well, I think competition is always a good
    thing. I think this marketplace also needs regulation. And they
    work in tandem, or that's how they ought to work, is in tandem,
    and that competition will spur businesses to want to--the
    insurance companies here, the health insurance companies--to
    find a way to give consumers a better deal because their
    business will thrive as a result of that.
        So in all kinds of ways the whole principle behind
    antitrust is that you don't want competitors getting together
    and saying, you know, ``We're feeling a lot of pressure from
    competition now. If we all sit down and talk together, we can
    figure out a way to take some of this pressure off so that
    consumers won't be taking such advantage of us, and we'll be
    able to get a better deal for ourselves in the marketplace.''
        You don't want that kind of an instinct to develop as a way
    of doing business. And, in general, having the antitrust laws
    there, you don't have to bring an enforcement action every day.
    Just the fact that they're there is going to change business
    instincts for the better.
        Mr. Schneider. Mr. Balto, do you want to expand on that?
        Mr. Balto. That was a great answer. I can't do better than
    that.
        Mr. Schneider. Fair enough.
        One of the debates happening in Congress right now is
    whether or not to repeal the Affordable Care Act, whether we
    repeal the Affordable Care Act without a replacement.
        What impact would a repeal of McCarran-Ferguson, repeal of
    the Affordable Care Act without replacement, what sense would
    you have that would have on the marketplace?
        Mr. Balto?
        Mr. Balto. First, at the end of our testimony, it builds on
    George's point that you need a mix of antitrust enforcement and
    smart regulation to make these markets work effectively. And I
    think it's worth everybody taking a look at it to sort of see
    how regulation does really improve the nature of competition.
        I think eliminating this just provides greater opportunity
    for competition to fully break out, and that's something that's
    necessary to make health insurance markets work. And if that
    happens, then, you know, we may need to rely somewhat less on
    regulation as we go forward.
        Mr. Schneider. Mr. Miller?
        Mr. Miller. Well, what I usually hear is the addition key
    and not the subtraction key or the balancing key--more, more,
    more. If there's a window to think about a better balance,
    that's a more promising avenue in which to follow.
        Mr. Schneider. But is it a fair question--you look at the
    Affordable Care Act that has tried to increase competition.
    Overall, I think the assessment is, over the last number of
    years, the rate of increase in healthcare costs have come down,
    but we're seeing that health insurance costs and the
    competition in States like Illinois isn't what we had hoped it
    would be.
        How would repeal of McCarran-Ferguson address----
        Mr. Miller. I think it's really somewhat to the side of it,
    and that's the reason why you had the Congressional Budget
    Office view in 2009 on similar legislation that it really
    wouldn't have much impact in either direction.
        However, we have to be careful of what we call competition.
    What the Affordable Care Act wanted was a particular type of
    highly managed, highly regulated ``competition'' in quotation
    marks, which was to achieve certain results. They haven't
    worked out as materialized, but it was not the same thing as a
    consumer-directed level of procompetitive activity.
        Mr. Schneider. And Mr. Balto?
        Mr. Balto. And my testimony directly addresses that and
    shows that there have been savings because of some of those
    regulatory provisions. But just to give one concrete example,
    when you talk about the market division in Virginia affecting
    Mr. Goodlatte's constituents, there's clearly added costs that
    might come about because of the McCarran-Ferguson Act. It
    dampens the type of competition that would otherwise occur.
        Mr. Schneider. Okay.
        Again, I'll thank the witnesses for your testimony and your
    input and thank the Chairman for calling this hearing. Thank
    you very much. I yield back.
        Mr. Farenthold. Thank you.
        We'll now recognize the gentleman from California for 5
    minutes.
        Mr. Swalwell. Thank you, Chair.
        Mr. Slover, you've expressed your support for the
    Affordable Care Act and its important provisions that have
    extended health insurance coverage to millions of Americans.
    This landmark legislation has even saved the lives of people
    like Terri, one of my constituents from Dublin, California.
        Before the Affordable Care Act, Terri did not have access
    to proper medical care. After the Affordable Care Act was
    passed, Terri got covered and was able to get preventive care.
    During a well-woman exam, it was revealed that Terri had early-
    stage breast cancer. By catching her cancer early, she was able
    to undergo surgery and is now cancer-free. Without the
    Affordable Care Act, Terri tells us she would never have
    received the preventive care that she credits for saving her
    life.
        While I've heard countless stories like Terri's, House
    Republicans are looking to dismantle the hard-fought
    protections of the Affordable Care Act. How do you think
    Congress should be working to strengthen the Affordable Care
    Act and ensure people like Terri from Dublin, California, can
    keep their coverage?
        Mr. Slover. Well, we're strong supporters of the Act, and
    we want to see whatever is changed to continue the essential
    protections that are in the Affordable Care Act, to build on
    those, rather than to undermine them.
        And I could take some time to tell you some of the key
    things that we think are benefits of the Affordable Care Act
    that we think need to be preserved.
        It should cover as many or more Americans as currently--not
    just make coverage ``available'' in some sense, but actually be
    as affordable or more affordable to those who are now covered.
        Preexisting conditions should not be excluded or charged at
    a higher rate. Families are now protected against being frozen
    into keeping the same insurance company, or keeping the same
    job because that's where they get their insurance, or being
    devastated when circumstances force them to switch insurance
    companies or jobs.
        A family should all be able to stay on the same health plan
    until the kids are grown and out of the house and have their
    own jobs.
        A basic package of health benefits should be as good or
    better than what's available now.
        There should be no caps on coverage, not annual and not
    lifetime. They would've probably affected your constituent that
    you're talking about. We don't want consumers to be hit with
    devastating illness and then find that they don't have
    insurance any longer to cover that.
        There should be strong, clear provider network standards.
        The choices of available plans must be clear and
    understandable.
        And then there's a lot in the Affordable Care Act that
    doesn't make the headlines but that has been critically
    important for bringing down the cost of providing health care
    while also improving patient safety and quality of care, and
    those programs should continue.
        And that's just a short list. You know, we could spend all
    day talking about what the benefits are. Our point is just
    there's a lot of good stuff there, and we want to see it kept.
        Mr. Swalwell. Mr. Slover, I was talking to a small-business
    owner in the East Bay area of California over the weekend, and
    he told me something that I don't think gets enough attention.
    He said, look, I'm a small-business owner. I'm exempted from
    the Affordable Care Act because I have 50 or fewer employees,
    so I don't have to provide healthcare coverage to my employees.
        But he said, what I appreciate about the Affordable Care
    Act is that, each year, before the Affordable Care Act, my
    team, management team, would have to sit down and look at how
    astronomically high the coverage costs have been, and then we'd
    have to figure out how to cover the difference, and sometimes
    that meant, you know, increasing the deductible amounts so that
    our employees could afford it.
        And he said, what I've noticed since the Affordable Care
    Act is that we don't have to have those pressure-point
    decisions anymore, meaning that he hasn't seen the costs of
    health care go up as much or at the same rate that it was going
    up before the Affordable Care Act went in place.
        So what he is saying is he doesn't even fall under the
    Affordable Care Act as far as now having coverage and didn't
    have coverage before, but because so many other people have
    coverage, he's noticed that the cost of healthcare coverage for
    his company and providing for his employees has gone down. Have
    you seen that?
        Mr. Slover. Yes. I think a rising tide lifts all boats. And
    California has been particularly good in implementing the
    Affordable Care Act. One of our offices is in San Francisco, so
    we're very well aware of how things have improved in
    California, and we hope that will stay.
        Mr. Swalwell. Great. Thank you.
        Mr. Chair, I yield back.
        Mr. Farenthold. Thank you very much.
        Seeing as we have no other Members with questions, I want
    to take this opportunity to once again thank our panel of
    witnesses and welcome Mr. Cicilline. This is his first day as
    the Ranking Member of the Committee. I'm the Vice-Chairman of
    this Subcommittee. You will usually see Mr. Marino sitting up
    here.
        But I hope I made your first day a pleasant one.
        Mr. Cicilline. You did. You did.
        Mr. Farenthold. And I would also remind our panelists that
    the Chairman of the full Committee, Mr. Goodlatte, did indicate
    that the political climate is such that the repeal of McCarran-
    Ferguson is likely, and if you all have concerns about how it's
    done, now is the time to let the Committee know about it. And
    we would welcome any followup you have in writing.
        So thank you all again very much.
        And, with that, this Subcommittee is adjourned.
        [Whereupon, at 11:59 a.m., the Subcommittee was adjourned.]

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