[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


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      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:]
    
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                               __________
                               
    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:]
    
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                               __________
    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.
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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.
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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.
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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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