[House Report 115-36]
[From the U.S. Government Publishing Office]


115th Congress      }                                     {     Report
                        HOUSE OF REPRESENTATIVES
 1st Session        }                                     {     115-36

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



 
            COMPETITIVE HEALTH INSURANCE REFORM ACT OF 2017

                                _______
                                

March 15 (legislative day, March 13), 2017.--Committed to the Committee 
 of the Whole House on the State of the Union and ordered to be printed

                                _______
                                

   Mr. Goodlatte, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 372]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 372) to restore the application of the Federal 
antitrust laws to the business of health insurance to protect 
competition and consumers, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill as amended do pass.

                                CONTENTS

                                                                   Page

The Amendment....................................................     1
Purpose and Summary..............................................     2
Background and Need for the Legislation..........................     3
Hearings.........................................................     7
Committee Consideration..........................................     8
Committee Votes..................................................     8
Committee Oversight Findings.....................................     9
New Budget Authority and Tax Expenditures........................     9
Congressional Budget Office Cost Estimate........................     9
Duplication of Federal Programs..................................    10
Disclosure of Directed Rule Makings..............................    11
Performance Goals and Objectives.................................    11
Advisory on Earmarks.............................................    11
Section-by-Section Analysis......................................    11
Changes in Existing Law Made by the Bill, as Reported............    12

                             The Amendment

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Competitive Health Insurance Reform 
Act of 2017''.

SEC. 2. RESTORING THE APPLICATION OF ANTITRUST LAWS TO THE BUSINESS OF 
                    HEALTH INSURANCE.

  (a) Amendment to Mccarran-Ferguson Act.--Section 3 of the Act of 
March 9, 1945 (15 U.S.C. 1013), commonly known as the McCarran-Ferguson 
Act, is amended by adding at the end the following:
  ``(c)(1) Nothing contained in this Act shall modify, impair, or 
supersede the operation of any of the antitrust laws with respect to 
the business of health insurance (including the business of dental 
insurance and limited-scope dental benefits).
  ``(2) Paragraph (1) shall not apply with respect to making a 
contract, or engaging in a combination or conspiracy--
          ``(A) to collect, compile, or disseminate historical loss 
        data;
          ``(B) to determine a loss development factor applicable to 
        historical loss data;
          ``(C) to perform actuarial services if such contract, 
        combination, or conspiracy does not involve a restraint of 
        trade; or
          ``(D) to develop or disseminate a standard insurance policy 
        form (including a standard addendum to an insurance policy form 
        and standard terminology in an insurance policy form) if such 
        contract, combination, or conspiracy is not to adhere to such 
        standard form or require adherence to such standard form.
  ``(3) For purposes of this subsection--
          ``(A) the term `antitrust laws' has the meaning given it in 
        subsection (a) of the first section of the Clayton Act (15 
        U.S.C. 12), except that such term includes section 5 of the 
        Federal Trade Commission Act (15 U.S.C. 45) to the extent that 
        such section 5 applies to unfair methods of competition;
          ``(B) the term `business of health insurance (including the 
        business of dental insurance and limited-scope dental 
        benefits)' does not include--
                  ``(i) the business of life insurance (including 
                annuities); or
                  ``(ii) the business of property or casualty 
                insurance, including but not limited to--
                          ``(I) any insurance or benefits defined as 
                        `excepted benefits' under paragraph (1), 
                        subparagraph (B) or (C) of paragraph (2), or 
                        paragraph (3) of section 9832(c) of the 
                        Internal Revenue Code of 1986 (26 U.S.C. 
                        9832(c)) whether offered separately or in 
                        combination with insurance or benefits 
                        described in paragraph (2)(A) of such section; 
                        and
                          ``(II) any other line of insurance that is 
                        classified as property or casualty insurance 
                        under State law;
          ``(C) the term `historical loss data' means information 
        respecting claims paid, or reserves held for claims reported, 
        by any person engaged in the business of insurance; and
          ``(D) the term `loss development factor' means an adjustment 
        to be made to reserves held for losses incurred for claims 
        reported by any person engaged in the business of insurance, 
        for the purpose of bringing such reserves to an ultimate paid 
        basis.''.
  (b) Related Provision.--For purposes of section 5 of the Federal 
Trade Commission Act (15 U.S.C. 45) to the extent such section applies 
to unfair methods of competition, section 3(c) of the McCarran-Ferguson 
Act shall apply with respect to the business of health insurance 
without regard to whether such business is carried on for profit, 
notwithstanding the definition of ``Corporation'' contained in section 
4 of the Federal Trade Commission Act.

                          Purpose and Summary

    In 1945, Congress passed the McCarran-Ferguson Act,\1\ 
which exempts the business of insurance from Federal antitrust 
regulation to a limited extent. The ``Competitive Health 
Insurance Reform Act'' would have the effect of altering the 
McCarran-Ferguson Act's Federal antitrust exemption so that it 
no longer applies to the business of health insurance. The 
amended bill leaves unchanged the current treatment under 
McCarran-Ferguson for certain practices involving the 
collection, dissemination, and analysis of historical loss 
data, the performance of certain actuarial services, and the 
development and use of standardized forms. Moreover, the 
McCarran-Ferguson Act would remain in effect for other types of 
insurance (e.g., car insurance or property insurance), thus 
maintaining a narrowly tailored Federal antitrust exemption for 
certain practices relating to the provision of those types of 
services.
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    \1\15 U.S.C. Sec. Sec. 1011-1015.
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                Background and Need for the Legislation

A. Brief Overview of Insurance Regulation and the McCarran-Ferguson Act
    Historically, the business of insurance was viewed as not 
falling within interstate commerce and thus was subject to 
state, not Federal, regulation.\2\ 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 in restraint of trade.\3\ 
Both states and insurers decried the change, and Congress 
responded with the McCarran-Ferguson Act.\4\ The Act exempts 
the ``business of insurance'' to ``the extent it is regulated 
by state law'' from Federal antitrust laws, including 
provisions of the Federal Trade Commission Act.\5\ However, the 
exemption does not cover agreements to ``boycott, coerce, or 
intimidate.''\6\
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    \2\Paul v. Virginia, 75 U.S. (8 Wall.) 168, 183 (1868) (find that 
``[i]ssuing a policy of insurance is not a transaction of [interstate] 
commerce.'').
    \3\United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533 
(1944).
    \4\15 U.S.C. Sec. Sec. 1011-1015.
    \5\15 U.S.C. Sec. 1012.
    \6\15 U.S.C. Sec. 1013(b).
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    In determining whether conduct constitutes the ``business 
of insurance'' under McCarran-Ferguson, courts consider: (1) 
whether the activity has the effect of transferring a 
policyholder's risk; (2) whether the activity is an integral 
part of the policy relationship between the insurer and a 
policyholder; and (3) whether the activity is limited to 
entities within the insurance industry.\7\ It should be noted 
that a wide range of practices of health insurers do not 
constitute the business of insurance under this test. As 
evidenced by the Justice Department's challenges to both the 
Anthem/Cigna and Aetna/Humana transactions, health insurance 
mergers are still reviewed by antitrust agencies and may be 
subject to conditions when the reviewing agency or a court has 
determined that a merger raises anti-competitive concerns.\8\
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    \7\Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982).
    \8\Bid-rigging also has been held not to constitute the business of 
insurance and thus not within the exemption. See In re Ins. Brokerage 
Antitrust Litig., 2006 WL 2850607, MDL No. 1663 (D.N.J. Oct. 3, 2006).
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    As a direct result of McCarran-Ferguson, every state has 
its own regulations and regulatory agency to protect consumers 
and competition in the insurance market. These regulations 
include bans on the types of anticompetitive conduct by 
insurers that the Federal antitrust laws would reach if they 
applied.\9\ The Congressional Budget Office noted when 
analyzing a prior bill similar to H.R. 372: ``According to 
state insurance regulators, state laws already prohibit issuers 
of health insurance and medical malpractice insurance from 
engaging in practices such as price fixing, bid-rigging, and 
market allocations.''\10\
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    \9\Congressional Budget Office, Cost Estimate: H.R. 3596 Health 
Insurance Industry Antitrust Enforcement Act of 2009, Oct. 23, 2009, at 
2, available at https://www.cbo.gov/sites/default/files/111th-congress-
2009-2010/costestimate/hr35960.pdf.
    \10\Id.
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B. Narrow Exemption
    A review of cases addressing what constitutes the 
``business of insurance'' shows that the McCarran-Ferguson 
exemption has been judicially narrowed in the 70 years since 
its enactment. The cases are highly specific. However, certain 
general conclusions can be drawn:

         LActivities among insurers involving 
        cooperative ratemaking and related functions constitute 
        the business of insurance.\11\ Insurers may enter into 
        agreements or arrangements that do not involve such 
        matters, but the more arrangements involve functions 
        that are not unique to the insurance business, or the 
        primary impact of which is not on the insurance market, 
        the less likely courts are to apply the exemption.\12\
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    \11\California League of Indep. Ins. Prods. v. Aetna Cas. & Sur. 
Co., 175 F. Supp. 857, 860 (N.D. Cal. 1959) (``It is common knowledge 
that the rate of commission paid to agents is a vital factor in the 
ratemaking structure.'').
    \12\See, e.g., United States v. Title Ins. Rating Bur. of Arizona, 
Inc., 700 F. 2d 1247 (9th Cir. 1983) (provision of escrow services by 
title insurance companies is not the business of insurance).

         LActivities involving the relationship between 
        the insurer and the insured constitute the business of 
        insurance.\13\ If the activity does not involve risk-
        spreading, however, or if its primary impact on 
        competition is not in the insurance industry, courts 
        are less likely to apply the exemption.\14\
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    \13\SEC v. National Securities, Inc., 393 U.S. 453, 459-60 (1969).
    \14\See, e.g., Virginia Academy of Clinical Psychologists v. Blue 
Shield of Virginia, 624 F.2d 476 (4th Cir. 1980), cert. denied, 450 
U.S. 916 (1981) (finding that insurer's policy of refusing to pay for 
services of clinical psychologist unless they were billed through a 
physician to not be the business of insurance.).

         LActivities involving arrangements between 
        insurers and third-party providers of non-insurance 
        goods and service do not constitute the business of 
        insurance.\15\
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    \15\See, e.g., Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 
126 (1982); Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 
205 (1979).

    DOJ testified to Congress in 1999 that ``the McCarran-
Ferguson Act does not give insurers leverage.''\16\ The 
Department described the exemption as a ``limited one'' and 
stated that the Act ``provides no obstacle to prosecution of 
[appropriate] claims either by the affected providers or by 
state or Federal antitrust enforcement agencies.'' DOJ has 
since shifted its position, saying that the Act's exemption is 
``very broad'' although it did not indicate why its position 
shifted.\17\
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    \16\Hearing on the Quality Health Care Coalition Act of 1999 Before 
the H. Comm. On the Judiciary (1999) (statement of Joel I. Klein, Asst. 
Atty. Gen., Antitrust Division, Dept. of Justice).
    \17\Hearing on Prohibiting Price Fixing and Other Anticompetitive 
Conduct in the Health Insurance Industry Before S. Comm. On the 
Judiciary (2009) (statement of Christine A. Varney, Asst. Att'y 
General, Antitrust Division, Dept. of Justice).
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C. Data Aggregation and Standardized Forms
    In addition to protecting state primacy in insurance 
regulation, the McCarran-Ferguson Act also gives states the 
flexibility to allow some types of regulated coordination 
between insurance companies that actually improve competition. 
To be competitive, an insurer needs accurate and comprehensive 
actuarial data so it can gauge the risk associated with its 
policies and set premiums accordingly.\18\ For this reason, 
state insurance regulators have historically allowed insurance 
companies to share actuarial and loss information, often 
through a ratings bureau, so that they can more accurately 
estimate risk and price their policies.\19\ At the most basic 
level, companies gather data from various insurers, aggregate 
and analyze this data, and provide aggregated data back to the 
individual insurers for use in setting future rates.
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    \18\See Janice E. Rubin and Baird Webel, Congressional Research 
Service, Limiting McCarran-Ferguson Act's Antitrust Exemption for the 
``Business of Insurance'': Impact on Health Insurers and Issuers of 
Medical Malpractice Insurance at 5 (Jan. 14, 2010), available at http:/
/www.crs.gov/reports/pdf/R40968 (hereinafter ``CRS Report'').
    \19\Id.
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    This cooperation is especially valuable to small insurance 
companies and start-ups, which would otherwise lack the scale 
of information they need to price policies accurately.\20\ By 
making it possible for small and independent insurance 
companies to compete, information-sharing within the insurance 
industry arguably increases competition and lowers prices for 
consumers.\21\ Repeal proponents claim that the market is 
different today; data-sharing is largely permitted under 
Federal antitrust laws and the bigger problem is market 
consolidation.
---------------------------------------------------------------------------
    \20\Id.
    \21\Id.
---------------------------------------------------------------------------
    In addition to data sharing, ratings bureaus are also 
involved in the creation and filing of insurance policy forms. 
Insurance policy forms are complex legal documents, and, as 
controversies over insurance coverage for New York's World 
Trade Center and for buildings damaged in Hurricane Katrina 
have shown, millions of dollars may ride on the interpretation 
of a handful of words. Supporters of the McCarran-Ferguson Act 
assert that standardized forms promote comparison shopping by 
consumers by reducing the confusion that could result from 
multiple policy forms being offered by different companies. 
Since the states generally require the filing of policy forms 
for state approval, using a jointly created form that has 
already been filed with the states significantly reduces the 
regulatory burden on a single insurer. The uniformity of policy 
forms, however, also may reduce consumer choice.
    If the McCarran-Ferguson antitrust protection for ``the 
business of insurance'' is, in fact, curtailed or abolished, 
many lawsuits challenging some of these insurer practices as 
violations of the Federal antitrust laws are likely. It is 
possible that many of the cooperative activities that insurers 
engage in may be found to be permissible under the ``state 
action'' doctrine, which immunizes from the Federal antitrust 
laws: (1) all actions of state public entities; and, (2) those 
of private entities that are legislatively mandated or 
authorized and are ``actively supervised'' by the states. The 
question then becomes to what extent do the requirements of the 
McCarran-Ferguson exemption (under which current practices have 
been developed) differ from requirements of the ``state 
action'' doctrine, which dictates both that there be a ``clear 
articulation'' of state policy and that a state engage in 
``active supervision'' of the private activity that occurs in 
response to that articulation.
    If the cited examples of cooperation were found to be in 
violation of Federal antitrust laws, it would likely 
necessitate significant changes in the operation of insurers, 
particularly small insurers which do not have large pools of 
information from their own experience. Should additional data 
be unavailable to small insurers in some way, it may spur 
further consolidation in the insurance industry, as small 
insurers merge in order to gain the competitive advantage of 
additional information.
D. Sale of Insurance Across State Lines
    Current interest surrounding McCarran-Ferguson repeal for 
health insurance appears to be related to interest in the 
passage of a Federal law to permit the sale of insurance across 
state lines. However, the general consensus, including among 
witnesses at the most recent Judiciary hearing on the 
Competitive Health Insurance Reform Act, is that if Congress 
decides to allow insurers to sell across state lines, such 
action does not necessarily require a repeal of McCarran-
Ferguson.\22\ For example, Robert Woody, Vice President--
Policy, Property Casualty Insurers Association of America, 
testified that ``Congress reserved the right to apply Federal 
laws to the business of insurance whenever it wants to. All 
that is required is that Congress make clear that the Federal 
law applies to insurers.''\23\
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    \22\See H.R. 372, the ``Competitive Health Insurance Reform Act of 
2017: Hearing Before the Subcomm. on Regulatory Reform, Commercial and 
Antitrust Law of the H. Comm. on the Judiciary (2017) (hereinafter 
RRCAL Subcomm. Hearing).
    \23\RRCAL Subcomm. Hearing, supra note 22, at 6 (written testimony 
of Mr. Robert Woody).
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    Insurers already can (and a number do) sell across state 
lines, to the extent permitted by the individual states. While 
instances of this are limited, it is unclear how much is a 
result of protectionist state policy rather than the actual 
viability of selling across state lines. Several parties have 
spoken of the general difficulty involved in setting up a 
provider network in one state from another. Importantly, a 
repeal of McCarran-Ferguson would not prohibit the states' 
ability to regulate the health insurance market outside of the 
antitrust sphere any more than regulations provided under 
existing Federal law.
E. Previous Legislative Activity
    The Committee has from time to time considered legislation 
to repeal or scale back the McCarran-Ferguson antitrust 
exemption since at least the late 1980's. Some prior 
legislative efforts to repeal or scale back the exemption are 
discussed in detail in the Committee's report on the Insurance 
Competitive Pricing Act of 1994, H.R. 9 (103d Cong.).\24\
---------------------------------------------------------------------------
    \24\H.R. Rep. No. 103-853 (1994).
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    More recently, in the 114th Congress, there were five 
varying bills introduced to repeal the McCarran-Ferguson Act. 
Mr. Gosar (R-AZ) introduced a bill which applied to health and 
dental insurance, but not medical malpractice insurance.\25\ 
House Judiciary Committee Ranking Member Conyers (D-MI) 
introduced a bill which included health insurance and medical 
malpractice, but specifically permitted data-sharing 
activities.\26\ Mr. Guthrie (R-KY) introduced a similar bill, 
but prohibited private class action lawsuits against health 
insurers for antitrust violations.\27\ The other two bills were 
introduced by Messrs. Defazio (D-OR) and Roe (R-TN).\28\
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    \25\See H.R. 494, 114th Cong.
    \26\See H.R. 99, 114th Cong.
    \27\See H.R. 3682, 114th Cong.
    \28\See H.R.s 2462, 2653, 114th Cong.
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    Rep. Gosar introduced H.R. 372, the ``Competitive Health 
Insurance Reform Act of 2017'', on January 9, 2017. This bill 
is identical to Mr. Gosar's bill introduced during the 114th 
Congress. The Competitive Health Insurance Reform Act of 2017 
would have the effect of altering 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 (e.g., car 
insurance or property insurance), thus maintaining a narrowly 
tailored Federal antitrust exemption for certain practices 
relating to the provision of those types of services.
    H.R. 372 as amended by the Committee has been made similar 
in a number of respects to repeal legislation that was 
introduced in the 111th and 112th Congresses. During the 111th 
Congress, the Committee reported out a prior version of Ranking 
Member Conyers' bill, limited to health insurance and medical 
malpractice. Ranking Member Conyers' bill contained carve-outs 
for information-gathering and for rate-setting activities of 
state regulatory agencies. Moreover, when reported out of the 
Committee, the bill included an amendment ``to add safe harbors 
for collecting and distributing historical loss data, 
developing a loss development factor, and performing actuarial 
services that do not involve a restraint of trade.''\29\ The 
full House ultimately voted on and passed during the 111th 
Congress a different bill in a bipartisan vote by 406-19.\30\ 
This legislation was not acted on by the Senate. In the 112th 
Congress, it was included in comprehensive health care 
legislation introduced by Rep. Gingrey (R-GA) that passed the 
House 223-181.\31\ Again, this legislation was not acted on by 
the Senate.
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    \29\See Health Insurance Industry Antitrust Enforcement Act of 
2009, H.R. Rep. No. 111-322 (2009).
    \30\H.R. 4626, 111th Cong.
    \31\See H.R. 5, 112th Cong.
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                                Hearings

    On February 16, 2017, the Subcommittee on Regulatory 
Reform, Commercial and Antitrust Law held a legislative hearing 
on the Competitive Health Insurance Reform Act.\32\ At this 
hearing, the Subcommittee received testimony from: Congressman 
Paul Gosar; Congressman Austin Scott (GA-08); Thomas P. Miller, 
Resident Fellow at the American Enterprise Institute; David 
Balto, Principal, Law Offices of David Balto and Health Policy 
Program Fellow, New America Foundation; Robert Woody, Vice 
President--Policy, Property Casualty Insurers Association of 
America; and George Slover, Senior Policy Counsel, Consumers 
Union. Both Congressmen Gosar and Scott discussed the 
importance of the Competitive Health Insurance Reform Act and 
their reasons for filing the bill.
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    \32\See RRCAL Subcomm. Hearing, supra note 22.
---------------------------------------------------------------------------
    Mr. Miller testified generally against the bill and noted 
that McCarran-Ferguson provides no exemption against scrutiny 
under state antitrust laws and that merger enforcement 
authority over insurers remains at both the state and Federal 
level.\33\ Mr. Miller admitted that an argument could be made 
that many of the activities insurers are concerned with may be 
exempt from existing Federal antitrust laws through the court 
developed rule of reason.\34\ However, the uncertain risks of 
new litigation challenges and organizational change pressures 
would produce offsetting costs.\35\ Mr. Miller specified that 
cooperative activities essential to the current health care 
market include aggregation of trending/signaling rate and 
historical loss data, utilizing of common forms, and joint 
underwriting.
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    \33\RRCAL Subcomm. Hearing, supra note 22, at 8 (testimony of Mr. 
Thomas Miller).
    \34\Id. at 10-11.
    \35\Id. at 11.
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    Mr. Balto testified in favor of the bill and asserted that 
the health care market desperately needs Federal antitrust 
oversight due to its highly-concentrated nature, complex and 
opaque transactions, and high barriers to entry.\36\ According 
to Mr. Balto, the state insurance commissioners whom McCarran-
Ferguson defers antitrust regulation to, do not ``have the 
capacity to fully address the problems that their states' 
residents are experiencing.''\37\ Rather, Mr. Balto believes 
that FTC oversight is necessary to provide a high standard of 
uniform protection.\38\
---------------------------------------------------------------------------
    \36\RRCAL Subcomm. Hearing, supra note 22, at 2 (written testimony 
of Mr. David Balto).
    \37\Id.
    \38\Id.
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    Mr. Woody testified against the bill and cautioned that 
while the current bill is limited to health insurance, 
expanding of the scope seems likely, and the importance of 
maintaining the McCarran-Ferguson exemption to protect the data 
sharing activities of smaller and less concentrated property 
and casualty insurers cannot be overstated. Mr. Woody noted 
that ``[e]ven larger insurers of any size seeking to enter new 
states, markets, classes of business, or product lines depend 
upon industry wide data that is available to them only because 
of the McCarran limited exemption.''\39\ In his testimony, Mr. 
Woody also noted that while competitive concentration is high 
in the case of health insurance, it is significantly lower in 
property and casualty insurance. Because McCarran impacts both 
industries equally, the disparate concentrations cannot be 
blamed solely on McCarran-Ferguson.\40\
---------------------------------------------------------------------------
    \39\RRCAL Subcomm. Hearing, supra note 22, at 5 (written testimony 
of Mr. Robert Woody).
    \40\Id. at 7.
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    Mr. Slover testified in favor of the bill and believes that 
repeal would add a much-needed dose of competition in the 
health insurance market. Specifically, increased competition 
would prevent insurers from ``agreeing among themselves that 
they will treat the regulatory floor as also the ceiling.''\41\ 
Moreover, in discussing the risks associated with maintaining 
the exemption, Mr. Slover noted that ``many kind of 
arrangements, such as if insurers were to require providers to 
restrict the quality of care they offer consumers, or to impose 
higher cost-sharing, in order to participate in a network, 
could be covered'' under the exemption.\42\
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    \41\RRCAL Subcomm. Hearing, supra note 22, at 4 (written testimony 
of Mr. George Slover).
    \42\Id.
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                        Committee Consideration

    On February 28, 2017, the Committee met in open session and 
ordered the bill H.R. 372 favorably reported, with an 
amendment, by voice vote, a quorum being present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that no 
recorded votes were taken during the Committee's consideration 
of H.R. 372.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 372, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 10, 2017.
Hon. Bob Goodlatte, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 372, the 
``Competitive Health Insurance Reform Act of 2017.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Stephen 
Rabent and Scott Laughery, who can be reached at 226-2860.
            Sincerely,
                                                Keith Hall,
                                                  Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member




       H.R. 372--Competitive Health Insurance Reform Act of 2017.

      As ordered reported by the House Committee on the Judiciary 
                         on February 28, 2017.




    Under current law, some activities of companies that 
provide health insurance are exempt from certain Federal 
antitrust laws if the companies are engaged in the business of 
insurance and are regulated at the state level. H.R. 372 would 
remove that exemption and subject such businesses to Federal 
antitrust laws, but would retain the antitrust exemption for 
certain collaborative activities between health insurance 
businesses.
    Based on an analysis of information from the Federal Trade 
Commission (FTC) about the commission's current enforcement 
capabilities, CBO estimates that implementing H.R. 372 would 
increase costs by less than $500,000 for the FTC and the 
Department of Justice (DOJ) to enforce the expanded antitrust 
laws. Such spending would be subject to the availability of 
appropriated funds.
    H.R. 372 could affect the size and costs of premiums 
charged by private health and dental insurance companies, but 
those effects would probably be quite small. Changes in health 
or dental insurance premiums can affect Federal revenues 
because of the favorable tax treatment that is accorded to 
employment-based coverage under current law. Premiums might be 
lower to the extent that enacting the bill would prevent 
insurers from engaging in practices currently exempted from 
antitrust law. (That effect would probably be small because the 
range of insurer practices that fall under the antitrust 
exemption is narrow and such practices are subject to state 
regulation.) On the other hand, insurers could become subject 
to additional litigation and thus their costs and premiums 
might increase. Based on information from the National 
Association of Insurance Commissioners, the FTC, and DOJ, CBO 
estimates that both of those effects would be small. Thus, 
enacting the bill would have no significant net effect on the 
premiums that private insurers would charge for health or 
dental insurance and any effect on Federal revenue would be 
negligible.
    Because those prosecuted and convicted under H.R. 372 could 
be subject to criminal fines, Federal collections may increase. 
Criminal fines are recorded as revenues, deposited in the Crime 
Victims Fund, and later spent without further appropriation 
action; therefore, pay-as-you-go procedures apply. CBO expects 
that any additional revenues and subsequent direct spending 
would not be significant because the legislation would probably 
affect only a small number of cases.
    CBO estimates that enacting H.R. 372 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2028.
    H.R. 372 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments.
    H.R. 372 would impose a private-sector mandate, as defined 
in UMRA, on issuers of health insurance by repealing their 
exemptions from Federal antitrust laws with some exceptions. 
Because state laws generally prohibit or regulate activities 
that would be prohibited under the bill, CBO estimates that the 
incremental cost for health insurers to comply with the mandate 
would fall below the annual threshold established in UMRA for 
private-sector mandates ($156 million in 2017, adjusted 
annually for inflation).
    The CBO staff contacts for this estimate are Stephen Rabent 
and Scott Laughery (for Federal costs) and Amy Petz (for 
private-sector mandates). The estimate was approved by H. 
Samuel Papenfuss, Deputy Assistant Director for Budget 
Analysis.

                    Duplication of Federal Programs

    No provision of H.R. 372 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that H.R. 372 specifically directs 
to be completed no specific rule makings within the meaning of 
5 U.S.C. Sec. 551.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
372 repeals the McCarran-Ferguson Act's Federal antitrust 
exemption as it applies to the business of health insurance 
(including the business of dental insurance and limited scope 
dental benefits), while maintaining safe harbors for pro-
competitive cooperative activities.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 372 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.

                      Section-by-Section Analysis

    The following discussion describes the bill as reported by 
the Committee.
    Section 1. Short Title. Provides that the bill may be 
referred to as the ``Competitive Health Insurance Reform Act of 
2017.''
    Section 2. Restoring the Application of Antitrust Laws to 
the Business of Health Insurance.

         LSec. 2(a)(c)(1): The McCarran-Ferguson Act 
        provides that Federal antitrust law, including the 
        Sherman Act, Clayton Act, and FTC Act shall not apply 
        to the ``business of insurance.'' The Competitive 
        Health Insurance Reform Act amends this section to 
        provide that the exception for the business of 
        insurance does not apply to ``the business of health 
        insurance (including the business of dental insurance 
        and limited scope dental benefits).''

         LSec. 2(a)(c)(2): Provides that the repeal of 
        the McCarran-Ferguson Act for the business of health 
        insurance does not apply to specified safe-harbored 
        activities. These activities include making a contract, 
        or engaging in a combination or conspiracy for the 
        collection, compilation and dissemination of historical 
        loss data, the determination of a loss development 
        factor, the performance of actuarial services that do 
        not involve a restraint of trade, and the development 
        or diminution of a standard insurance policy form, if 
        such contract, combination or conspiracy is not to 
        adhere to or require adherence to such standard form.

         LSec. 2(c)(3)(A): Clarifies that the term 
        ``antitrust laws'' shall have the meaning provided in 
        the Clayton Act as well as section 5 of the FTC Act, to 
        the extent the FTC Act applies to ``unfair methods of 
        competition.''

         LSec. 2(c)(3)(B): Explicitly provides that the 
        term ``business of health insurance'' does not include 
        the business of life insurance (including annuities), 
        property or casualty insurance, other specific 
        ``excepted benefits'' as stated in the Internal Revenue 
        Code.

         LSec. 2(c)(3)(C): Provides that the term 
        ``historical loss data'' means information respecting 
        claims paid, or reserves held for claims reported, by 
        any person engaged in the business of insurance.

         LSec. 2(c)(3)(D): Provides that the term 
        ``loss development factor'' means an adjustment to the 
        aggregate of losses incurred during a prior period of 
        time that have been paid or for which claims have been 
        incurred and reserves are being held, in order to 
        estimate the aggregate of the losses incurred during 
        such period that will ultimately be paid.

         LSec. 2(b): Section 5 of the FTC Act prohibits 
        ``unfair or deceptive acts or practices in or affecting 
        commerce.'' The Competitive Health Insurance Reform Act 
        clarifies that section 5 of the FTC Act applies to the 
        business of health insurance regardless of whether such 
        business is carried on for profit.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

                 SECTION 3 OF THE ACT OF MARCH 9, 1945

  AN ACT to express the intent of the Congress with reference to the 
                regulation of the business of insurance.

    Sec. 3. (a) Until June 30, 1948, the Act of July 2, 1890, 
as amended, known as the Sherman Act, and the Act of October 
15, 1914, as amended, known as the Clayton Act, and the Act of 
September 26, 1914, known as the Federal Trade Commission Act, 
as amended, and the Act of June 19, 1936, known as the 
Robinson-Patman Antidiscrimination Act, shall not apply to the 
business of insurance or to acts in the conduct thereof.
    (b) Nothing contained in this Act shall render the said 
Sherman Act inapplicable to any agreement to boycott, coerce, 
or intimidate, or act of boycott, coercion, or intimidation.
    (c)(1) Nothing contained in this Act shall modify, impair, 
or supersede the operation of any of the antitrust laws with 
respect to the business of health insurance (including the 
business of dental insurance and limited-scope dental 
benefits).
    (2) Paragraph (1) shall not apply with respect to making a 
contract, or engaging in a combination or conspiracy--
            (A) to collect, compile, or disseminate historical 
        loss data;
            (B) to determine a loss development factor 
        applicable to historical loss data;
            (C) to perform actuarial services if such contract, 
        combination, or conspiracy does not involve a restraint 
        of trade; or
            (D) to develop or disseminate a standard insurance 
        policy form (including a standard addendum to an 
        insurance policy form and standard terminology in an 
        insurance policy form) if such contract, combination, 
        or conspiracy is not to adhere to such standard form or 
        require adherence to such standard form.
    (3) For purposes of this subsection--
            (A) the term ``antitrust laws'' has the meaning 
        given it in subsection (a) of the first section of the 
        Clayton Act (15 U.S.C. 12), except that such term 
        includes section 5 of the Federal Trade Commission Act 
        (15 U.S.C. 45) to the extent that such section 5 
        applies to unfair methods of competition;
            (B) the term ``business of health insurance 
        (including the business of dental insurance and 
        limited-scope dental benefits)'' does not include--
                    (i) the business of life insurance 
                (including annuities); or
                    (ii) the business of property or casualty 
                insurance, including but not limited to--
                            (I) any insurance or benefits 
                        defined as ``excepted benefits'' under 
                        paragraph (1), subparagraph (B) or (C) 
                        of paragraph (2), or paragraph (3) of 
                        section 9832(c) of the Internal Revenue 
                        Code of 1986 (26 U.S.C. 9832(c)) 
                        whether offered separately or in 
                        combination with insurance or benefits 
                        described in paragraph (2)(A) of such 
                        section; and
                            (II) any other line of insurance 
                        that is classified as property or 
                        casualty insurance under State law;
            (C) the term ``historical loss data'' means 
        information respecting claims paid, or reserves held 
        for claims reported, by any person engaged in the 
        business of insurance; and
            (D) the term ``loss development factor'' means an 
        adjustment to be made to reserves held for losses 
        incurred for claims reported by any person engaged in 
        the business of insurance, for the purpose of bringing 
        such reserves to an ultimate paid basis.

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