On January 13, 2021, former President Trump signed into law the Competitive Health Insurance Reform Act of 2020 (CHIRA), which repeals the McCarran Ferguson Act’s federal antitrust exemption for health insurers.
The McCarran Ferguson Act, enacted in 1945, gave states the power to regulate insurance and granted insurers a federal antitrust exemption. Specifically, the McCarran Ferguson Act exempted from federal antitrust law conduct that
Historically, courts have applied a narrow three-pronged test to determine whether the challenged conduct constitutes the business of insurance. The test, which the United States Supreme Court announced in Group Life & Health Insurance Co. v. Royal Drug Co., considers:
CHIRA effectively eliminates the McCarran Ferguson immunity for insurers engaged in the “business of health insurance.” The operative language in the new law states: “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].”
CHIRA also clarifies that the Federal Trade Commission Act (FTCA) applies to all health insurers regardless of whether they are for profit or not. This is because the FTCA has been interpreted to exclude most non-profit entities due to its definition of the term “corporation,” which only references entities operating for profit.
CHIRA, however, maintains immunity for agreements among health insurers:
CHIRA also excludes insurers engaged in the business of life insurance (including annuities) and property or casualty insurance from the term “business of health insurance.”
Although it is too soon to predict the long-term consequences of CHIRA, opponents of the new law argue that CHIRA will:
Notwithstanding the foregoing predictions, the impact of CHIRA is likely limited. Health insurers have always been subject to antitrust regulation under state laws. Further, the McCarran-Ferguson Act exemption was narrow, and already excluded many health insurer activities, such as mergers between health insurers and market allocation agreements. Nevertheless, health insurers should revisit previously exempt business practices, and exercise antitrust caution in light of CHIRA.