Patrick Leahy, chairman of the U.S. Senate Judiciary Committee, has introduced a bill that would eliminate the federal antitrust exemption given to health insurance and medical malpractice insurance companies as a means of cutting costs.

If approved by Congress and President Barack Obama, the bill would repeal the exemption under the 1945 McCarran-Ferguson Act, which empowers states to regulate “the business of insurance.” Leahy has introduced the bill several other times and it has failed to gain support.

The bill’s approval would not signal the end of state regulation of insurance, but instead allow insurers to face greater penalties if they participate in “flagrant antitrust violations.”

Patrick Leahy

“Subjecting health and medical malpractice insurance providers to the antitrust laws will enable customers to feel confident that the price they are being quoted is the product of a fair marketplace,” Leahy (D-Vt.) said in a statement.

Leahy’s proposal offers Congress and Obama yet another avenue to pursue as part of the broader effort to reform the nation’s health care system and financial services regulatory reform.

“There are many proposals to bring competition to health insurance providers,” Leahy said. “While we are debating these solutions, we should not lose sight of the fact that the health insurance industry currently does not have to play by the same, good-competition rules as other industries. That is wrong, and the Health Insurance Industry Antitrust Enforcement Act corrects it.”

Leahy said insurance companies are treated differently than other companies in the U.S.

“A few industries have used their influence to obtain a special, statutory exemption from the antitrust laws, and the insurance industry is one of them,” Leahy said.  “In the markets for health insurance and medical malpractice insurance, patients and doctors are paying the price, as costs continue to increase at an alarming rate. Insurers should not object to being subject to the same antitrust laws as everyone else.”

Leahy’s plan is to eliminate the federal antitrust exemption for health insurance and medical malpractice insurance companies for antitrust violations such as price-fixing, bid-rigging and market allocations.

He also seeks to “subject health insurers and medical malpractice insurers to the same good-competition laws that apply to virtually every other company doing business in the United States,” he said.

The 2007 bipartisan Insurance Industry Competition Act, introduced by Leahy and then-Senate Majority Leader Trent Lott (D-Miss.), sought a broader repeal of the McCarran-Ferguson Act. “While Congress did not reach consensus on that legislation, surely in this environment of rising healthcare costs, we can agree on this more narrowly tailored repeal,” Leahy recently said of that failed effort at passage.