President Barack Obama minced no words in his weekly radio and Internet address Oct. 17, saying the Congress’ review of the anti-trust exemption granted to insurance companies is appropriate because they are standing in the way of health care reform.

Frustrated by an insurance industry report suggesting current reform could dramatically increase insurance costs, Obama said in the address that he does not want insurers’ to “bend the truth or break it” to halt reform.

Obama accused insurers of pulling out their “big guns and breaking out their massive war chests” to avoid any changes to the current system, which he said is about insurance company “profits and bonuses” and “figuring out how to avoid covering people.”

“And they’re earning these profits and bonuses while enjoying a privileged exemption from our antitrust laws, a matter that Congress is rightfully reviewing,” the president said.

Two weeks ago, America’s Health Insurance Plans, a trade group representing about 1,300 carriers who service nearly 200 million health plan members, issued a PriceWaterhouseCoopers report indicating current reform proposals would increase health insurance costs for the average family by about $20,7000 between 2010 and 2019.

Speaking on “This Week with George Stephanopoulos” on ABC Oct. 18, David Axelrod, Obama’s senior White House adviser, said he thought Congress’ review of the exemption was appropriate “because most of the stakeholders in this health care debate are at the table, they’re trying to produce real reform, because everyone knows the current system is unsustainable.

“The insurance industry has decided now at the 11th hour that they don’t want to go along with this. One of the problems we have is we have a health care system now that functions very well for the insurance industry but not well for the customers,” Axelrod said.

However, when questioned repeatedly by Stephanopoulos about whether the president would sign a bill eliminating the exemption and allowing Congress to set caps on premiums, Alexrod declined to answer directly.

The Health Insurance Industry Antitrust Enforcement Act of 2009 (Senate Bill 1681) would amend the McCarran-Ferguson Act, which defers insurance regulation to state antitrust oversight. An identical bill was introduced in the U.S. House.

Christine A. Varney

Christine A. Varney, head of the U.S. Attorney General’s antitrust division, told the Senate Judiciary Committee at a hearing on the bill Oct. 14 that her office supports ending the exemption.

“There are strong indications that possible justifications for the broad insurance antitrust exemption in the McCarran-Ferguson Act when it was enacted in 1945 are no longer valid today,” Varney said.

“The Department of Justice generally supports the idea of repealing antitrust exemptions,” Varney said. “However, we take no position as to how and when Congress should address this issue.”

The McCarran-Ferguson antitrust exemption, which protects insurance companies from egregious violations, including price fixing, bid-rigging and market allocation, was enacted by Congress in 1945 in response to a Supreme Court decision that preempted state control and governance of insurance.

Varney said a repeal of the exemption “would allow competition to have a greater role in reforming health and medical malpractice insurance markets than would otherwise be the case.”

At the same hearing, a representative of the Property Casualty Insurers Association of America disagreed with Varney’s assessment.

“We are not aware of any credible contrary evidence that would justify the amendments proposed in S. 1681,” said David A. Sampson, president and CEO of the Property Casualty Insurers Association of America, in testimony to the Senate Judiciary Committee. “This bill is a solution in search of a problem and in fact would reduce competition by increasing trial-lawyer suits and making it more difficult for insurers to enter into new markets or new insurers to be created.”

The PCI said McCarran-Ferguson allows for insurers of all sizes to pool the loss data that makes it possible to price their products fairly and in an actuarially sound manner.

“Without this very limited exemption, many small and medium-sized, Main Street insurers would not be able to afford this costly data and would either have to raise premiums or go out of business, reducing competition and choice for consumers,” Sampson said. “Even large insurers would have difficulty expanding to compete in new regions or lines of business without actuarially credible historical loss data.”