Insurers' exemption is said to boost costs

WASHINGTON - Christine Varney, the Obama administration's chief antitrust enforcer, told lawmakers yesterday that repealing the insurance industry's antitrust exemption would spur competition and further the drive to control the cost of health insurance.

Varney, head of the Justice Department's antitrust division, told the Senate Judiciary Committee that ending the exemption would "allow competition to have a greater role in reforming health and medical malpractice insurance markets."

She stopped short in her testimony of calling on Congress to end the exemption.

Insurance companies "are highly concentrated in many geographic regions," meaning there "is very little incentive to compete on price," she said.

Yesterday's committee hearing is part a broader effort in Congress to reexamine the shield that exempts several industries from federal laws aimed at stifling such practices as price-fixing and collusion. Railroad companies and agriculture are among the parts of the economy that benefit from the exemption.

The Obama administration's pursuit of revamping health care has also increased interest in repealing the insurance industry's special antitrust status.

Senate Majority Leader Harry Reid (D., Nev.) showed his support for the idea by taking the unusual step of stopping by the hearing to testify in favor of repeal.

The insurance industry's exemption "damages the American economy, and that's a gross understatement," he said.

New York Democrat Charles E. Schumer, a Judiciary Committee member, said the repeal proposal he was cosponsoring should be a part of any health-care overhaul Congress passes.

The exemption "deserves a lot of the blame for the huge rise in premiums that has made health insurance so unaffordable," he said in a statement.

Congress exempted the insurance industry from antitrust laws in 1945 after the Supreme Court ruled it was subject to federal regulation. The states have traditionally been the chief regulators of the industry.