Closing the McCarran-Ferguson Loophole

For years, organized dentistry rallied against the anti-competitive insurance practices protected by the McCarran-Ferguson Act. Will last year’s partial repeal of the law bring meaningful change to dentists and patients?

On Jan. 13, 2021, then-President Donald Trump signed the Competitive Health Insurance Reform Act (CHIRA) into law.¹ The bipartisan legislation removed an exemption in the McCarran-Ferguson Act that allowed medical and dental insurance companies to operate without being regulated by federal antitrust laws that are designed to ensure fair industry competition and consumer choice. 

The passage of CHIRA is a pinnacle achievement of a decades-long organized dentistry effort to remove an advantage for health insurers that opponents said benefitted neither dentists nor patients. 

Organized dentistry, including AGD and the American Dental Association (ADA), along with countless individual dentists, reached out to lawmakers to help them understand why holding insurance companies to the same standard as other industries not only preserves healthy competition fundamental to a strong marketplace but also acts in the best interest of healthcare providers and patients by encouraging more choice. 

When it comes to advocating at the federal level, change doesn’t come swiftly or easily — particularly when dealing with antitrust legislation. As the first anniversary of CHIRA’s passage approaches, general dentists may wonder when they can expect to see real change in the post-CHIRA world. 

The short answer from experts: It’s hard to say. However, general dentists can benefit from educating themselves on the issues revolving around CHIRA, including the beginnings of the McCarran-Ferguson Act and its effects on medical insurance. 

1945: Insurance Companies Lobby to Pass the McCarran-Ferguson Act 
CHIRA and the McCarran-Ferguson Act are centered on antitrust legislation. Antitrust laws, such as the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914, were designed to protect competition in the marketplace, “making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.”² More competition breeds more choices for products and services. More choices aren’t just good for consumers — providers of products and services (e.g., dentists) are encouraged to innovate and offer more options for customers.³ 

Anti-competitive practices banned by these laws include deals among competing businesses to fix prices, rig bids or divide markets.² 

In 1944, a U.S. Supreme Court ruling against an insurance company put the McCarran-Ferguson Act in motion. The ruling stated that because the insurance company did business across state lines, that it is subject to federal antitrust regulation, including the Sherman Antitrust Act.⁴ 

During this time, many states relied upon insurance premium taxes for state government funding, explained George Slover, senior policy counsel for Consumer Reports, during a May 2021 episode of the ADA’s “Tooth Talk” podcast. After the U.S. Supreme Court ruling, the insurance industry lobbied state lawmakers to limit the federal government’s oversight, exempting insurance plans from federal antitrust laws and putting the states in control of regulating the business of insurance.³ 

On March 9, 1945, President Franklin Roosevelt signed the McCarran-Ferguson Act into law.⁴ 

Dental Insurance Problems During the McCarran-Ferguson Era
Opponents of the McCarran-Ferguson Act say the law enabled medical and dental insurers to operate virtually unregulated, setting their own reimbursement rates, fees and service terms in a lockstep fashion that limited competition and choice. 

Although the law put the states in regulatory control, many states often lack time and resources to effectively investigate antitrust claims, leaving many of them unchallenged.⁵ 

But concerns didn’t lie only with the lack of state regulation. The McCarran-Ferguson Act didn’t entirely strip the federal government of its oversight of the insurance industry, although some critics say the federal government turned a blind eye to the industry after McCarran-Ferguson passed. 

“The problem as we see it has been that, because of the limited exemption from the federal antitrust laws that the business of insurance was given under McCarran-Ferguson, the federal agencies in charge of enforcing those laws have not scrutinized the health insurance industry to any meaningful extent — even in areas that were not covered by the McCarran-Ferguson limited exemption,” said Daniel J. Klemmedson, DDS, MD, president of the ADA. 

One of the more controversial features of the McCarran-Ferguson Act gave insurance companies the ability to legally share information to calculate risk. This ability to share loss and actuary information “provides for unfair methods of competition with respect to the business of health insurance, and, effectively, establishes state insurance cartels,” wrote Jeanie Kennedy, AGD manager of Dental Practice & Policy, in an August 2017 AGD Impact article. “The McCarran-Ferguson Act is credited with creating artificially higher premiums, unfair insurance restrictions, policy exclusions and a lack of choice.”⁶ 

For dentists, dental insurance during McCarran-Ferguson meant low reimbursement rates, which deterred dentists from accepting insurance. Ultimately, patients suffered from a lack of choice and access to care. 

Among the longstanding critics of the McCarran-Ferguson Act is Mike Bromberg, DDS. Bromberg chairs the AGD Legislative and Government Affairs Council and has worked for years to repeal the legislation that he said has plagued dentists and patients for decades. 

“The health insurance carriers, as a result of not being subject to the federal antitrust laws, and therefore essentially being able to act as a monopoly, created numerous problems for dentists,” Bromberg said. “Complaints of anticompetitive activities were rampant. There were concerns having to do with unfair price fixing, bid rigging, gouging, collusion and market allocations that hurt consumers. Something had to be done.” 

Finally, in 2020, Congress passed CHIRA, which removed the antitrust exemption from the McCarran-Ferguson Act. Interestingly, the legislation passed in 2020 during a time of peak partisan divide. Organizations like AGD and the ADA rallied member dentists to discuss the issue with their elected officials, explaining how the repeal benefitted providers and consumers. And, in doing so, they broke through a seemingly impenetrable political divide. 

“The ADA’s Washington, D.C., team made sure to approach this issue from a politically bipartisan perspective,” Klemmedson said. “Over the last few years, we know that Washington, D.C., has been a very partisan place. Having this issue be supported by both parties was a very important factor during these tumultuous times. The ADA made sure to not only have support from its Congressional allies but also from the past few administrations in both the Democratic and Republican parties.” 

How Was CHIRA Passed? 
Rep. Paul A. Gosar, DDS, (R-AZ) and Rep. Peter DeFazio (D-OR) cosponsored H.R. 372, the Competitive Health Insurance Reform Act of 2017. Long before Gosar was a congressman, he was a practicing dentist in Arizona. 

“This is personally very satisfying to me,” Gosar said. “As a dentist for more than two decades before running for Congress, I have always been concerned that large health insurance companies were exempt from antitrust laws, allowing them to basically become a monopoly of sorts where only a few insurance companies dominated the market. CHIRA repeals this antitrust exemption and therefore injects competition into the market, leading to improved coverage for patients.” 

Although CHIRA seemed like a legislative slam dunk and consistently made its way through the House of Representatives with little issue, Slovar explained in the ADA podcast that the bill “never got traction in the Senate.”³ To kickstart the last hurdle to the president’s desk, there was bipartisan sponsorship in the House and the Senate. Organized dentistry also lent its support, including AGD Advocacy leaders. 

One of AGD’s most prominent voices against McCarran-Ferguson has been Joseph A. Battaglia, DMD, FAGD, who chairs the AGD Dental Practice Council. He’s fought to create “a level playing field” for insurance companies for more than 15 years. 

“Over the years, AGD has lobbied the sponsors of the legislation. We’ve supported them and provided them background information to help them identify the areas where it was an unfair playing field,” Battaglia said. “We continually discussed the issue with the supporters and sponsors, and, eventually, all of the members of Congress who voted to pass the bill. Even at the final hour, there was an advocacy push to have the president sign the legislation. It was an all-hands-on deck effort by dental professionals.” 

“It took years of one-on-one meetings and outreach from constituents to ensure a critical mass of members of Congress understood the benefits of CHIRA and would stand behind the legislation when it came up for a vote,” said Pat O’Connor, a partner of Kent and O’Connor, AGD’s lobbying firm. 

“CHIRA represents a win for organized dentistry,” said AGD President Bruce L. Cassis, DDS, MAGD. “The level playing field between insurance companies and the offering of benefits for patients represent the opportunity to increase access to care. Having achieved this legislative change is a victory the industry should celebrate and continue to work hard to defend.” 

What Does CHIRA Do? 
First, CHIRA is not a full repeal of the McCarran-Ferguson Act. Instead, it is a partial repeal, removing the “business of insurance” exemption for medical and dental insurance companies. This means that federal agencies, including the Department of Justice (DOJ) and Federal Trade Commission (FTC), may now investigate and prosecute insurance companies that engage in illegal conduct as outlined by federal antitrust laws. The ultimate outcome is to eliminate anti-competitive business practices, like bid rigging and price fixing, leading to “a greater range of options for patients and more appropriate reimbursement rates for healthcare providers.”⁵ 

CHIRA has its limitations. As a partial repeal, CHIRA allows for some provisions in the McCarran-Ferguson Act to remain legal — including data sharing among medical and dental insurers to establish fair rates. CHIRA, as Slovar explained in the ADA podcast, doesn’t force any immediate action. However, he explained that the environment will change and improve in the short term — it just may take time for consumers and providers to see it.³ 

“[Insurers] can stick with the status quo if they want, but they’re at risk of someone else building a better mouse trap, telling the world about it and getting more business,” Slovar said in the podcast. “They’re now in a race to build a better product and better service and market it better to consumers to win the marketplace. It’s just the way competition works — and now it’s going to be working in this part of the economy.”³ 

With CHIRA’s passage, medical and dental insurers are subject to the same set of antitrust laws as all other industries. Although state attorneys general may investigate insurance anti-competitive conduct, the federal government is crucial to how strictly — and quickly — the law will be enforced, Bromberg said. 

“The question arises then, with regard to health insurance carriers, will the DOJ and the FTC investigate and prosecute violations of the Sherman Antitrust Act, or will it just be business as usual?” Bromberg said. “It will be up to organized dentistry to hold those two organizations’ feet to the fire so that antitrust abuses on the part of the health insurance carriers do not continue.” 

It remains to be seen whether these agencies will now pursue investigations. To date, the agencies haven’t shared any updates on how they intend to use their newly legal oversight of the health insurance industry (see “U.S. Senators Want Answers on Federal Agencies’ Plans to Put CHIRA to Work,” below). 

Explaining the ‘Business of Insurance’ and How It May Impact Reimbursement 
With CHIRA now established as law, the “business of insurance” clause for health and dental insurance is no longer exempt from antitrust laws. Gosar explained that, after McCarran-Ferguson was enacted in the 1940s, the courts were asked to rule on several disputes about what was truly exempt from antitrust laws. In a series of cases, the courts rallied around the phrase “business of insurance.” Anything that was deemed the “business of insurance” was exempt, and anything outside of that scope was nonexempt. Four areas of exempt practices emerged:

1. Insurers were allowed to cooperate in rate setting in Arroyo-Melecio v. Puerto Rican Am. Ins. Co., 398 F.3d 56, 68 (1st Cir. 2005). 
2. Insurers were allowed to engage in joint underwriting in Slagle v. ITT Hartford, 102 F.3d 494, 497–98 (11th Cir. 1996). 
3. The courts allowed insurer cooperation for purposes of reinsurance risk spreading in Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 214 (1979). 
4. The process of claims handling was also deemed exempt and within the business of insurance test as ruled in Campo v. Allstate Ins. Co., 562 F.3d 751 (5th Cir. 2009). 

The claims-handling exemption impacted insurance reimbursements to dental providers the most, and the repeal of the exemption may have the greatest impact on dental providers, Gosar said. 

“It may be too soon to tell, but dentists across the country should start to notice different claims handling and reimbursement practices by different carriers,” Gosar said. “Some will be prompt and diligent — and they may get a bigger market share to reward them for better service. Dentists may ultimately tell patients they accept one company but not another based on reimbursement and claims handling practices. The insurers that routinely lag, delay or haggle dentists may lose business, as they will be seen as noncompetitive. In short, there should be less uniformity of payment processing and more incentive to provide better service to dentists and patients.”

That is hopefully one of the improved outcomes of CHIRA, Gosar said, but, for dentists wondering whether their reimbursement rates will increase after years of stagnation, they will likely have to wait a while longer to see change. 

“While it is unlikely that CHIRA will directly result in increased reimbursement rates,” said Gosar, “the new law will increase competition in the healthcare market — one that will be patient-centered, provide a variety of affordable and quality options to the patient, and have more attractive terms and services for dental providers whom the plans will want to participate in their insurance networks.” 

Is CHIRA the Big Win Organized Dentistry Was Hoping For? 
With CHIRA, several questions remain that create a lot of speculation and little certainty. Experts aren’t sure if CHIRA will lead to competition among health insurers and don’t know if federal agencies will take advantage of their newfound oversight of health insurers’ potentially anti-competitive conduct. 

But for the dental industry and patients, CHIRA is a much-needed open door to positive change in the marketplace. “Having the ability to regulate insurance companies at the federal level will help ensure fair practices and will also provide an opportunity to offer the consumer more choice in healthcare plans — and make these plans more affordable,” said Cassis. “By scrutinizing and removing unfair restrictions, we can ensure more competition among insurance companies and encourage each to offer its best products.” 

“It is a huge win in terms of legislative advocacy and cooperation with consumer advocates,” Klemmedson said. “Translating this victory into practical benefits for dentists and patients may take some time, but it ultimately should contribute to more robust competition in which health insurers will have to aggressively compete for patients and for the dentists who will agree to participate in their plans.” 

Now that CHIRA is law, Battaglia said AGD’s next major insurance advocacy focus is on getting adults age 65 and older dental coverage in a competitive marketplace to ensure that the benefits of the antitrust exemption are realized. Without a competitive marketplace for senior dental benefits, the anticipated benefits of the repeal will not be achieved, Battaglia said. 

“We will continue to monitor the insurance landscape by reviewing the relationship between dentists, patients and insurance and by ensuring everyone is benefitting from the plan,” Battaglia said. “We are working to ensure the process of receiving dental benefits is seamless and efficient.” 

“Our goal in the near term is to advocate for policies that enhance and preserve a market-based approach for the delivery of dental care, which will hopefully set the stage for higher reimbursements down the road,” said O’Connor. “We have also been calling for the advancement of additional insurance reform-focused legislation, such as the Dental and Optometric Care (DOC) Access Act [S. 1793/H.R. 3461].” 

CHIRA took years to come to fruition, and, now that it is 10 months into law, it has produced little change in the day-to-day lives of general dentists. Instead of feeling deflated, Battaglia said the industry should feel empowered. Achieving a federal legislative victory is no small feat, but dentists made it happen. And, if you want to see change in the dental industry, you can be part of it, too. 

“Federal legislation is a slow, tireless effort, and AGD will continue in the federal arena to lobby for our industry,” Battaglia said. “If you are inspired to advocate for an issue, it’s worth it.” 

U.S. Senators Want Answers on Federal Agencies’ Plan to Put CHIRA to Work
As of this issue’s publication date, neither the Department of Justice (DOJ) nor the Federal Trade Commission (FTC) has shared details on how their respective agencies will enforce their authority on medical and dental insurers to ensure they do not continue to conduct business in an anti-competitive manner. 

In July 2021, Senators Patrick Leahy (D-VT) and Steve Daines (R-MT), chief Senate co-sponsors of CHIRA, formally requested updates from the DOJ and FTC on “any enforcement actions, guidelines, rulemaking, or other actions taken to extend antitrust enforcement to the health insurance industry.”⁷ 

“Since the CHIRA’s enactment in January 2021, not much is publicly known about what the DOJ or the FTC have done to exercise their expanded authorities under the law,” wrote Leahy and Daines.⁷ 

Leahy and Daines requested answers from the DOJ and FTC to several questions, including:

• Since Jan. 13, 2021, what legal actions, if any, has your department taken to enforce antitrust laws against companies in the business of health insurance that are no longer exempt from enforcement under the McCarran-Ferguson Act?
• Specifically, what has your department done since Jan. 13, 2021, to investigate unlawful price fixing, bid rigging or market allocation by health insurers?
• What steps, if any, has your department taken to craft new enforcement guidelines that account for CHIRA and its application to the health insurance industry?⁷ 

Kelly Rehan is a freelance journalist based in Omaha, Nebraska. To comment on this article, email impact@agd.org. 

References 
1. Osborn, Kathy L., et al. “New Amendment to McCarranFerguson Act Repeals Important Antitrust Exemption for Health and Dental Insurance Companies.” Drinker Biddle & Reath LLP, 16 Feb. 2021, faegredrinker.com/en/insights/publications/2021/1/congress-passes-amendment-to-mccarran-ferguson-act-to-repeal-important-antitrust-exemption-for-healt. 
2. “The Antitrust Laws.” Federal Trade Commission, 15 Dec. 2017, ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws. Accessed 26 July 2021.  
3. Slover, George. “#47 McCarran-Ferguson Reform Passes – What Comes Next?” Tooth Talk, American Dental Association, 17 May 2021, toothtalkshow.com/episode/47-mccarran-ferguson-reform-passes-what-comes-next/. Accessed 28 July 2021. 
4. Bachman, Radha V., and Elizabeth Scarola. “Repeal of the McCarran-Ferguson Act: On Ramp or Speed Bump Along the Highway of Health Care Reform.” AHLA Connections, May 2017, pp. 20–24. 
5. “Insurance.” Academy of General Dentistry, agd.org/dental-practice-advocacy-resources/advocacy-resources/key-federal-issues/insurance. Accessed 3 Sept. 2021. 
6. Kennedy, Jeanie. “The McCarran-Ferguson Act: What a Repeal Could Mean for Dentistry.” AGD Impact, Aug. 2017, pp. 28–29. 
7. Leahy, Patrick, and Steve Daines. “7.20.21 Leahy Daines Letter to DOJ and FTC Re CHIRA 2020.” Received by Honorable Merrick Garland and Honorable Lina Khan, 20 July 2021.