Have you ever heard of the McCarran-Ferguson Act? Not long ago, half a century after its passage, the statute became a low-key but key part of the healthcare reform debate.
The WWII-vintage statute, you see, generally exempts insurers from federal antitrust law. That means health (and other) insurers can collude to fix premiums, rig bids, allocate customers and terroritories, and commit other gravely anticompetitive acts without running afoul of the Sherman Act. Although state law likely will bar such bad behavior, any remedy for it usually must happen on a state by state basis.
Senator Patrick Leahy (D-VT) in September filed a bill to repeal the exemption for health and medmal insurance carriers. A version of it made its way into the comprehensive bill that the House passed a few days ago.
Blawgletter would now like you to turn to another part of the Act, one that drew the en banc Fifth Circuit's attention yesterday. This portion also does an odd thing. It makes state law supreme over any "Act of Congress" that affects the business of insurance "unless such Act specifically relates to the business of insurance". Reverse preemption — state law trumping federal law instead of the other way around.
The issue arose because a district court held that a Louisiana statute barred enforcement of a contract clause calling for arbitration overseas (in London, we think). A Fifth Circuit panel reversed. The en banc court reconsidered and came out the same way.
Fourteen of the 18 judges agreed that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards didn't count as an "Act of Congress" under McCarran-Ferguson. The logic went like this: Treaty does not equal Act. Safety Nat'l Casualty Corp. v. Certain Underwriters at Lloyd's, London, No. 06-30262 (5th Cir. Nov. 9, 2009) (en banc). Louisiana law therefore did not bar, and could not bar, enforcement of the international arbitration clause, McCarran-Ferguson or no.
A concurring judge would've reversed purely on Supremacy Clause grounds. A three-judge dissent pointed out that Congress passed an Act that breathed life into the Convention, therefore meeting the "Act of Congress" requirement.
Blawgletter thinks insurers no longer deserve special legal treatment, if they ever did. Repeal away!
