The Stifling of Competition by the Antitrust Laws: The Irony of the Health Care Industry

By Powers, John A. | Journal of Law and Health, Summer 2000 | Go to article overview

The Stifling of Competition by the Antitrust Laws: The Irony of the Health Care Industry


Powers, John A., Journal of Law and Health


INTRODUCTION

In recent years, the health care system in the United States has come to be dominated almost entirely by large health maintenance organizations [hereinafter "HMOs"] (1) and insurance providers. This trend has proven to deprive physicians of their decision-maturing authority when it comes to the administration of care, with the ultimate result of reducing the quality of health care services provided to consumers. The market dominance enjoyed by these entities is primarily the product of the current state and federal antitrust laws, which have effectively tied the hands of independently practicing physicians by preventing them from banding together in their contract negotiations with these types of managed care providers [hereinafter "MCPs"]. (2) As such, a substantive change in our national antitrust laws is required in order to equalize the imbalance of power between physicians and MCPs, and to ensure the availability of the highest quality of care.

The text to follow is intended to provide an overview of the legal basis for the imbalance of power currently inherent to the health care industry, suggesting several reasons for its development. It also provides an outline of the current basis for antitrust liability in this country and describes some possible solutions. The most practical and effective means through which to rectify this imbalance would be to enact new federal legislation that would amend the antitrust laws to allow for limited "unionization" of independently practicing physicians for collective bargaining purposes.

I. REASONS FOR THE IMBALANCE

A. Lack of Enforcement of Antitrust Laws Against HMOs

The bargaining position of independent physicians is substantially weakened by the lack of significant enforcement of the antitrust laws by the Federal Trade Commission [hereinafter "FTC"] and the Department of Justice [hereinafter "DOJ"] against managed care and insurance companies. Even in the face of the considerable market dominance in many localities by a single HMO, the federal enforcement agencies charged with the enforcement of the antitrust laws seem reluctant to interfere with their growth. In fact, Robert F. Liebenluft, former assistant director for health care in the FTC's Bureau of Competition, has reportedly stated that the federal agencies "had rarely, if ever, challenged an HMO merger." (3) In some markets, MPCs have amassed more than fifty percent of the health care market, yet the FTC and the DOJ have done little more than rubber stamp the mergers and acquisitions of these large health plans. (4) This apparent lack of enforcement of the antitrust laws against HMOs allows such entities to accumulate even greater dominance in health care and serves to undermine the limited bargaining power that independent physicians enjoy.

B. Limited Exemption From Antitrust Liability For Insurance Companies

Insurance companies are also treated in a more preferential light by the federal government in regards to antitrust matters, thereby further weakening the bargaining power of independent physicians and lessening their control over treatment of their patients. In the United States, the regulation and taxation of the insurance business is left primarily to the states. (5) In 1945 the U.S. government enacted the McCarran-Ferguson Act. (6) This legislation served to provide insurance companies with a limited exemption from federal antitrust laws, to the extent that their activity is covered by state law. (7) However, this exemption does not shield insurance companies from federal prosecution for acts that traditionally constitute violations of federal antitrust law, such as boycotts, coercion, or intimidation. (8)

The Supreme Court has established a three-part test for determining whether the actions of an insurance company should be construed as part of the "business of insurance," and, therefore, exempt from antitrust liability under the McCarran-Ferguson Act. …

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