posted on: 7/7/2006    revised: 10/8/2013

Have you ever wondered how the health insurance industry came to be regulated under such a ridiculous maze of entangled and sometimes conflicting laws in 50 different states?  More than sixty years ago the insurance industry, operating in the form of the National Association of Insurance Commissioners (NAIC), drafted a proposal that later became known as the McCarran-Ferguson Act, which was passed by Congress in 1945.  This law effectively exempted insurance companies from federal anti-trust restrictions (that were extremely hazardous to big business at that time) as long as they were regulated by each individual state where they did business.  Dealing with 50 sets of state regulators was seen the lesser of the two evils.  (This seems to be a clue as to how insurers feared federal anti-trust prosecutors).  Consumers were deemed to be adequately protected by their own state regulators, and that was at the forefront of public interest.  State control seemed like a good idea at the time. 

But times have changed.  Consumers increasingly feel that an issue as important as health insurance - especially considering the current state of crisis - is too important to leave up to the policymakers inside a state insurance department office.

Consumers righfully ask why should a policy that is offered to citizens of one state be outlawed by a neighboring state. And why should people pay vastly different amounts for health insurance depending on their state of residence?  Should guaranteed issue coverage be available in one state but unavailable in the next?

The time has come for the loosening of state control on health insurance.  This would not necessarily be an abandonment of state control, but perhaps just an allowance of cross-selling across state lines.  Nowadays, so many people are calling for national health care or a single payer system that anti-trust concerns hardly seems like a relative topic.

An allowance of selling across state lines would go a long way toward easing the current health insurance crisis and would enable millions to enroll in health insurance that is not currently available.  It is an easy solution that would be wildly popular with consumers.

The time has come to modify or repeal McCarran-Ferguson but apparently Congress and insurance regulators still need to be convinced.

2013 Update: Repeal of McCarran-Ferguson still seems like a smart idea but legislative action is taking much longer than I presumed. There are now a number of repeal bills at various stages in the U.S. House of Representatives. Yet it seems likely that repeal is being pursued for different reasons that discussed in this article. It appears that the current motive is to allow an additional layer of federal regulation on top of state regulation rather than improve market choices for consumers. .

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Copyright 2010 by Tony Novak. Originally produced and published for the "AskTony" column syndication prior to 2007. Edited and independently republished by the author in March 2010. All rights reserved.