Market Allocation in the Health Insurance Industry and the McCarran-Ferguson Act

Abstract

If Congress passes legislation removing the McCarran-Ferguson Act (MFA) exemption from the health insurance industry, attention will certainly focus on whether the Blue Cross/Blue Shield (BCBS) companies, which together form the largest health benefits provider in the nation, are engaged in unlawful market allocation agreements. The Blue Cross and Blue Shield Association (BCBSA), the national organization that licenses the Blue Cross and Blue Shield trade names and symbols, has a history replete with statements that could support claims of market allocation being a fundamental strategy of BCBS companies, and in fact there are few examples of BCBS companies competing against one another.This Article examines the scope of the MFA under existing Supreme Court precedent and reviews the sparse case law addressing the MFA’s applicability to market allocation schemes in the insurance industry, including the BCBS market allocation scheme. This Article concludes that whether any market allocation scheme is exempt is a close, fact-specific question that courts will not answer in the abstract. On any set of facts, insurers will have considerable leeway in attempting to prove that a given market allocation scheme should be treated as the business of insurance and thus exempt if regulated by state law. A clear determination that the BCBS market allocation scheme is not exempt, or congressional action to repeal the MFA as to the health insurance industry, would remove a primary obstacle to a challenge of the scheme, but it is not clear whether this would affect competitive dynamics among BCBS companies.