The McCarran–Ferguson Act, 15 U.S.C. §§ 1011-1015, is a United States federal law that exempts the business of insurance from most federal regulation, including federal antitrust laws to a limited extent. The McCarran–Ferguson Act was passed by the 79th Congress in 1945 after the Supreme Court ruled in United States v. South-Eastern Underwriters Association that the federal government could regulate insurance companies under the authority of the Commerce Clause in the U.S. Constitution and that the federal antitrust laws applied to the insurance industry.
Contents
The Act was sponsored by Senators Pat McCarran (D-Nev.) and Homer Ferguson (R-Mich.).
Intent
The McCarran–Ferguson Act does not itself regulate insurance, nor does it mandate that states regulate insurance. It provides that "Acts of Congress" which do not expressly purport to regulate the "business of insurance" will not preempt state laws or regulations that regulate the "business of insurance."
The Act also provides that federal antitrust laws will not apply to the "business of insurance" as long as the state regulates in that area, but federal anti-trust laws will apply in cases of boycott, coercion, and intimidation. By contrast, most other federal laws will not apply to insurance whether the states regulate in that area or not.
History
United States v. South-Eastern Underwriters Association (322 U.S. 533) came before the Supreme Court in 1944 on appeal from a district court located in north Georgia. The South-Eastern Underwriters Association controlled 90 percent of the market for fire and other insurance lines in six southern states and set rates at non-competitive levels. Furthermore, it used intimidation, boycotts and other coercive tactics to maintain its monopoly.
The questions before the Court were whether or not insurance was a form of "interstate commerce" which could be regulated under the Commerce Clause of the United States Constitution, and whether Congress intended the Sherman Anti-Trust Act to cover the insurance industry. The general opinion in law before this case, according to the Court, was that the business of insurance was not commerce, and the District Court concurred with the opinion. The Supreme Court reversed, holding that insurance was clearly commerce, even within the meaning of that word when the Constitution was written, and that the broad "any person" language of the antitrust law covered the insurance industry.
Passage of the Act
As a result, on March 9, 1945, the McCarran–Ferguson Act was passed by Congress. Among other things, it:
Significance to U.S. health care reform in the 21st century
One aspect of Republican proposals for healthcare reform in the United States is allowing interstate competition for health insurance, potentially requiring modification of the McCarran–Ferguson Act. In February 2010, the House of Representatives voted 406-19 to repeal the McCarran–Ferguson Act with regard to health insurance.