Buying protection against the possibility of future risks is as old as time itself. In the corporate world, this system of protection is called insurance. Everyone faces the risk of fires and damage to a home or apartment. Damage to an automobile is another example. That is why fire, property and auto insurance is an accepted fact in everyone’s life. The issue that is raised is the level of profit that insurance carriers demand to guard against that risk.
Health insurance is a bountiful area for exorbitant profit. This could have been avoided and still can be. Socialist countries and Western European capitalist countries established national health systems decades ago. Those people and their governments made the pledge to make sure that basic health services were available to their population without buying insurance. But when the U.S. Congress rejected national health legislation as an integral part of the 1935 Social Security Act, the U.S. continued on the road of private, for-profit insurance carriers running the health services system.
The McCarran-Ferguson Act of 1945
In the U.S., the insurance industry was not satisfied with being the only game in town. They demanded — and got — the McCarran-Ferguson Act of 1945. This federal legislation required that the regulation of the insurance industry be up to each state, and not be a federal regulatory issue. This meant that every state would be forced to establish its own system of regulating the behavior and rates of insurance carriers — no federal oversight. It also meant that insurance rates would be set in each state by insurance carriers themselves. Self-regulation is the system that we have today. It totally favors big insurance business over small- and medium-size employers and, of course, workers.
Corruption scandals inevitable
When N.Y. State Attorney General Elliott Spitzer found the large and powerful insurance company Marsh and McLennan in violation of the law, few were surprised. And now, state and federal investigations are looking into the activities of another major insurance carrier, AIG. In this case, the feds got involved through the Security and Exchange Commission. The head of AIG was removed. But, the fundamental problem remains. Business Week’s April 25 issue reported that federal action is being demanded. According to the BW article, some policy makers are arguing for a federal office of insurance regulation in the U.S. Treasury, or even a fully independent federal agency. In either case, the repeal of the McCarran-Ferguson Act is a worthy goal. By highlighting McCarran-Ferguson, BW was making a significant statement.
Corporate arrogance: good target for activists
As the U.S. inches toward a new phase of discussion of national health policy taking place on the state and federal level, activists are facing not just the health and prescription drug industry juggernaut, but also a politically revitalized and ravenous health insurance industry. However, the public exposés of AIG and other carriers, the greed of the drug companies, and the for-profit hospitals’ violations of Medicare laws have made them obvious targets for political action. They, themselves, have become powerful focal points for activists demanding that incumbents and those seeking public office in the year 2006 remove all insurance involvement in national health alternatives. Including in this campaign the repeal of the McCarran-Ferguson can be an added tool in the educational and agitation effort to arouse people. There must be strong federal regulation of these transnational corporations as a first step toward congressional action on national health legislation.