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Antitrust [3]
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SENT BY:Antitrust - - Exec Off ; 8- 3-94 11:46AM ;
2027864248-
9-4562878;# # 1
U.S. Department of Justice
Free
,
Antitrust Division
[4843b]
Washington. D.C. 20530
DATE 8/3/94
TO:
Jennifer Klein
FAX # 456-2878
PHONE # 456-2599
FROM:
X
NEIL ROBERTS (202-514-2512)
JOYCE HUNDLEY (202-514-2570)
HOWARD BLUMENTHAL (202-514-2513)
FRED PARMENTER (202-514-1504)
ILENE BLOCK (202-514-4773)
JACK SIDOROV (202-514-3958)
JOHN FILIPPINI (202-514-2497)
CLAUDIA DULMAGE (202-514-7018)
BEN GILIBERTI (202-514-4298)
JOANN FAY (202-514-2551)
PATRICIA BLUM (202-514-2512)
LINDIA KELLY (202-514-2497)
JOYCE MADISON (202-514-2513)
COMMENTS:
Per our conversation yesterday
TOTAL PAGES TRANSMITTED: 5 (EXCLUDING TRANSMITTAL SHEET)
PANAFAX NO. 202-514-9082
SENT BY:Antitrust - Exec Off ; 8- 3-94 11:46AM ;
2027864248-
9-4582878:# 2
JOSEPH R. BIDEN, JR., DELAWARE CHAIRMAN
EDWARD M. KENNEDY, MASSACHUSETTS
ORRIN a. HATCH. UTAN
HOWARD M. METZENBAUM, OHIO
STROM THURMOND, SOUTH CAROLINA
DENNIS DECONCINI, ARIZONA
ALAN K. SIMPSON, WYOMING
PATRICK J. LEAHY, VERMONT
CHARLES L GRASSLEY. IOWA
HOWELL HEFLIN, ALABAMA
ARLEN SPECTER PENNSYLVANIA
PAUL SIMON, ILLINOIS
HANK BROWN, COLORADO
United States Senate
HEABERT KOHL WISCONSIN
WILLIAM 8. COMBN, MAINE
DIANNE PEINSTEIN. CALIFORNIA
LARRY PARESLER. SOUTH DAKOTA
CAROL MOBELEY-ERAUN, ILLINOIS
COMMITTEE ON THE JUDICIARY
CYNTHIA c. HOGAN, CHIP COUNSEL
WASHINGTON, DC 20810-8278
CATHERINE M. SUBBELL STAFF DIRECTOR
MARK R DISLER MINDARY START DIRECTOR
SHAROR PRODY, MINCRIPY CHIEF COUNSE
July 29, 1994
Anne K. Bingaman
Assistant Attorney General
Antitrust Division
United States Department of Justice
Washington, D.C. 20530
Re: Health Care Policy Statements
Dear Ms. Singamant
I am writing to urge the Department to update and expand the
statements of Antitrust Enforcement Policy in the Health Care
Area that it issued last September jointly with the Federal Trade
Commission ("FTC"), As you know, I have been a strong advocate
for providing antitrust guidance to the health care community. I
was encrmously impressed with the policy statements issued by the
Antitrust Division and, the FTC last September. They dealt with
pressing issues that had created antitrust confusion among health
care providers and could have chilled new and innovative health
care deals among hospitals and other providers. The policy
statements were of great benefit to health care providers when
they were issued last September, and I believe that updating and
expanding them as soon as possible is needed to continue that
reserved
Three separate groups have contacted INCO with their concerns
about the policy statements, First, the American Hospital
Association (with which I have worked cooperatively since it
first raised the issue of antitrust guidance) has indicated that
there are four additional areas in which hospitals require
antitrust guidance in the near future. They are multi-provider
network formation and operation; joint ventures for services and
existing equipment; efficiency considerations in mergers and
joint ventures; and application of the state action doctrine to
deals involving hospitals. I feel confident that the Antitrust
Division will be able to provide speedy additional guidance to
hospitals in these areas through policy statements.
Second, I have also been contacted by a number of non-
physician providers. They have requested that the policy
statements be revised to specify that they apply to deals
involving nurses, nurse-anesthetists, optometrists and other non-
physician providers. This seems to be a request that can be
accommodated easily.
Third, I have been contacted by a number of my colleagues
SENT BY:Antitrust - Exec Off ; 8- 3-94 :11:47AM ;
2027864248-
9-4562878:# 3
about expanding the policy statements to address the special
needs of rural hospitals and other providers. Rural providers
have requested that additional illustrative examples be included
in the policy statements to deal with the antitrust questions
that arise in sparsely populated areas of the country, including
small towns. They have also requested that the Antitrust
Division and the FTC develop a plan to disseminate more widely
the updated policy statements among rural providers. That could
be accomplished in a variety of ways, including closer
coordination with the Department of Health and Human Service's
Office of Rural Health. However, I would appreciate any other
recommendations that you might have on ways to get the policy
statements into the hands of more rural providers,
Thank you for your assistance with this matter. I look
forward to working with you on updated and expanded policy
statements for health care providers.
Howard sincerely, Chairman, M. Metzenbaym
Subcommittee on
Antitrust, Monopolies &
Business Rights
CC: George J. Mitchell
Edward M. Kennedy
Patrick J. Leahy
Thomas A. Daschle
Tom Harkin
James M. Jeffords
John H. Chafee
mordos TATIATES MANN
WI 00:00
SENT BY:Antitrust - Exec Off ; 8- 3-94 :11:48AM ;
2027864248-
9-4562878:# 4
U.S. Department of Justice
Antitrust Division
DRAFT
Office of the Assistans Anorney General
Washington, D.C. 20530
The Honorable Howard M. Metzenbaum
Chairman
Subcommittee on Antitrust, Monopolies
and Business Rights
Committee on the Judiciary
United States Senate
Washington, D.C. 20510
Dear Mr. Chairman:
Thank you for your letter of July 29, 1994, in which you
urge the Department to update and expand the Statements of
Antitrust Enforcement Policy in the Health Care Area that it
issued jointly with the Federal Trade Commission in September
1993. As your letter reflects, those policy statements dealt
with a number of issues that had been identified by the health
care community and the agencies as warranting guidance to dispel
unwarranted antitrust uncertainty that may be deterring mergers,
joint ventures, and other joint conduct that does not present
serious competitive problems. Indeed, such activities may
significantly further the goals of improving health care quality
and access at lower costs, increasing innovation and efficiency,
and reducing costs in the health care sector.
We have been informed by representatives of health care
providers and other interested groups that our policy statements
are serving their intended purpose of reducing antitrust
uncertainty and providing greater clarity with respect to the
application of the antitrust laws in the health care area. The
agencies have not challenged any activity falling within one of
the "safe harbors" in those statements, nor are we aware of any
private cases challenging such activities.
As you know, health care delivery systems and markets
continue to evolve, emphasizing the need for careful, continuing
attention to antitrust enforcement policy in this crucial sector
of the economy. Recognizing this, the agencies have continued to
meet with interested members of the health care community to
consider possible revisions to our existing policy statements and
additional statements covering other health care antitrust
issues. We have benefitted greatly from the suggestions of many
in the health care community over the last few months in this
SENT BY:Antitrust - Exec Off ; 8- 3-94 :11:48AM :
2027864248->
9-4562878:# 5
Thank you again for your thoughtful letter. The Department
believes strongly that sound, reasoned antitrust enforcement is
the best way of preserving and promoting competition in this
crucial and dynamic sector of the economy. We are committed to
and well along the way toward issuing revised and updated health
care enforcement policy statements, and we appreciate very much
your continuing strong support of our efforts.
Sincerely,
Anne K. Bingaman
Assistant Attorney General
SENT BY:Antitrust - Exec Off ; 8- 3-94 :11:48AM :
2027864248->
9-4562878:# 6
regard. We fully intend to revise and update our policy
statements, and are nearing completion of our first effort to do
so. I expect that new Department of Justice/Federal Trade
Commission health care antitrust
enforcement policy statements
will be issued very soon.
Our September 1993 statements covered a number of important
areas identified to us by health
care providers: hospital
mergers; hospital joint ventures
involving high technology or
other expensive medical equipment; physicians' provision of
information to purchasers of health care services; hospital
participation in exchanges of price and cost information; joint
purchasing arrangements among health care providers; and
physician network joint ventures Notwithstanding the breadth of
the 1993 statements, however, we recognized when we released them
that additional antitrust guidance might be warranted in the
areas they covered, as well as in other evolving health care
contexts. The comments and suggestions we have received from the
health care community since the issuance of our September 1993
statements have provided valuable input in this regard.
Your letter notes concerns regarding additional policy
statements expressed to you by the American Hospital Association.
We have been working closely with the AHA as to how best to
address the issues that are important to hospitals in particular,
and I believe that we have made substantial progress in
addressing those issues. Your letter also notes concerns
expressed to you by non-physician providers that the policy
statements should appropriately be revised to specify that they
apply to such providers as well. These same concerns and
recommendations have been expressed directly to us, and I believe
that they have merit. Finally, your letter notes contacts by
your colleagues about expanding the policy statements to address
the needs of rural hospitals and other providers. We are acutely
aware of rural providers' concerns about the application of
antitrust principles in rural settings. Rural providers have
requested additional illustrative examples of the policy
statements as they apply in sparsely populated areas. Addressing
the desire of rural health care providers for additional
antitrust guidance through illustrative examples is but one
example of our current efforts to update and expand our health
care antitrust enforcement policy statements. We agree with you
that widespread dissemination of our policy statements in rural
areas is vital and will work to accomplish that goal.
I would also note that we have met with representatives of
other members of the health care community, including the
American Medical Association, regarding their suggestions for
revisions or supplements to our policy statements. I believe
that a number of the suggestions that we received also can be
accommodated by our current effort to update and expand these
statements.
2
AUG-02-1994 18:56 FROM ATR LEGAL POLICY
TO
/*7#94562878 P.01
U.S. Department of Justice
,
Antitrust Division
[4843b]
Washington. D.C. 20530
DATE 8/2
Jennifer Klein
TO:
FAX # 456-2878
PHONE #
FROM:
NEIL ROBERTS (202-514-2512)
JOYCE HUNDLEY (202-514-2570)
HOWARD BLUMENTHAL (202-514-2513)
FRED PARMENTER (202-514-1504)
ILENE BLOCK (202-514-4773)
JACK SIDOROV (202-514-3958)
JOHN FILIPPINI (202-514-2497)
CLAUDIA DULMAGE (202-514-7018)
BEN GILIBERTI (202-514-4298)
JOANN FAY (202-514-2551)
PATRICIA BLUM (202-514-2512)
LINDIA KELLY (202-514-2497)
JOYCE MADISON (202-514-2513)
Per conv.
COMMENTS:
TOTAL PAGES TRANSMITTED: 9 (EXCLUDING TRANSMITTAL SHEET)
PANAFAX NO. 202-514-9082
AUG-02-1994 18:56 FROM ATR LEGAL POLICY
TO
/*7#94562878
P.02
F:VJHVHR3600\CANADY.001
agreed to
Amendment to H.R. 3600
19
Offered by Mr. Canady
Page 980, after line 16, insert the following (and
make such technical and conforming changes as may be
appropriate):
1 Subtitle G-Application of the Anti-
2
trust Laws to Health Care Serv-
3
ices
4 SEC. 5601. EXEMPTION FROM ANTITRUST LAWS FOR CER-
5
TAIN COMPETITIVE AND COLLABORATIVE
6
ACTIVITIES.
7
(a) EXEMPTION DESCRIBED.-An activity relating to
8 the provision of health care services shall be exempt from
9 the antitrust laws if
10
(1) the activity is within one of the categories
11
of safe harbors described in subsection (b); or
12
(2) the activity is within an additional safe har-
13
bor designated by the Attorney General under sub-
14
section (c).
15
(b) SAFE HARBORS.-The following activities are
16 safe harbors for purposes of subsection (a)(1):
17
(1) ACTIVITIES OF MEDICAL SELF-REGULATORY
18
ENTITIES.-
11. 1994 (5:43 D.m.)
AUG-02-1994 18:57 FROM ATR LEGAL POLICY
TO
/*7#94562878
P.03
F:VJHVHR3600\CANADY.001
2
1
(A) IN GENERAL.-Subject to subpara-
2
graph (B), any activity of a medical self-regu-
3
latory entity relating to standard setting or
4
standard enforcement activities that are de-
s
signed to promote the quality of health care
6
provided to patients.
7
(B) EXCEPTION.-No activity of a medical
8
self-regulatory entity may be deemed to fall
9
under the safe harbor established under this
#(i)
10
paragraph if the activity. Kny is conducted for pur-
11
poses of financial gain; or
(ii) interferes
12
(2) PARTICIPATION IN SURVEYS.-The partici-
with the
provision of
13
pation of a provider of health care services in a writ-
14
ten survey of the prices of services, reimbursement
healthcare
15
services by
levels, or the compensation and benefits of employ-
any provider16 16 17
ees and personnel, but only if
who is not
(A) the survey is conducted by a third
18
party, such as a purchaser of health care serv-
a member
of the specific 19
ices, governmental entity, institution of higher
profession
20
education, or trade association;
which is
21
(B) the information provided by partici-
subject to
22
pants in the survey is based on prices charged,
the authorityz
reimbursements received, or compensation and
of the medicate
benefits paid prior to the third month preceding
self-regulatory
entity.
August 1. 1994 (5:43 p.m.)
AUG-02-1994 18:57 FROM ATR LEGAL POLICY
TO
/*7#94562878
P.04
F:NJHSHR3800\CANADY.001
3
1
the month in which the information is provided;
2
and
3
(C) if the results of the survey are dissemi-
4
nated, the results are aggregated in a manner
5
that ensures that no recipient of the results
6
may identify the prices charged, reimbursement
7
received, or compensation and benefits paid by
8
any particular provider.
9
(3) JOINT VENTURES FOR HIGH TECHNOLOGY
10
AND COSTLY EQUIPMENT AND SERVICES.-Any ac-
11
tivity of a health care cooperative venture relating to
12
the purchase, operation, or marketing of high tech-
13
nology or other expensive medical equipment, or the
14
provision of high cost or complex services, but only
15
if the number of participants in the venture does not
16
exceed the lowest number needed to support the ven-
17
ture together with any other providers for whom the
18
participation in the venture is the only means of ob-
19
taining or operating such equipment or providing
20
such services.
21
(4) HOSPITAL MERGERS-Activities relating to
22
a merger of 2 hospitals if, during the 3-year period
23
preceding the merger, one of the hospitals had an
24
average of 100 or fewer staffed beds and an average
AUG-02-1994 18:57 FROM ATR LEGAL POLICY
TO
/*7#94562878
P.05
F: .JH\HR3600\CANADY.001
4
1
daily inpatient census of less than 50 percent of
2
such beds.
3
(5) JOINT PURCHASING ARRANGEMENTS.-Any
4
joint purchasing arrangement among health care
5
providers if-
6
(A) the purchases under the arrangement
7
represent less than 35 percent of the total sales
8
of the product purchased in the relevant market
9
area; and
10
(B) the amounts paid under the arrange-
11
ment represent less than 20 percent of the total
12
revenues of the supplier of the product pur-
13
chased.
14
(6) PHYSICIAN NETWORK JOINT VENTURES.-
15
Any activity of a physician network joint venture
16
comprised of 20 percent or less of the physicians in
17
each physician specialty who practice in the relevant
18
geographic market and share substantial financial
19
risk.
20
(7) NEGOTIATIONS-Activities consisting of
21
good faith negotiations to carry out any activity-
22
(A) described in this subsection; or
23
(B) within an additional safe harbor des-
24
ignated by the Attorney General under sub-
25
section (c).
August 1. 1994 (5:43 a.m.)
AUG-02-1994 18:58 FROM ATR LEGAL POLICY
TO
⑇*7#94562878
P.06
F:` JHSHR3600\CANADY.001
6
1
General (in consultation with the Chair of the
2
Federal Trade Commission) shall publish in the
3
Federal Register proposed additional safe har-
4
bors for purposes of subsection (a)(2) for pro-
5
viders of health care services. Not later than
6
180 days after publishing such proposed safe
7
harbors in the Federal Register, the Attorney
8
General shall issue final rules establishing such
9
safe harbors.
10
(2) CRITERIA FOR SAFE HARBORS.-In estab-
11
lishing safe harbors under paragraph (1), the Attor-
12
ney General shall take into account the following:
13
(A) The extent to which a competitive or
14
collaborative activity will accomplish any of the
15
following:
16
(i) An increase in access to health
17
care services.
18
(ii) The enhancement of the quality of
19
health care services.
20
(iii) The establishment of cost effi-
21
ciencies that will be passed on to consum-
22
ers, including economies of scale and re-
23
duced transaction and administrative costs.
24
(iv) An increase in the ability of
25
health care facilities to provide services in
August 1, 1994 (5:43 p.m.)
AUG-02-1994 17:13 FROM ATR LEGAL POLICY
TO
*7#9-4562876
P.01
United States Department of Justice
Antitrust Division
Main Justice Building
10th & Constitution, NW
Washington, DC 20530
The information contained in this facsimile is government privileged and confidential information intended only
for the use of the addressee(s) listed on this coversheet. If the reader of this message is not the intended
recipient(s), you are hereby notified that any dissemination, distribution or copying of the telecopy is strictly
prohibited. If you have received this facsimile in error, please immediately notify the sender at the telephone
number listed on this coversheet and the original facsimile must be returned via the United States Postal Service
to the address above. Thank you.
Office of Assistant Attorney General
FACSIMILE TRANSMISSION COVER SHEET
DATE: 8/2/94
TO:
JeNNifER Klein
OF: White House
FAX NUMBER: 202-456-2878
FROM: Robert A. Potter
PHONE: 202/616-0964
FAX: 202/514-9082
Number of pages (including this page): 23
Message:
AUG-02-1994 17:13 FROM ATR LEGAL POLICY
TO
/*7#9-4562878
P.02
SENT BY:HOUSE JUDICIARY CMTE : & 2-94
4:01PM :
8682+
202 514 9282:# 1
Amendment to H.R.3600
Offered by Mr. Brooks
Page 835, in the table of contents of title V, strike
the item relating to section 5501 insert the following:
See. 5501. Short title.
See 5502. Rules of construction.
Sea. 5508. Amindments.
Bas. 5506. Publication and availability of historical underwriting capacity risk
poot notifications.
Dos. 5505. Business review.
Bm. 5506. Study and report.
See 5507. Effective dates.
Beginning on page 979, strike line 21 and all that
follows through line 16 on page 980, and insert the fal-
lowing:
1 SEC. 5501. SHORT TITLE.
2
This subtitle may be cited as the "Insurance Com-
3 petitive Pricing Act of 1994".
4 SEC. 5502. RULES OF CONSTRUCTION.
5
The amendments made by this subtitle preserve-
6
(1) the provisions relating to State taxing and
7
regulatory authority in section 2 of the Act of March
8
9, 1945 (59 Stat 34; 15 U.S.C. 1012), commonly
9
known as the McCarran-Ferguson Act;
July 27. 1994 R4 A/A)
AUG-02-1994
17:14
FROM
ATR LEGAL POLICY
TO
/*7#9-4562878
SENT BY:HCUSE JUDICIARY CMTE : 8- 2-94 4:02PM :
P.03
8582->
202 514 9062:# 2
2
1
(2) the availability, to persons engaged in the
2
business of insurance, of the defense of State action
3
in the same: manner and to the ssme extent as such
4
defense is available to other persons;
5
(3) the availability, to persons engaged in the
6
business of insurance, of any antitrust immunity or
7
defense that may be applicable under law other than
8
the McCarran-Farguson Act;
9
(4) the legal standards applicable under the
10
McCarran-Ferguson Act, as in effect before such Act
11
is amended by this subtitle, to all conduct described
12
in the safe harbors found in subparagraphs (B), (C),
13
(D), and (E) of section 2(b)(1) of the McCarran-
14
Ferguson Act, as amended by this subtitle; and
15
(5) the provisions relating to boycott, coercion,
16
or intimidation in section 3(b) of the McCarran-Fer-
17
guson Act
18 SEC. 5503. AMENDMENTS.
19
Section 2 of the Act of March 9, 1945 (59 Stat. 84;
20 15 U.S.C. 1012), commonly known as the McCarran.Fer-
21 guson Act, is amended-
22
(1) in subsection (b)—
23
(A) by striking "; Provided," and all that
24
follows through "law." and inserting the follow-
25
ing:
July 27, 1994 (246 am)
17:14
FROM
ATR LEGAL POLICY
TO
SENT BY:HOUSE JUDICIARY CMTE : 8-2-94 4:02PM ;
/*7#9-4562878
P.04
8682->
202 514 9082:# 3
3
1 "except as follows:
2
"(1)(A) The antitrust laws shall be applicable
3
to the business of insurance except as provided in
4
subparagraphs (B), (C), (D), and (E).
5
"(B) The antitrust laws shall not be applicable
6
to conduct that consists of making an agreement or
7
engaging in joint conduct-
8
"(i)(I) to collect, compile, classify, or dis-
9
seminate historical data;
10
"(II) to develop procedures to collect, com-
11
pile, classify, or disseminate historical data; or
12
-
"(III) to verify that historical data is secu-
13
rate and complete;
14
"(ii) to determine, using standard actuarial
15
techniques, or disseminate, & loss development
16
factor or developed losses;
17
"(iii) to develop or disseminate a standard
18
insurance policy form (including a standard ad-
19
dendum to an insurance policy form and stand-
20
ard terminology in an insurance policy form) if
21
such agreement or joint conduct does not in-
22
clude an agreement to adhere to such standard
23
form, or to require adherence to such standard
24
form, except that the fact that 2 or more per-
July 17. 1994 12:68 an,)
AUG-02-1994 17:14 FROM ATR LEGAL POLICY
TO
SENT BY:HOUSE JUDICIARY CMTE : 8- 2-94 4:03PM :
/*7#9-4562878 P.05
8682->
202 S14 9062:# 4
F.\JH\HR3600\BROOKS.003
4
1
sons engaged in the business of insurance use
2
such standard form-
3
I
"(I) shall not be sufficient in itself to
4
support a finding that an agreement to ad-
5
here, or to require adherance, to such
6
standard form exists; and
7
"(II) may be used only for the pur-
8
pose of supplementing or explaining direct
9
evidence of the existence of an agreement
10
to adhere, or to require adherence, to such
11
standard form;
12
"(iv) to develop or disseminate, for use in
13
providing insurance in a State, a manual that
14
is filed, before dissemination, with the State en-
15
tity that regulates the business of insurance
16
under State law, if such manual includes only-
17
"(I) information and conduct de-
18
scribed in clauses (i), (ii), and (iii), includ-
19
ing relativity factors;
20
"(II) during the transition period, &
21
trend factor or information to which a
22
trend factor has been applied, to the extent
23
permitted under subparagraph (C); and
24
"(II) explanations and instructions
25
for using the manual (or any of the infor-
July 27. 1994 1245 D.M.)
17:15
FROM
ATR LEGAL POLICY
SENT
BY:HOLEE
JUDICIARY
TO
CMTE
:
&
2-94
*7#9-4562878
4:03PM
;
P.06
8582->
202 514 9082: # 5
F:\JH\ER3800\BROOKS.003
5
1
mation contained in the manual), if such
2
agreement or joint conduct does not in-
3
clude an agreement among competitors to
4
adhers, or to require adherance, to any of
5
such explanations or instructions;
6
"(v) to provide insurance pursuant to a
7
public necessity market mechanism;
8
"(vi) to provide insurance as a historical
9
underwriting capacity risk pool;
10
"(vii) to administer B public necessity mar-
11
ket mechanism in A State, pursuant to the au-
12
thorization of and under the supervision of such
13
State, if all persons who provide insurance in
14
such State pursuant to such mechanism, and all
15
persons seeking to obtain insurance through
16
such mechanism, have & reasonable opportunity
17
to appeal determinations affecting them to a
18
governmental entity;
19
"(viii) to develop or participate in a pro-
20
gram to inspect commercial buildings and fire
21
protection facilities, and evaluate government
22
building code requirements and enforcement of
23
such requirements, to determine the likelihood
24
and potential extent of loss due to fire, wind,
25
hail, earthquake, flood, or tidal HEFE, pursuant
JULY 27. 1904 (24 p.m.)
HUG-02-1994
17:15
FROM
ATR LEGAL POLICY
TO
SENT BY:HOUSE JUDICIARY CMTE : B- 2-94 4:04PM ;
/*7#9-4562878
P.07
8562->
202 514 9062:# # 6
6
1
to a State law that provides procedures for
2
making such a determination and provides a
3
reasonable opportunity for an affected person to
4
appeal such a determination to a governmental
5
entity, or
6
"(is) to develop or participate in & pro-
7
gram, pursuant to a workers' compensation in-
8
surance plan filed with the State entity that
9
regulates the business of insurance under State
10
law, to measure an employer's experience with
11
respect to occupational accidents and illnesses
12
for which such employer is liable, against the
13
comparable experience of other employers, and
14
to make a modification for an individual em-
15
ployer based on such comparisons, if an af-
16
fected employer has & reasonable opportunity to
17
appeal a determination under such program to
18
a governmental entity,
19
to the estent that such conduct is regulated by State
20
law.
21
"(C) During the transition period, the antitrust
22
laws shall not be applicable to conduct that consists
23
of making an agreement or engaging in joint con-
24
duct to determine or disseminate & trend factor, to
July 27. 1994 (248 am)
AUG-02-1994
17:15
FROM
ATR LEGAL POLICY
TO
/*7#9-4562878
SENT
BY:HI
P.08
JUDICIARY
OMTE
:
8-
2-94
4:04PM
:
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F:\JH\HRSS00\BROOKS.00S
7
1
the extent that such conduct is regulated by State
2
law.
3
"(D) The antitrust laws shall not be applicable
4
to conduct by a director, officer, or employee of B
5
national trade association representing insurance
6
agents, or: of a State trade association representing
7
insurance agents that is affiliated with such national
8
trade association, acting within the scope of the au-
9
thority vested in such director, officer, or employee
10
by the trade association involved, that consists of
11
preparing disseminating, or discussing & report or
12
comment (including describing, evaluating, and sug-
13
gesting possible responses for members of the asso-
14
ciation whose directors, officers, or employees pre-
15
pared such report or such comment to consider) with
16
respect to any insurer practice affecting the relation-
17
ship between insurers and insurance agents, if
18
"(i) such report or such comment includes
19
B conspicuous statement that each insurance
20
agent is expected to make his or her own deci-
21
sion regarding matters contained in such report
22
or such comment and that anticompetitive
23
agreements among insurance agents with re-
24
spect to any response to such practice are ille-
25
gal under the antitrust laws;
July 27. 1994 1240 pa)
AUG-02-1994 17:16 FROM ATR LEGAL POLICY
TO
/*7#9-4562878
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SENT BY:HOUSE JUDICIARY CMTE : 8- 2-94 4:05PM ;
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202 514 9082:# 8
8
1
"(5) such conduct does not involve
2
"(I) monitoring or policing the extent
3
to which any insurance agent follows, or
4
pressuring any insurance agent to follow,
5
any of such responses;
6
"(II) initisting any communication
7
(including a mailing, association publica-
8
tion, or association meeting) with any
9
member of any such association with re-
10
speet to such report or such comment (in-
11
cluding any of such responses), other than
12
-
by a means designed to reach all members,
13
or all directors and officers, of such asso-
14
ciation;
15
"(III) referring to any of such re-
16
sponses in any discussion unless the dis-
17
cussion emphasizes that each insurance
18
agent is expected to make his or her own
19
decision regarding matters contained in
20
such report or such comment and that
21
anticompetitive agreements among insur-
22
ance agents with respect to any response
23
to such practice are illegal under the anti-
24
trust laws; or
July 27. 1994 (245 am)
AUG-02-1994
17:16
FROM
ATR
LEGAL
POLICY
TO
/*7#9-4562878
P.10
SENT BY:HOUSE JUDICIARY CMTE : 8- 2-94
4:05PM :
8682+
202 514 9282:# 9
9
}
"(IV) the formal endorsement of such
2
report or such comment (including any of
3
such responses) by any part of the mem-
4
bership of any such association, other than
5
a statement that dissemination of such re-
6
port or such comment has been approved
7
by the directors or officers of the associa-
8
tion whose directors, officers, or employees
9
prepared such report or such comment;
10
and
11
"(iii) the number of directors and officers
12
- of any such association who are involved in pre-
13
,
paring, disseminating, or discussing such report
14
or such comment (including any of such re-
15
sponses) does not substantially exceed the num-
16
ber of directors and officers of such association
17
serving on April 30, 1994;
18
and if the business of insurance is regulated by
19
State law.
20
"(E) The antitrust laws shall not be applicable
21
to conduct of an insurance agent that is a member
22
of an association referred to in subparagraph (D)
23
that consists of independently initiating a commu-
24
nication, in an issue of a regularly scheduled asso-
25
cistion publication or at a regularly scheduled asso-
July 27. 1994 (268 p.m.)
AUG-02-1994 17:17 FROM ATR LEGAL POLICY
TO
/*7#9-4562878
SENT BY:HOUSE JUDICIARY CMTE : 8- 2-94
P.11
4:06PM :
8682-
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202 514 9062:#10
10
1
cistion meeting, to members of a local trade associa-
2
tion representing insurance agents of which such
3
agent is a member, that describes or summarizes all
4
or part of the contents of & report or comment de-
s
scribed in such subparagraph provided to such agent
6
by such association described in such subsection and
7
that is made only by & means designed to reach all
8
such members, if-
9
"(i) such conduct does not involve-
10
"(I) monitoring or policing the extent
11
to which any insurance agent follows, or
12
pressuring any insurance agent to follow,
13
any of the possible responses contained in
14
such report or such comment;
15
"(II) referring to any of such re
16
sponses unless the references emphasizes
17
that each insurance agent is expected to
18
make his or her own decision regarding
19
matters contained in such report or such
20
comment and that anticompetitive agree-
21
ments among insurance agents with re-
22
spect to any response to an insurance
23
practice discussed in such report or such
24
comment are illegal under the antitrust
25
laws; or
July 27. 1294 (246 am)
AUG-02-1994 17:17 FROM ATR LEGAL POLICY
TO
/*7#9-4562878
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ENT BY:HOUSE JUDICIARY CMTE : 8-2-94 4:07PM :
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202 514 9082:#11
11
1
"(III) the formal endorsement of such
2
report or such comment (including any of
3
such responses); and
4
"(i(ii) the primary purpose of such meeting,
5
or of such issue of such publication, is not the
6
discussion of such report or such comment (in-
7
cluding any of such responses);
8
and if the business of insurance is regulated by
9
State law.
10
"(2) Subsequent to the transition period, the
11
independent purchase of & trend factor by a person
12
engaged in the business of insurance from & person
13
not engaged in providing insurance (and not affili-
14
ated with a person engaged in providing insurance)
15
shall be presumed not to violate the antitrust laws.
16
"(S) The Federal Trade Commission Act shall
17
be applicable to the business of insurance to the es-
18
tent that such business is not regulated by State
19
law, except that, with respect to enforcement of the
20
antitrust laws, section 5505 of such Act shall be ap-
21
plicable to the business of insurance to the same es-
22
tent as the other antitrust laws.", and
23
(2) by adding at the end the following:
24
"(c) For purposes of subsection (b)—
July 27. 1994 (24 am)
AUG-02-1994 17:17 FROM ATR LEGAL POLICY
TO
/*7#9-4562878
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12
1
"(1) the term 'antitrust laws' has the meaning
2
given it in subsection (a) of the first section of the
3
Clayton Act (15 U.S.C. 12), except that such term
4
also includes the Act of June 19, 1936 (49 Stat.
5
1526; 15 U.S.C. 13 et seq.), commonly known as the
6
Robinson Patman Act, and section 5 of the Federal
7
Trade Commission Act (15 U.S.C. 45) as such sec-
8
tion 5 applies to conduct that constitutes a violation
9
of the Sherman Act or the Clayton Act;
10
"(2) the term 'devaloped losses' means aggre-
11
gate paid losses and aggregate reserves held for re-
12
ceived claims, as adjusted by & loss development fac-
13
tor,
14
"(3) the term 'historical underwriting capacity
15
risk pool' means an underwriting capacity risk pool
16
established prior to April 30, 1994-
17
"(A) the purpose of which is to provide in-
18
surance for & commercial risk relating to-
19
"(i) an airport, aviation, or aerospace
20
activity,
21
"(ii) a large commercial or industrial
22
property (including machinery, boilers, and
23
pressure vessels);
24
"(iii) a grain elevator or feed mill;
25
"(iv) an oil, gas, or chemical peril;
July 27. 1994 (246 p.m.)
AUG-02-1994 17:18 FROM ATR LEGAL POLICY
TO
/*7#9-4562878
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F:\JH\HR3800\BROOKS.003
#13
18
1
"(F) the construction or operation of a
2
nuclear energy facility,
3
"(vi) an inland marine peril or an
4
ocean marine enterprise;
5
"(vii) & natural disaster;
6
"(viii) an occupational accident or ill-
7
ness;
8
"(is) transportation of currency, mail,
9
securities, bullion, or other valuables by &
10
person with fiduciary responsibility for
11
their safe transport;
12
"(x) foreign commercial activities un-
13
dertaken in cooperation with the United
14
States Export-Import Bank; or
15
"(si) a war, rebellion, riot, or similar
16
civil commotion;
17
"(B) whose conduct has not materially
18
changed from the conduct described in accord-
19
ance with subparagraph (C)(iii) in which such
20
pool-
21
"(i) was authorized to engage under
22
its charter, bylaws, or other documents of
23
organization or governance filed in accord-
24
ance with subparagraph (C)(iiii); and
25
"(ii) did engage as 80 authorized;
July 27. 1994 12:15 am)
AUG-02-1994 17:18 FROM ATR LEGAL POLICY
TO
/*7#9-4562878
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14
1
prior to April 30, 1994; and
2
"(C) that, before the effective date of the
3
Insurance Competitive Pricing Act of 1994,
4
filed with the Attorney General of the United
5
States, in accordance with such rules as the At-
6
torney General may have issued, a
7
notification-
8
"(i) disclosing the identities of the
9
members of such pool on April 30, 1994;
10
"(ii) describing the nature and scope
11
of the activities of such pool, and the lines
12
of insurance in which such pool was en-
13
gaged, prior to April 30, 1994; and
14
"(iii) containing the charter, bylaws,
15
and other documents of organization or
16
governance of such pool in effect on or be-
17
fore April 30, 1994;
18
"(4) the term 'historical data' means informa-
19
tion respecting-
20
"(A) losses paid by, claims received by, re-
21
serves for such claims set aside by, or units of
22
exposure to loss in insurance policies sold by
23
any person engaged in the business of insur-
24
ance; or
July 27. 1994 (2:45 am)
AUG-02-1994 17:19 FROM ATR LEGAL POLICY
TO
**7#9-4562878
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15
1
"(B) insurance premiums received by any
2
person engaged in the business of insurance, if
3
such information is not disseminated in & form
4
from which information respecting premiums
5
received by any separately identifiable person
6
angaged in the business of insurance may be
7
derived;
8
"(5) the term insurance agent' means & person
9
that is
10
"(A) engaged as an independent contractor
11
in the business of selling insurance;
12
"(B) licensed under the law of a State as
13
an insurance agent or insurance broker; and
14
"(C) neither an insurer in any State in
15
which such person is so engaged, nor an em-
16
ployee of an insurer,
17
"(6) the term 'insurance policy' means a con-
18
tract under which insurance is sold to an insured;
19
"(7) the term 'insurer' means a person that
20
is-
21
"(A) engaged in the business of providing
22
insurance; and
23
"(B) obligated to pay losses under the in-
24
surance policies under which it provides insur-
25
ance;
JUSY 27, 1994 (2:46 RM)
AUG-02-1994 17:19 FROM ATR LEGAL POLICY
TO
/*7#9-4562878
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16
1
"(8) the term 'loss' means an amount paid or
2
to be paid by a person engaged in the business of
3
insurance to (or for the benefit of) a claimant to sat-
4
isfy a claim on an insurance policy, and includes any
5
attorney, investigatory, or litigation expenses that
6
are separately incurred, identified, and allocated by
7
such person with respect to that particular claim;
8
"(9) the term 'loss development factor' means
9
an adjustment to be made to the aggregate of losses
10
incurred during a prior period of time that have
11
been paid or for which claims have been received and
12
reserves are being held, in order to estimate the ag-
13
gregate of the losses incurred during such period
14
that will ultimately be paid;
15
"(10) the term 'loss incurred' means a loss for
16
which the event has occurred that ultimately gives
17
rise to liability on a claim on an insurance policy,
18
without regard to whether 8 claim based on such
19
event has been received;
20
"(11) the term 'public necessity market mecha-
21
nism' means & plan established by State law or by
22
the State entity that regulates the business of insur-
23
ance under State law-
24
"(A) for providing a type of insurance in
25
8 State;
July 27, 1994 246 p.m.)
AUG-02-1994
17:19
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ATR LEGAL POLICY
TO
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/*7#9-4562878
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17
1
"(B) in which the persons providing such
2
type of insurance pursuant to such mechanism
3
represent & substantial number of the persons
4
engaged in the business of providing such type
5
of insurance in such State and are either re-
6
quired by State law, or formally requested or
7
ordered by such State entity to participate;
8
"(C) the purpose of which is to make such
9
type of insurance available to persons who
10
would not otherwise be able to obtain such type
11
of insurance at affordable cost; and
12
"(D) in which the rate for such type of in-
13
surance is subject to the approval or dis-
14
approval of such State;
15
"(12) the term 'relativity factor' means 8 ratio
16
comparing one classification of historical data to an-
17
other such classification, or comparing developed
18
losses in one such classification to developed losses
19
in another such classification;
20
"(13) the term 'transition period' means the 2-
21
year period beginning on the effective date of the In-
22
surance Competitive Pricing Act of 1994;
23
"(14) the term 'trend factor' means an adjust-
24
ment to be made to developed losses in order to ac-
July 27. 1994 (2:48 am)
AUG-02-1994 17:20 FROM ATR LEGAL POLICY
TO
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18
1
count for any change that is anticipated to affect
2
losses; and
3
"(15) The term 'underwriting capacity risk
4
pool' means s business arrangement or association-
5
"(A) whose members consist of 2 or more
6
persons engaged in the business of insurance;
7
and
8
"(B) that operates for the purpose of pro-
9
viding insurance under which the liability for
10
paying losses is spread among such members.".
11 SEC. 5504. PUBLICATION AND AVAILABILITY OF HISTORI.
12
CAL UNDERWRITING CAPACITY RISK POOL
13
NOTIFICATIONS.
14
The Attorney General shall, not later than 30 days
15 after receiving a notification filed in accordance with sec-
16 tion 2(c)(8)(C) of the Act of March 9, 1945 (59 Stat. 34;
17 15 U.S.C. 1012), commonly known as the McCarran-Fer-
18 guson Act-
19
(1) publish in the Federal Register-
20
(A) a summary of such notification; and
21
(B) notice that such notification is avail-
22
able to the public; and
23
(2) make such notification available to the pub-
24
lic.
July 27. 1994 (266 D.M.)
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TO
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19
1 SEC. 8505. BUSINESS REVIEW.
2
If a person engaged in the business of insurance sub-
3 mits a written request to the Attorney General in accord-
4 anne with section 50.6 of title 28 of the Code of Federal
5 Regulations (July 1, 1992), as amended from time to
6 time, for & business review letter with respect to the appli-
9 cation of the antitrust laws to specified activities of an
8 underwriting capacity risk poal (as defined in section
9 2(c)(15) of the Act of March 9, 1945, commonly known
10 as the McCarran-Ferguson Act) of which such person is,
11 or intends to become, a member, then the Attorney Gen-
12 eral shall issue such letter in accordance with such section.
13 SEC. 5506. STUDY AND REPORT.
14
(a) STUDY.-During the 5-year period beginning on
15 the effective date of this Act, the Attorney General shall
16 conduct a study to determine the effect of this subtitle,
17 and the amendments made by this subtitle, on the busi-
18 ness of insurance.
19
(b) REPORT.-Not later than 1 year after the expira-
20 tion of the 5-year period referred to in subsection (a), the
21 Attorney General shall submit, to the Speaker of the
22 House of Representatives and the President pro tempore
23 of the Senate, a report summarizing the results of the
24 study required by subsection (a).
July 27. 1994 (2:46 p.m.)
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1 SEC. 5507. EFFECTIVE DATES.
2
(a) GENERAL EFFECTIVE DATE.-Except as pro-
3 vided in subsection (b), this subtitle shall take effect 1
4 year after the date of the enactment of this Act.
5
(b) EFFECTIVE DATE OF SECTIONS 5504 AND
6 5505.-Sections 5504 and 5505 shall take effect on the
7 date of the enactment of this Act.
July 27. 1994 (2:46 p.m.)
AUG-02-1994 17:21 FROM ATR LEGAL POLICY
TO
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Amendment To H.R. 3600
4
2
Offered By Mr. Fish
Page 376, line 20, insert the following after the pe-
riod: "Nothing in this subsection may be construed to
prohibit any transaction otherwise lawful under any of
the antitrust laws.".
Page 376, insert after line 21 the following (and re-
designate the succeeding provisions accordingly):
1
"(1) ANTITRUST LAWS.-The term 'antitrust
2
laws' has the meaning given it in subsection (a) of
3
the first section of the Clayton Act (15 U.S.C.
4
12(a)), except that such term includes section 5 of
5
the Federal Trade Commission Act (15 U.S.C. 45)
6
to the extent such section 5 applies to unfair meth-
7
ods of competition.
July 29. 1994 (3:27 p.m.)
AUG-02-1994 17:21 FROM ATR LEGAL POLICY
TO
/*7#9-4562878
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3
Amendment to H.R. 3600
Offered by Mr. Brooks
Page 135, strike lines 3 through 7, and insert the
following:
1
(2) COMMENTS FROM PROVIDERS.-The fee
2
schedule under paragraph (1) shall be established
3
after considering comments received from providers.
Beginning on page 135, strike line 19 and all that
follows through line 25 on page 136.
Page 137, beginning on line 10, strike "negotiate
with health providers annually to" and insert "annually".
Page 137, lines 13 and 20, strike "negotiated".
Page 138, after line 7, insert the following:
4
(e) ANTITRUST LAWS PRESERVED.-
July 27. 1994 (8:14 p.m.)
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2
1
(1) APPLICABILITY-Nothing in this title shall
2
be construed to modify, impair, or supersede any of
3
the antitrust laws.
4
(2) ANTITRUST LAWS.-For purposes of para-
5
graph (1), the term "antitrust laws" has the mean-
6
ing given it in subsection (a) of the first section of
7
the Clayton Act (15 U.S.C. 12(a)), except that such
8
term includes the Act of June 19, 1936 (49 Stat.
9
1526; 15 U.S.C. 13 et seq.), commonly known as the
10
Robinson Patman Act, and section 5 of the Federal
11
Trade Commission Act (15 U.S.C. 45) to the extent
12
that such section 5 applies to unfair methods of
13
competition.
July 27. 1994 (8:14 p.m.)
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7
1
medically underserved areas or to medi-
2
cally underserved populations.
3
(v) An improvement in the utilization
4
of health care resources or the reduction in
5
the inefficient duplication of the use of
6
such resources.
7
(B) Whether the designation of an activity
8
as a safe harbor under paragraph (1) will result
9
in the following outcomes:
10
(i) Health plans and other health care
11
insurers, consumers of health care services,
12
and health care providers will be better
13
able to negotiate payment and service ar-
14
rangements which will reduce costs to con-
15
sumers.
16
(ii) Taking into consideration the
17
characteristics of the particular purchasers
18
and providers involved, competition will not
19
be unduly restricted.
20
(iii) Equally efficient and less restric-
21
tive alternatives do not exist to meet the
22
criteria described in subparagraph (A).
23
(iv) The activity will not unreasonably
24
foreclose competition by denying competi-
25
tors a necessary element of competition.
August 1, 1994 (5:43 D.M.)
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TO
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F:SJHVHR3600\CANADY.001
8
1
(d) DEFINITIONS.-For purposes of this section-
2
(1) the term "antitrust laws"-
3
(A) has the meaning given it in subsection
4
(a) of the first section of the Clayton Act (15
5
U.S.C. 12(a)), except that such term includes
6
section 5 of the Federal Trade Commission Act
7
(15 U.S.C. 45) to the extent such section ap-
8
plies to unfair methods of competition; and
9
(B) includes any State law similar to the
10
laws referred to in subparagraph (A);
11
(2) the term "health care cooperative venture"
12
means any activities, including attempts to enter
13
into or perform a contract or agreement, carried out
14
by 2 or more persons for the purpose of providing
15
health care services;
16
(3) the term "health care services" means any
17
services for which payment may be made under a
18
health benefit plan, including services related to the
19
delivery or administration of such services;
20
(4) the term "medical self-regulatory entity"
21
means a medical society or association, a specialty
22
board, a recognized accrediting agency, or a hospital
23
medical staff, and includes the members, officers,
24
employees, consultants, and volunteers or commit-
25
tees of such an entity;
August 1. 1994 (5:43 p.m.)
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1
(5) the term "provider of health care services"
2
means any individual or entity that is engaged in the
3
delivery of health care services in 8 State and that
4
is required by State law or regulation to be licensed
5
or certified by the State to engage in the delivery of
6
such services in the State; and
7
(6) the term "standard setting and enforcement
8
activities" means-
9
(A) accreditation of health care practition-
10
ers, health care providers, medical education in-
11
stitutions, or medical education programs;
12
(B) technology assessment and risk man-
13
agement activities,
14
(C) the development and implementation of
15
practice guidelines or practice parameters; or
16
(D) official peer review proceedings under-
17
taken by a hospital medical staff (or committee
18
thereof) or a medical society or association for
19
purposes of evaluating the professional conduct
20
or quality of health care provided by a medical
21
professional.
August 1, 1994 (5:43 p.m.)
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U.S. DEPARTMENT OF JUSTICE
ANTITRUST DIVISION
(OFFICE OF THE ASSISTANT ATTORNEY GENERAL)
(OFFICE OF THE DEPUTY ASSISTANT ATTORNEY GENERAL)
10th & Constitution Avenue, NW
Washington, DC 20530
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PROTECTED BY LAW FROM DISCLOSURE, and is intended only for the are of the Addressee named below. If you are not
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hereby notified that any dissemination or copying of this facsimile may be strictly prohibited. If you have received this facsimile in
error, please immediately notify - by telephone and return the original facsimile to us at the above address via the Postal Service.
Thank you.
DATE: 4/7/94
TIME:
6:40
am pm
TO:
Jennifes Klein
Phone: 456-2599
Fax:
456 - 2878
FROM:
Bob Potter
Antitrust Division
Phone: (202) 616-0964
Fax: (202) 616-2645
No. of Pages:
9
(excluding transmittal page)
COMMENTS:
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U.S. Department of Justice
Antitrust Division
Office of the Assistant Attorney General
Washington, DC 20530
The Honorable Howard W. Metzenbaum
Chairman
Subcommittee on Antitrust, Monopolies,
and Business Rights
Committee on the Judiciary
United States Senate
Washington, D.C. 20510-6275
Dear Mr. Chairman:
I am writing in response to your letter of March 22, 1994,
also signed by Chairman Brooks, requesting the views of the
Department of Justice on S. 1658 and its companion bill,
H.R. 3486, the "Health Care Antitrust Improvements Act of 1993."
These bills would create special new broad based statutory
immunities from the antitrust laws for a wide range of health
care activities.
The Department is committed to reasonable and responsible
application of the antitrust laws in the health care area to
promote new competition in evolving markets. We have established
as a priority the issuance of antitrust enforcement policy
statements in the health care area designed to bring down health
care costs to consumers while providing effective quality health
care services. Six such statements have already been issued and
others will be considered. We are committed to ongoing review
and supplementation of these statements.
Effective antitrust laws have for over a century been the
principal guarantor of competition in the American system and
have time and again proved far superior to pervasive government
review, regulation, and oversight of collective activities that
may have competitive consequences. Health reform needs to build
and should build on a commitment to competition in health care
markets. Consequently, the Department of Justice opposes the
broad new statutory antitrust immunities contained in these
bills.
The antitrust laws are enforced so as to take fully into
account increased efficiency, lower administrative and other
costs, improvements in quality, and other factors that are
important to the cost-effective delivery of health care services.
Neither the Justice Department nor the Federal Trade Commission
has ever challenged a joint venture among hospitals to purchase,
operate and market high-technology or other expensive medical
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equipment. And of the more than 250 hospital mergers since 1987,
only 11 have been found by the Department or the FTC to have
likely anticompetitive effects that warranted antitrust
challenge. Only those combinations that will harm the American
consumer by raising prices, decreasing quality or availability of
services, or discouraging innovation face antitrust challenge.
The Department and the FTC have recognized that uncertainty
over the application of the antitrust laws in the health care
area should be addressed, and have issued specific antitrust
guidance to the health care industry. In September 1993, the
agencies issued several joint Statements of Antitrust Enforcement
Policy in the Health Care Area. Moreover, recognizing that
issues and circumstances may change over time, the agencies have
committed to providing additional general guidance, and also
developed an expedited process whereby health care providers can
obtain the views of the Department or the FTC on specific
proposed activities.
Private remedies have been an integral part of antitrust
enforcement for over 100 years. Moreover, the "private"
antitrust remedies are used by State attorneys general to protect
consumers in their states from localized anticompetitive
activity. Such actions are an important adjunct to federal
enforcement: Our enforcement resources are limited, and cannot
uncover or move against every anticompetitive practice that may
be harming consumers. At the same time, however, there is no
reason to expect that health care providers will face a multitude
of baseless private antitrust suits. Private parties are
unlikely to institute meritless lawsuits and even less likely to
be successful in pursuing them. This is especially the case with
regard to health care matters, where it can be expected that
courts will take into account the views of the government,
including those expressed in the DOJ-FTC Statements of Antitrust
Enforcement Policy, in private antitrust actions. This will help
ensure sound and reasoned decisions in private litigation.
S. 1658 and H.R. 3486
S. 1658 and H.R. 34861 provide several types of broad
immunities from the operation of the antitrust laws to the health
care industry. Briefly, Section 2 of each bill provides
antitrust immunity for any health care activity that:
(1) falls within one of the "safe harbors" described in
Section 3 of the bill;
(2) falls within an additional safe harbor established by
The two bills are nearly identical. The Department objects
equally to both S. 1658 and H.R. 3486.
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the Attorney General, after seeking public suggestions for
further safe harbors via Federal Register notice under
Section 4 of the bill; or
(3) is covered by a "certificate of review" issued by the
Attorney General with the concurrence of the Secretary of
Health and Human Services ("the Secretary") under Section 5
of the bill.
Additionally, Section 6 of each bill provides special antitrust
protections in the form of guaranteed rule-of-reason treatment
and the "detrebling" of any antitrust damages for a health care
cooperative venture, if notice of the venture is provided to the
Attorney General.
The broad new statutory antitrust immunities accorded by
S. 1658 and H.R. 3486 are unnecessary and potentially harmful.
The certificate of review immunity scheme in the bills, covering
any activity relating to the provision of health care services,
would create pervasive and continuing Federal government
regulation of the competitive and other dimensions of an unknown
and potentially vast number of health care provider activities.
This task could well overwhelm the Justice Department, seriously
impeding its ability to focus on any activities that actually
would have anticompetitive effects. It likely would result in a
massive new bureaucracy within the Department of Justice to
administer such a program. Moreover, regulatory attempts to
guard against anticompetitive behavior have consistently proved
to be no substitute for the standard operation of the antitrust
laws. The notification-based antitrust protections in the bills,
broadly covering any collective activity among health care
providers, could undercut sound antitrust substantive standards
and skew the balance of antitrust remedies that has served so
well for over a century. And the "safe harbor" immunities in the
bills, based as they would be on hard-to-amend statutory or
regulatory language and legislative or regulatory history, could
have unintended anticompetitive effects, whereas enforcement
policy statements based on common sense, basic competitive
principles, would not.
Having summarized the Department's views on S. 1658 and
H.R. 3486, I will address below our concerns with each aspect of
the bills in more detail.
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CERTIFICATE OF REVIEW PROVISIONS OF S.1658 AND H.R. 3486
The most comprehensive and complex new antitrust immunity
scheme provided by S. 1658 and H.R. 3486 is the certificate of
review process set out in Section 5 of each bill. This section
provides complete antitrust immunity to successful applicants for
a certificate of review that may cover any activity relating to
the provision of health care services. In deciding whether to
issue a certificate, the Attorney General and the Secretary are
to take into account the extent to which a particular activity
will:
A) lead to an increase in access to health care
services;
B) enhance the quality of health care services;
C) establish cost efficiencies that will be passed on
to consumers, including economies of scale and reduced
transaction and administrative costs;
D) increase the ability of health care facilities to
provide services in medically underserved areas or to
medically underserved populations; and
E) improve the utilization of health care resources or
reduce inefficient duplication of such resources.
They must also consider whether:
A) the activity will help health plans and other
health care insurers, consumers of health care services, and
health care providers to better negotiate payment and
service arrangements that will reduce costs to consumers;
B) taking into consideration the characteristics of
the particular purchasers and providers involved,
competition will not be unduly restricted;
C) equally efficient and less restrictive alternatives
do not exist to meet the criteria described above; and
D) the activity will not unreasonably foreclose
competition by denying competitors a necessary element of
competition.
Section 5 requires the Attorney General, in consultation
with the Secretary and the Chair of the FTC, to establish
procedures to be used in applying for and approving certificates.
It also requires published notice of each application in the
Federal Register within 10 days of receipt, and action by the
Attorney General and the Secretary within 90 days. If an
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application for a certificate has not been denied within 90 days,
it is deemed approved. There is also provision for expedited
action if an applicant "indicates a special need for prompt
disposition."
Further provisions in Section 5 deal with denial of
applications, requests for reconsideration, fraudulent
procurement, amendment and revocation of certificates, requests
for compliance information, investigative authority, review of
certification determinations in federal court, the effect of
rejected applications, publication of decisions, annual reports,
restrictions on disclosure of information, and prohibition
against use of information to support or answer claims under the
antitrust laws. In short, section 5 replaces the normal
operation of the antitrust laws with ongoing government review
and regulation of certificated activities under the comprehensive
standards set out above.
Objections to the Certificate of Review Provisions
Antitrust immunity for any and all activities relating to
the provision of health care services pursuant to the complex
certificate of review process contained in S. 1658 and H.R. 3486
is unnecessary and potentially harmful. There is no evidence
that establishment of such a pervasive regulatory scheme or such
a substantial departure from the antitrust standards and
procedures applicable in virtually all other sectors of the
economy is necessary to foster the innovative health care
delivery systems envisioned by the Health Security Act and most
of the other reform proposals currently before the Congress.
Justice Department and FTC policy and practice have accorded
favorable treatment to the vast majority of cooperative
activities in the health care area. Nor does the ability of
health care providers, consumers or third party payers to seek
redress of antitrust grievances through private litigation
warrant the substitution of continuing government oversight of
health care activities for the discriminating application of
sound antitrust law.
The dangers of a comprehensive certification/antitrust
immunity scheme are manifest. First, such a scheme would place
the entire responsibility of initially and prospectively
detecting anticompetitive threats and continually monitoring
approved health care activities on the Departments of Justice and
HHS. In light of the breadth of the scheme, analyzing and
processing certification applications could be overwhelming,
impeding the Justice Department's ability to screen proposed
activities for anticompetitive effects, and diverting its staff
from their primary mission the detection and prosecution of
antitrust violations and the prevention of anticompetitive
mergers and joint ventures. Competitive harm in such
circumstances is entirely predictable.
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The certification scheme provided by S. 1658 and H.R. 3486
also would require unwarranted and continuing government
oversight of an unknown and potentially vast number of day-to-day
activities of health care providers. Government agencies would
have the ability to approve a wide range of individual or
collaborative activities, perhaps on condition that they be
altered in a particular way. In addition, the agencies would
have the power, and indeed the obligation, after certification to
intervene in a regulatory manner whenever they determined that
the complex and judgmental criteria in the bill were no longer
met. Constant monitoring of existing certificate holders would
be required to determine whether a certificate should be amended
or revoked. To effectively administer such a scheme would
require a massive new bureaucracy within the Department of
Justice. Finally, the certification scheme in the bills likely
would impose increased costs on the health care industry as
providers spent substantial sums preparing and filing requests
for certificates for activities that typically raise no colorable
antitrust issues.
NOTIFICATION PROVISIONS OF S. 1658 AND H.R. 3486
Section 6 of each bill would create a notification procedure
whereby any "health care cooperative venture" would be guaranteed
a "rule-of-reason" antitrust analysis if challenged under the
antitrust laws, and any antitrust relief granted against such a
venture would be limited to actual rather than treble damages.
Parties could obtain such protection by affirmatively notifying
the Attorney General of their activities, but in addition many
types of ventures would be "deemed" to have submitted such a
notification. These include any ventures that have applied for a
certificate of review under Section 5, and any health care
cooperative ventures of a certain size² among non-institutional
providers who share risks.
Objections to the Notification Provisions
As with certification schemes, rule-of-reason/single damage
protection via notification for unknown and potentially broad
'For a nonexclusive network, any group including 50 percent
or fewer of the providers in a relevant market and 50 percent or
fewer of the members of any one specialty within that group; for
an exclusive network, any group including 35 percent or fewer of
the providers or specialists in a relevant market.
³H.R. 3486 deems either ventures below the size limits in
Note 2 supra or ventures wherein providers share risks to have
been notified; S. 1658 imposes both size limits and risk sharing
before ventures will be deemed to have been notified. H.R. 3486
also omits the "non-institutional" qualifier.
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categories of collaborative health care activities is unnecessary
and potentially harmful. There is no indication, in light of the
sound enforcement policies applied to health care activities,
that cost-saving or otherwise efficient joint ventures in the
health care area are unusually vulnerable to antitrust attack.
In fact, quite the opposite is clear from the record. There is
no sound reason to extend antitrust protection to joint ventures
that present no anticompetitive risks and that would not be in
danger of challenge in the first place. Moreover, such a
provision could actually increase costs in the health care
industry as the costs of notifications were passed on to
consumers.
A notification scheme such as that set out in S. 1658 and
H.R. 3486 could be harmful to competition and consumers by
providing unwarranted rule-of-reason or single damage protection
to potentially anticompetitive activities. There is no
indication that procompetitive joint activity in the health care
area is being placed at unusual or undue antitrust risk.
Moreover, there is no legitimate distinction between health care
and other industries such that potential treble damages should
not produce the same salutary compensatory and deterrent effects
in the health care area that they do generally.
Absent clear and convincing evidence of aberrations or
abuse, antitrust standards and remedies should not be abrogated
by special industry-specific protection for broad ranges of
activities. Blanket, automatic protection for any "health care
cooperative venture," which is defined in the two bills as "any
activities, including attempts to enter into or perform a
contract or agreement, carried out by two or more persons for the
purpose of providing health care services," and for broad
categories of activities that without any notice at all would be
"deemed" to have filed a notification, would significantly
constrain appropriate antitrust enforcement and deterrence. The
rationale behind notification schemes is to give the government
an opportunity to step in and stop potentially harmful
activities, and the trade-off is that parties who notify are
given rule-of-reason and single damages protection if they come
forward. In light of the thousands of ventures that could
potentially be presented to the Department under a notification
scheme, there is a very real danger that potentially harmful
arrangements would be granted a degree of protection that they do
not deserve, and that could result in substantial harm to
consumers.
CODIFICATION OF SAFE HARBORS
Section 3 of each bill would create several categories of
statutory health care antitrust immunities that are in part
patterned on the safety zones described in the six Department of
Justice/FTC Statements of Antitrust Enforcement Policy in the
7
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Health Care Area issued in September 1993. The "safe harbor"
immunities in S. 1658 and H.R. 3486, however, are broader, and
there are seven categories of exemptions instead of six.
Section 4 of each bill would create a process whereby the public
could submit suggestions for additional safe harbors to be
established by the Attorney General, in consultation with the
Secretary and the Chair of the FTC.
Objections to Codification of Safe Harbors
Statutory "safe harbors" from antitrust scrutiny for health
care providers would be both unnecessary and potentially harmful.
Such protections are unnecessary because the Department and the
FTC have already set out significant safety zones in their joint
Statements of Antitrust Enforcement Policy in the Health Care
Area that inform health care providers of activities that are
clearly lawful. We have committed to continuing review and
supplementation of these Statements, and have complemented them
with an expedited process through which health care providers may
obtain the views of the Department or FTC on specific proposed
health care activities, whether or not they are covered by the
existing policy statements.
The harm that the Department foresees from codification of
health care antitrust safety zones is that it could have
unforeseen consequences and needlessly encumber law enforcement
and development in areas that may require fine tuning for some
time to come. Consumers, health care providers and enforcement
officials all need leeway to adjust to changes in relevant
markets as health care systems evolve and competition and
efficiencies in health care delivery become better understood.
Statutory antitrust immunities are not easily amended, and their
intended effects can be distorted by interpretations of both
statutory language and legislative history. On the other hand,
the articulation of safety zones in flexible, competition-
oriented enforcement policy statements such as those set out by
the agencies last September is a process much more geared to an
optimal outcome for both providers and consumers. What looks
like a perfectly reasonable activity today could have unforeseen
anticompetitive ramifications in the future and, similarly, what
appears to be a problematic activity today may be perfectly
reasonable in the future. Although it is extraordinary for one
particular industry to have a set of specific guidelines put
forth for its benefit, the Department and the FTC have done so
for the health care industry. It would be totally unprecedented
for such guidelines to be codified.'
"We would also note that some of the particular safe harbors
defined in the two bills are substantially broader than the
safety zones in the DOJ/FTC Statements of Enforcement Policy, and
(continued )
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*
*
In sum, the Department of Justice opposes S. 1658 and
H.R. 3486. I appreciate very much your interest in the
importance of sound antitrust enforcement and the preservation of
competitive health care markets. The Department is committed to
reasonable and responsible application of the antitrust laws in
the health care area and will continue to work to promote a fair
and competitive health care marketplace; however the broad new
statutory antitrust immunities in these bills could be
detrimental to the goals of health care reform.
This Department has been advised by the Office of Management
and Budget that there is no objection to the submission of this
report from the standpoint of the Administration's program.
Sincerely,
Anne K. Bingaman
Assistant Attorney General
4
(
continued)
may protect anticompetitive conduct that significantly harms
consumers.
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JOSEPH R DIDEN. Jan DELAWARE CHAIRMAN
BOWARD M. KENNEDY. MASSACHUSETTS
ORNIN a. HATCH, UTAH
HOWARD M. METZENBALIM. OHIO
STROM THURMOND, SOUTH CAROLINA
DENNIS DECONCINI, ARIZONA
ALAN K. BIMPSON, WYOMING
PATRICK J. LEAHY, VERMONT
CHARLIS & GRASSLEY. IOWA
HOWELL HEFLIN, ALABAMA
ARLEN SPECTER, PENNEYLVANIA
PAUL SIMON, ILLINOIS
HANK BROWN, COLORADO
Hnited States Senate
HEABERT KONL WISCONSIN
WILLIAM $. COHEN, MAINE
DIANNE PEINSTEIN. CALIFORNIA
LARRY PRESSLER. SOUTH DAKOTA
CAROL MODELEY.BRAUN, ILLINOIS
COMMITTEE ON THE JUDICIARY
CYNTHIA c. HOGAR, ONLIP COUNSEL
WASHINGTON, DC 20510-6278
CATHERINE M RUSSELL STAFF DIRECTOR
MARK A. DISLER MINDAITY STARF DIRECTOR
SHARON PROST, MINORITY CHIP COUNSEL
July 29, 1994
Anne K. Bingaman
Assistant Attorney General
Antitrust Division
United States Department of Justice
Washington, D.C. 20530
Re: Health Care Policy Statements
Dear Ms. Singsman:
I am writing to urge the Department to update and expand the
Statements of Antitrust Enforcement Policy in the Health Care
Area that it issued last September jointly with the Federal Trade
Commission ("FTC") As you know, I have been a strong advocate
for providing antitrust guidance to the health care community.
I
was enormously impressed with the policy statements issued by the
Antitrust Division and. the FTC last September. They dealt with
pressing issues that had created antitrust confusion among health
care providers and could have chilled new and innovative health
care deals among hospitals and other providers. The policy
statements were of great benefit to health care providers when
they were issued last September, and I believe that updating and
expanding them as soon as possible is needed to continue that
progress.
Three separate groups have contacted me with their concerns
about the policy statements. First, the American Hospital
Association (with which I have worked cooperatively since it
first raised the issue of antitrust guidance) has indicated that
there are four additional areas in which hospitals require
antitrust guidance in the near future. They are multi-provider
network formation and operation; joint ventures for services and
existing equipment; efficiency considerations in mergers and
joint ventures; and application of the state action doctrine to
deals involving hospitals. I feel confident that the Antitrust
Division will be able to provide speedy additional guidance to
hospitals in these areas through policy statements.
Second, I have also been contacted by a number of non-
physician providers. They have requested that the policy
statements be revised to specify that they apply to deals
involving nurses, nurse-anesthetists, optometrists and other non-
physician providers. This seems to be a request that can be
accommodated easily.
Third, I have been contacted by a number of my colleagues
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about expanding the policy statements to address the special
needs of rural hospitals and other providers. Rural providers
have requested that additional illustrative examples be included
in the policy statements to deal with the antitrust questions
that arise in sparsely populated areas of the country, including
small towns. They have also requested that the Antitrust
Division and the FTC develop a plan to disseminate more widely
the updated policy statements among rural providers. That could
be accomplished in a variety of ways, including closer
coordination with the Department of Health and Human Service's
Office of Rural Health. However, I would appreciate any other
recommendations that you might have on ways to get the policy
statements into the hands of more rural providers.
Thank you for your assistance with this matter. I look
forward to working with you on updated and expanded policy
statements for health care providers.
Chairman,
Subcommittee on
Antitrust, Monopolies &
Business Rights
CC: George J. Mitchell
Edward M. Kennedy
Patrick J. Leahy
Thomas A. Daschle
Tom Harkin
James M. Jeffords
John H. Chafee
FOR
mondons TATTATES MAYS
TAT T
20
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U.S. Department of Justice
Antitrust Division
DRAFT
Office of the Assistant Anorney General
Washington, D.C. 20530
The Honorable Howard M. Metzenbaum
Chairman
Subcommittee on Antitrust, Monopolies
and Business Rights
Committee on the Judiciary
United States Senate
Washington, D.C. 20510
Dear Mr. Chairman:
Thank you for your letter of July 29, 1994, in which you
urge the Department to update and expand the Statements of
Antitrust Enforcement Policy in the Health Care Area that it
issued jointly with the Federal Trade Commission in September
1993. As your letter reflects, those policy statements dealt
with a number of issues that had been identified by the health
care community and the agencies as warranting guidance to dispel
unwarranted antitrust uncertainty that may be deterring mergers,
joint ventures, and other joint conduct that does not present
serious competitive problems. Indeed, such activities may
significantly further the goals of improving health care quality
and access at lower costs, increasing innovation and efficiency,
and reducing costs in the health care sector.
We have been informed by representatives of health care
providers and other interested groups that our policy statements
are serving their intended purpose of reducing antitrust
uncertainty and providing greater clarity with respect to the
application of the antitrust laws in the health care area. The
agencies have not challenged any activity falling within one of
the "safe harbors" in those statements, nor are we aware of any
private cases challenging such activities.
As you know, health care delivery systems and markets
continue to evolve, emphasizing the need for careful, continuing
attention to antitrust enforcement policy in this crucial sector
of the economy. Recognizing this, the agencies have continued to
meet with interested members of the health care community to
consider possible revisions to our existing policy statements and
additional statements covering other health care antitrust
issues. We have benefitted greatly from the suggestions of many
in the health care community over the last few months in this
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regard. We fully intend to revise and update our policy
statements, and are nearing completion of our first effort to do
SO. I expect that new Department of Justice/Federal Trade
Commission health care antitrust
enforcement policy statements
will be issued very soon.
Our September 1993 statements covered a number of important
areas identified to us by health care providers: hospital
mergers; hospital joint ventures
involving high technology or
other expensive medical equipment; physicians' provision of
information to purchasers of health care services; hospital
participation in exchanges of price and cost information; joint
purchasing arrangements among health care providers; and
physician network joint ventures Notwithstanding the breadth of
the 1993 statements, however, we recognized when we released them
that additional antitrust guidance might be warranted in the
areas they covered, as well as in other evolving health care
contexts. The comments and suggestions we have received from the
health care community since the issuance of our September 1993
statements have provided valuable input in this regard.
Your letter notes concerns regarding additional policy
statements expressed to you by the American Hospital Association.
We have been working closely with the AHA as to how best to
address the issues that are important to hospitals in particular,
and I believe that we have made substantial progress in
addressing those issues. Your letter also notes concerns
expressed to you by non-physician providers that the policy
statements should appropriately be revised to specify that they
apply to such providers as well. These same concerns and
recommendations have been expressed directly to us, and I believe
that they have merit. Finally, your letter notes contacts by
your colleagues about expanding the policy statements to address
the needs of rural hospitals and other providers. We are acutely
aware of rural providers' concerns about the application of
antitrust principles in rural settings. Rural providers have
requested additional illustrative examples of the policy
statements as they apply in sparsely populated areas. Addressing
the desire of rural health care providers for additional
antitrust guidance through illustrative examples is but one
example of our current efforts to update and expand our health
care antitrust enforcement policy statements. We agree with you
that widespread dissemination of our policy statements in rural
areas is vital and will work to accomplish that goal.
I would also note that we have met with representatives of
other members of the health care community, including the
American Medical Association, regarding their suggestions for
revisions or supplements to our policy statements. I believe
that a number of the suggestions that we received also can be
accommodated by our current effort to update and expand these
statements before Congress passes health care reform legislation.
2
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Thank you again for your thoughtful letter. The Department
believes strongly that sound, reasoned antitrust enforcement is
the best way of preserving and promoting competition in this
crucial and dynamic sector of the economy. We are committed to
and well along the way toward issuing revised and updated health
care enforcement policy statements, and we appreciate very much
your continuing strong support of our efforts.
Sincerely,
Anne K. Bingaman
Assistant Attorney General
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
ROUTE SLIP
TO: Jemifer Klein
Take necessary action
Bob Pellicci
Approval signature
Adrien silas
Comment
Chris Panker
Prepare reply
Jim Murr
Discuss with me
Jim Jukes
For your information
See remarks below
FROM: Ingrid Schroeder
DATE: August 1,1994
REMARKS
Attached is a draft letter to Rep. Pomeroy from
Chris Edley concerning HR 9- Insurance Antitrust.
Chris would like to send this Out today.
Please provide comments by 4pm-today- 8/1/94
If I do not receive your comments by the
above deadline I will assume that you
have no comment on the leter.
Note: Chris Edley added a sentence to the last panagraph
I am in the AMITS of nethon A
JENI
0- 1-54 11.30AM 1
2023854038
531081# 1
i:\data\pomeroy.Itr
Honorable Earl Pomeroy
U.S. House of Representatives
Washington, D.C. 20515-3401
Dear Congressman Pomeroy:
It was a pleasure speaking with you Friday regarding H.R. 9, the Insurance
Competitive Pricing Act of 1993. We have reviewed this bill and agree with the position
enunciated by the Justice Department in the attached letter.
By making antitrust laws generally applicable to the insurance industry, we believe
H.R. 9 would promote competition and enhance economic efficiency. The "safe-harbors" set
forth in the bill would permit the continued sharing of a variety of historical loss-related data
and other information critical to the evaluation of risk. However, the bill would prohibit
collective insurer determinations about the cost of future losses after 8 short transition period.
This would promote price competition among insurance companies and discourage anti-
competitive activity.
H.R. 9 would lay the foundation for a more flexible and dynamic insurance industry.
It would promote price competition, which would benefit the American consumer.
Thank you again for sharing your views with me regarding this bill. I want to assure
you that OMB and White House strff took a "fresh" look at this, and consulted with
1
knowlegeable Justice Department officials, as you suggested.
Sincerely,
Christopher Edley, Jr.
Associate Director for
General Government and Finance
Jennifer Kkin's
mankup
U.S. Department of Justice
Office of Legislative Affairs
Office of the Animal Attorney Charal
DC 20030
DRAFT
The Honorable Jack Brooks
Chairman
Committee on the Judiciary
U.S. House of Representatives
Washington, D.C. 20515
Dear Mr. Chairman:
I am writing in response to your request for the views of
the Department of Justice on H.R. 9, the Insurance Competitive
Pricing Act of 1993, as reported favorably by the Subcommittee on
Economic and Commercial Law. As Assistant Attorney General
Bingaman testified before the Subcommittee on July 29, 1993, the
Administration supports a narrowing of the current broad
exemption for the business of insurance in the McCarran- Perguson
Act to nove carefully crafted protection for activities that are
demonstrably procempatitive and essamisally efficient, However,
we believe thes 14 such legiciation is to successful do must
also allow insurance compentes of ell sines to serve consumers
fairly and efficiently, and permit insurars to maintain finuncial
strength and proficability A The Department of Justice believes
that the bill as reported by the Subcommittee is an appropriate
balance of the need to Barrow the current broad antitrust
H.R.9
exemption for the business of insurance and the need of the
industry to operate efficiently and effectively in an
increasingly competitive environment. Thus, the Department
supports the thoust and scope of H.R. 9 as reported by the
Subcommittee. As you know, the Administration 18 also proposing
the repeal of the McCarran.Ferguson exemption for the business of
insurance to the extent that such business relates to the
provision of health benefits.
Like H.R. 9 as introduced, the bill as reported would narrow
the current antitrust exemption for the business of insurance.
It differs in form from the bill as introduced, however, in that
it simply applies the antitrust laws to the business of
insurance, except for certain categories of conduct to the extent
that such conduct is regulated by state law. This format is
similar to that of the current exemption and provides, we
believe, a workable way to narrow the exemption to specified
conduct without creating unnecessary uncertainty.
Section 3 of the bill sets forth rules of construction to
clarify the intent and the effect of the legislation. One such
rule preserves the legal standards applicable under the existing
MoCarran-Ferguson Act with respect to conduct in the bill's "safe
harbors" (categories of conduct that will remain exampt from the
antitrust laws to the extent regulated by state law), Another
rule of construction preserves the current provisions relating to
acts of boycott, coercion or intimidation in section 3 of the
McCerran-Ferguson Act. still another preserves the availability
of the state action defense to persons engaged in the business of
insurance to the same extent such defense is available to other
parsons. other rules of construction preserve existing state
taxing and regulatory authority as provided in section 2 of the
MoCarran-Perguson Act, and preserve antitrust immunities that may
be applicable under other laws.
Section 3 of the bill would effectively narrow the current
antitrust exemption for the business of insurance to certain
"safe harbors" specified in the bill. Safe harbors are provided
for joint conduct involving the collection, compilation and
dissemination of historical data; the determination, using
standard actuarial techniques, and dissemination of a loss
development factor or developed losses; the development and
dissemination of standard policy forms, provided that there is no
agreement to adhere to such forms or to require adherence to such
forms; the provision of insurance through public necessity market
mechanisms (often referred to as assigned risk Dools) the
provision of insurance as a historic underwriting capacity risk
pool (certain "grandfathered" pools specified in the bill); the
development of or participation in certain specified fire
inspection programs; and the development of or participation in a
program, pursuant to a worker's compensation insurance plan filed
with the state entity that regulates the business of insurance
under state law, to measure an employer's experience with respect
to occupational accident or illness of its employees against
comparable experience of other employees and to make a
modification for an individual employer based on such
comparisons, if an affected employer has a reasonable opportunity
to appeal a determination under such a program to a government
agency. We believe that these safe harbors are well-considered
and appropriate.
The bill also provides, during a 2 year transition period
beginning on the effective date of the bill (1 year after the
date of enactment), a safe harbor for conduct that consists of
making an agreement or engaging in joint conduct to determine or
disseminate a trend factor (an adjustment to developed losses to
account for any change that is anticipated to affect losses). It
further provides that subsequent to the transition period, the
2
*****
independent purchase of a trend factor by a person engaged in the
business of insurance from a person not engaged in (and not
affiliated with a person engaged in) providing insurance shall be
presumed not to violate the antitrust laws. while we do not
believe that trending should be permanently safe-harbored, we
have no objection to the transition period in the bill during
which trending will remain exempted from the application of the
antitrust laws.
Section 5 of the bill provides that the Attorney General
shall issue a "business review letter" (a statement of the
Department's antitrust enforcement intentions with respect to
specific conduct) in response to a written request by any person
engaged in the business of insurance with respect to the
activities of an underwriting risk pool in accordance with 28
C.F.R. s 50.6 (describing the Department's business review
procedure). The Department already provides guidance to the
insurance and other business communities through the use of the
business review procedure contained in the Code of Federal
Regulations. We will be sensitive to the needs of insurers and
others affected by the passage of H.R. 9 in responding LO
requests for business review letters that they may submit
pursuant to that procedure. we are, however, firmly opposed to
statutorily invoking the Department's business review procedure.
There is no need to do so given the Department's longstanding
business review policies and procedures. Moreover. a statutory
provision could encourage unnecessary business review requests
that otherwise would not be made and that could be costly both to
the industry and LO the Department. And private antitrust
counsel are also available to advise the industry on specific
pooling practices, guided by the business reviews issued by the
Department in the normal course. Finally, business reviews are
not currently provided for by statute, and such a provision in
MeCarran-Ferguson reform legislation would set a dangerous
precedent for similar provisions in other areas where the
affected industry argues that some level of antitrust uncertainty
warrants special consideration.
Aside from this important objection, we believe that H.R. 9
as reported by the Subcommittee is a highly workable solution to
the long-debated issue of MoCarran-Ferguson reform. We thank the
Committee for the opportunity to contribute to this historic
legislative effort. we look forward to continuing to work with
you on this legislation through its successful passage and
enactment into law.
3
This Department has been advised by the Office of Management
and Budget that there is no objection to the submission of this
report from the standpoint OE the Administration' s program.
Sincerely,
Sheila F. Anthony
Assistant Attorney General
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FLORIDA
FHA
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ASSOCIATION
ANTITRUST PROBLEMS AND
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FUTURE
July 26, 1994
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