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McCarran Ferguson Act of 1945 Stands in the Way of Obamacare

The McCarran Ferguson Act of 1945 Stands in the Way of Obamacare

By Ralph F. Weber

In 1944 the Supreme Court ruled that insurance was an item of commerce, and could be regulated by the federal government under the commerce clause. This ruling overturned a previous ruling by the Supreme Court in 1869 in the case of Paul VS. Virginia, (1) which held that “issuing a policy of insurance is not a transaction of commerce,” effectively moving the business of insurance beyond the United States Congress’s legislative reach.

That Supreme Court ruling in 1944 came from the case of the United States VS. South-Eastern Underwriters Association (2) which also held that the Sherman Act, the federal antitrust statue, applied to insurance.

The states protested the ruling and in 1945 Congress passed the McCarran Ferguson Act (3) which gave the states the authority to regulate insurance (4). A result of McCarran Ferguson was that each state was able to create its own mandates dictating what medical procedures must be covered by policies issued in each state. More importantly, McCarran Ferguson is also the act which makes it impossible for the department of Health and Human Services to establish insurance exchanges in the states, as is required in order to implement PPACA.

The department of Health and Human Services is promising grants to the states in order to set up “state run health exchanges”. In reality HHS needs the states to set them up, or grant permission to the HHS, because the federal government lacks the capability and the legal authority to set up healthcare exchanges which comply with the mandates of 50 different states as dictated by McCarran Ferguson.

Steve Larsen, deputy administrator and director of the Center for Consumer Information and Insurance Oversight, Centers for Medicare & Medicaid Services, U.S. Department of Health and Human Services, admits that: “The Affordable Care Act simply requires legal authority under state law to implement the exchange. That could be existing law, legislative action, or executive order. (5)” He likely understands that McCarran Ferguson stands in the way of implementation of the exchanges.

This week, Congress will consider legislation, the Medicare Decisions Accountability Act (HR 452), which repeals the ACA’s Independent Payment Advisory Board (IPAB), and with it the McCarran Ferguson act of 1945. Although the IPAB is an extremely troubling part of the ACA, as it acts as the rationing entity for healthcare, repealing it along with McCarran Ferguson will remove one of the largest roadblocks in implementation of the ACA. Furthermore, it will give politicians the opportunity to tell their constituents that they voted against one of the least desirable parts of Obamacare.



At MediBid, we restore market forces to medical care. Doctors get to set their own rates based on their training, experience, and outcomes, and patients get to shop for medical care across state lines and international borders. Many times with MediBid, you will find procedures that are more effective than procedures allowed, or covered by health plans. Transparency and competition are the only way to achieve reasonable costs. Many of our employer clients offering group health insurance through MediBid save $5,000 per employee per year. Those are substantial savings. Patients are saving an average of 48% vs. insurance discounted rates, or 80% vs. retail. Contact us for more information.
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