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August 23, 2004

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david giacalone

Here's a working link to Prof. Grace's 2nd posting, agreeing that antitrust law would not condemn insurance company collection of risk/loss data. See additional analysis in my Decs & Exs Comments here

david giacalone

There he goes again: Prof. Martin Grace is once again committing FAFOFA [Falsely Accusing Foes Of False Accusations]. Since I can't leave a comment at tort et a travers, I'm leaving one here with his co-conspirator.

First, I agree with the notion that repealing the antitrust immunity for med-mal insurers is not very likely to have a substantial effect on the "med-mal crisis." I also agree with Prof. Grace that whether or not malpractice insurers collude to set prices "deserves serious thought."

But, I don't understand the need to distort the position of those who want to remove the industry's antitrust exemption. Despite Martin's assertion, neither Sen. Durbin nor Rep. Conyers concludes that there is collusion. Durbin says, because of the M-FA exemption, "insurers can collude to set rates" and "enforcement officials cannot investigate any such collusion." Conyers says "We also know from past experience that the insurance industry – which is exempt from the antitrust laws – is not immune from collusion, price fixing and other anticompetitive problems." "Can collude" and "have colluded in the past" are not conclusory statements that collusion exists now. Wanting enforcers available to investigate signs or claims of collusion is not an unreasonable position; nor is wondering whether ultra-high premiums might be the result of collusion.

While Martin decries conclusory statements, he happily notes that "evidence of collusion is non-exisitant." Well, if the M-FA exemption is stopping federal enforcers from investigating, it's a little hard to have evidence in hand. It's worth pointing out though, that collusion exists in every industry, despite the applicability of the antitrust laws. It is far from illogical to believe tha it might also take place in an industry that (1) has historically colluded; (2) could be tempted to try to jointly stabilize or manage prices or allocate markets because, as Rep. Conyers has stated, it "goes through boom and bust cycles, with premiums ebbing and flowing as companies enter and exit the market and investment income rises and falls;" (3) already does far more information-sharing and has more publicly-declared prices than other industries; and (4) has had a federal antitrust exemption for half a century, so has less fear of consequences from collusion.

Prof. Martin may be correct that doctor-owned malpractice insurers may not have a (long-run?) incentive to keep premiums high, but they might nonetheless have the same incentives as any other company to coordinate, stabilize or manage premiums to help smooth out insurance cycles. [Also note: doctors own a lot of medical arts buildings, are the rents to their colleagues particularly low?]

Elsewhere, I've complained loudly about misleading ellipses. I'm just as irked by links and cites to statements that don't mean what we're told they mean. Stick to the merits guys, and stop arguing like lawyers and politicians.

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