McCarran-Ferguson Act — State Regulation of Insurance
The McCarran-Ferguson Act of 1945 is the foundational federal law explaining why insurance is regulated almost entirely at the state level. Passed in response to a 1944 Supreme Court decision that surprised the entire industry, McCarran-Ferguson declares that the business of insurance, and every person engaged in it, shall be subject to the laws of the several States. Federal law takes a back seat — the Sherman Act, the Clayton Act, and the FTC Act apply to insurance only where state law does not already regulate the matter, and even then only after a transition period ended in 1948.
The result is the system you see today: 50 state insurance commissioners, 50 different rate-filing regimes, 50 different market-conduct frameworks, and very limited direct federal oversight of ordinary insurance transactions. McCarran-Ferguson is the statutory reason for all of it.
Current Law (2026)
| Parameter | Value |
|---|---|
| Core statute | McCarran-Ferguson Act of 1945, codified at 15 U.S.C. §§ 1011–1015 |
| Default rule | State law governs the business of insurance; state regulation and taxation may continue |
| Federal antitrust application | Sherman Act, Clayton Act, and FTC Act apply only where state law does not regulate |
| Hard exception | Sherman Act always applies to agreements or acts involving boycott, coercion, or intimidation |
| Health insurance carve-out | Antitrust laws apply to the business of health insurance regardless of state regulation (added 1994) |
| Safe harbor | Certain cooperative actuarial activities among insurers are specifically protected |
| Covered territories | All 50 states, D.C., Puerto Rico, Guam, Alaska, Hawaii |
Legal Authority
- 15 U.S.C. § 1011 — Declaration of policy: Congress declares it is in the public interest for states to regulate and tax the business of insurance, and federal silence is not a limit on state authority
- 15 U.S.C. § 1012 — State regulation is the rule; federal antitrust laws (Sherman, Clayton, FTC Act) apply only where state law does not regulate; specific insurance federal laws do apply
- 15 U.S.C. § 1013 — Original 1948 phase-in is complete; Sherman Act applies to boycott, coercion, or intimidation; health insurance antitrust carve-out; cooperative actuarial activities protected
- 15 U.S.C. § 1014 — National Labor Relations Act, Fair Labor Standards Act, and Merchant Marine Act not affected
- 15 U.S.C. § 1015 — "State" defined to include D.C., Puerto Rico, Guam, and other territories
How It Works
For most of U.S. history, insurance was treated as a purely local transaction. That changed in 1944 when the Supreme Court held in United States v. South-Eastern Underwriters Association that insurance crossing state lines was interstate commerce subject to federal antitrust law. The industry and state regulators responded with alarm — existing state regulatory systems would suddenly be disrupted. Congress passed McCarran-Ferguson the following year to restore the prior arrangement. The Act made a deliberate federalism choice: rather than merely deferring to states temporarily, it affirmatively declared that the states' interest in regulating and taxing insurance is the public interest. Courts have read that framing broadly to protect state insurance regulation from federal preemption. The Act's protection applies when three conditions are met: (1) the conduct is part of the "business of insurance"; (2) state law regulates the conduct; and (3) the conduct does not constitute boycott, coercion, or intimidation — that carve-out has real teeth: the Sherman Act still applies to hard-core anticompetitive conduct even when state law fully regulates the area, meaning insurers cannot use McCarran-Ferguson as a shield for collective refusals to deal that coerce market participants.
Two significant limits have narrowed the Act's scope. First, health insurance is now mostly removed from the shield: the ACA and prior amendments made clear that federal antitrust laws apply to the business of health insurance regardless of whether state law regulates the same conduct; for life insurance, property/casualty, and specified excepted benefits, the traditional shield remains intact. Second, the Act explicitly protects cooperative actuarial activities: insurers may collectively collect and share historical loss data, set loss development factors, perform actuarial work that does not restrain trade, and share standard policy forms when use is voluntary — data-pooling activities that would be difficult or impossible under strict antitrust rules. Despite the 2008 financial crisis and subsequent creation of the Federal Insurance Office within Treasury (Dodd-Frank) and new requirements on systemically important insurers, Congress did not repeal McCarran-Ferguson or shift ordinary insurance regulation to the federal government — the state regulatory structure established in 1945 remains the primary framework for insurance oversight.
How It Affects You
<!-- pria:personalize type="impact" -->If you buy insurance — home, auto, health, life, business — McCarran-Ferguson is the reason your experience is governed by your state, not a federal agency. When your homeowners insurer cancels your policy, denies a claim, or raises your rate, the regulator with jurisdiction is your state department of insurance — not the FTC, not the CFPB (for most insurance), and not any other federal agency. Every state has an insurance commissioner with authority to handle consumer complaints, enforce claim payment requirements, and approve or disapprove rate filings. Filing a complaint with your state insurance commissioner typically triggers an inquiry to the insurer and often produces a faster resolution than litigation. Find your state's insurance department through the National Association of Insurance Commissioners (naic.org/state-insurance-departments). For the current homeowners insurance crisis in Florida, California, Louisiana, and other states: state insurance commissioners are your primary point of contact — they are monitoring insurer solvency, approving or challenging rate increases, and managing residual market programs (Citizens Property Insurance in Florida, the FAIR Plan in California) that are the market of last resort when private insurers withdraw.
If you're an insurance agent, broker, or insurance professional operating across multiple states, McCarran-Ferguson's state-regulation framework means you need a separate license in each state where you sell or advise on insurance — there's no single federal insurance license that works everywhere. The NARAB II framework (National Association of Registered Agents and Brokers, effective 2016) created a clearinghouse to streamline nonresident licensing for producers already licensed in their home state, but it still requires compliance with each state's requirements. For health insurance agents and brokers specifically: the federal exchange under the ACA operates with federally certified agents and brokers alongside state-licensed ones. If you're selling insurance across state lines, the Producer Licensing Study tool at nipr.com helps identify requirements by state. Note that where your conduct is coordinated with other insurers in ways that amount to boycott, coercion, or intimidation — collective refusals to write coverage in certain markets — the Sherman Act applies even under McCarran-Ferguson's protection, regardless of whether state law addresses the same conduct.
If you work in health insurance, the antitrust carve-out from McCarran-Ferguson means your industry operates under the same federal competition rules as any other sector — the DOJ Antitrust Division and FTC review health insurer mergers, investigate anticompetitive contracting practices with hospital systems and physicians, and can challenge market conduct that would be shielded in property/casualty or life insurance markets. The DOJ's challenge to UnitedHealth's acquisition of Change Healthcare and the FTC's investigations of hospital-insurer contracting practices are examples of this active enforcement. For health insurance executives and compliance teams, the combination of state market conduct regulation (premium rate filings, claim payment standards, network adequacy) and federal antitrust enforcement (merger review, contracting practices, market allocation) means regulatory exposure on two tracks simultaneously. Understand clearly which activities are governed by state law (and thus shielded from federal antitrust) versus which cross the line into competition conduct subject to DOJ/FTC jurisdiction.
If you work in property/casualty or life insurance (excluding health), McCarran-Ferguson's traditional shield remains largely intact — state regulation is the primary framework for rate setting, form approval, market conduct, and solvency oversight. The key exception to remember: boycott, coercion, and intimidation — even when state law fully occupies the regulatory space, collective insurer conduct rising to the level of a boycott is subject to federal Sherman Act prosecution. The insurance crisis in coastal and wildfire-exposed states has put this exception in focus: when multiple major insurers simultaneously decide to exit Florida or California — whether that's coordinated or coincidental market exits — questions arise about whether the exits reflect independent business judgment or coordinated conduct. So far, no federal antitrust action has followed, and market exits have been treated as independent business decisions. But as the property insurance availability crisis deepens, political pressure to repeal or narrow McCarran-Ferguson has grown. Track the legislative debate through the Federal Insurance Office annual report at treasury.gov/about/organizational-structure/offices/fio and the NAIC at naic.org.
<!-- /pria:personalize -->State Variations
State variation is exactly what McCarran-Ferguson intends:
- Rate filing: some states require prior approval of insurance rates before they take effect; others use file-and-use or use-and-file systems
- Market conduct exams: each state insurance department runs its own examinations of insurers doing business in that state
- Form approval: policy forms and endorsements must meet state-specific requirements that vary substantially
- Residual markets: state-run involuntary market mechanisms (assigned risk pools, FAIR plans) vary in scope and design
Pending Legislation (119th Congress)
Proposals to partially or fully repeal McCarran-Ferguson's antitrust exemption have surfaced periodically in Congress — most recently in the context of homeowners insurance availability and affordability crises in states like Florida and California. As of April 2026, no repeal bill has advanced, but the political pressure is real when state insurance markets show distress.
Recent Developments
- Property insurance crisis has put McCarran-Ferguson in the political spotlight: The collapse of private homeowners insurance markets in Florida (as major carriers exited the state after years of hurricane losses) and the withdrawal of major insurers from California wildfire-prone areas has generated renewed calls for federal intervention. Critics of the state-regulation model argue that McCarran-Ferguson allows insurers to collectively decide which markets to exit and which risks to price in ways that would be investigated as collusion in other industries. Several members of Congress introduced resolutions and bills in 2024–2025 calling for partial repeal of McCarran-Ferguson or creation of a federal backstop for climate-related property insurance. As of April 2026, no repeal legislation has passed.
- NAIC actively defending state regulation: The National Association of Insurance Commissioners has responded to federalization proposals with a sustained lobbying effort arguing that the existing state framework, while imperfect, provides more tailored consumer protections than a federal regime would. NAIC points to variations in state mandated-benefit laws, rate regulation, and market-conduct examinations as features that a federal system would level down rather than up. The debate reflects a genuine tension: state regulation allows experimentation and customization, but in a crisis, it can produce fragmented and inadequate responses.
- Health insurance antitrust carve-out enforcement remains active: The 1994 health insurance antitrust exemption removal — which subjects health insurers to the same federal antitrust laws as other industries — continues to generate enforcement activity. DOJ Antitrust Division and FTC have challenged health insurance mergers (including blocked UnitedHealth/Change Healthcare aspects), investigated provider-insurer contracting practices, and scrutinized hospital system vertical integration strategies. The health insurance antitrust carve-out from McCarran-Ferguson is the legal basis for all of this federal enforcement activity — it's not just theoretical.
- FIO monitoring but not regulating: The Federal Insurance Office within Treasury, created by Dodd-Frank in 2010, continues to monitor the insurance industry and publish annual reports on market conditions — including the climate/natural catastrophe coverage gap. FIO's role is to monitor, advise, and coordinate internationally, not to regulate. Proposals to give FIO regulatory authority would require legislation amending or effectively superseding McCarran-Ferguson's state-regulation default. No such legislation has advanced in the 119th Congress.