Kentucky Assn. of Health Plans, Inc. v. Miller
| Decision Date | 02 April 2003 |
| Docket Number | No. 00-1471.,00-1471. |
| Citation | 538 U.S. 329 |
| Parties | KENTUCKY ASSOCIATION OF HEALTH PLANS, INC., ET AL. v. MILLER, COMMISSIONER, KENTUCKY DEPARTMENT OF INSURANCE. |
| Court | U.S. Supreme Court |
Petitioner health maintenance organizations (HMOs) maintain exclusive "provider networks" with selected doctors, hospitals, and other health-care providers. Kentucky has enacted two "Any Willing Provider" (AWP) statutes, which prohibit "[a] health insurer [from] discriminat[ing] against any provider who is ... willing to meet the terms and conditions for participation established by the ... insurer," and require a "health benefit plan that includes chiropractic benefits [to] ... [p]ermit any licensed chiropractor who agrees to abide by the terms [and] conditions ... of the ... plan to serve as a participating primary chiropractic provider." Petitioners filed this suit against respondent, the Commissioner of Kentucky's Department of Insurance, asserting that the AWP laws are pre-empted by the Employee Retirement Income Security Act of 1974 (ERISA), which pre-empts all state laws "insofar as they ... relate to any employee benefit plan," 29 U. S. C. § 1144(a), but saves from pre-emption state "law[s] ... which regulat[e] insurance ...," § 1144(b)(2)(A). The District Court concluded that although both AWP statutes "relate to" employee benefit plans under § 1144(a), each law "regulates insurance" and is therefore saved from pre-emption by § 1144(b)(2)(A). The Sixth Circuit affirmed.
Held: Kentucky's AWP statutes are "law[s] ... which regulat[e] insurance" under § 1144(b)(2)(A). Pp. 334-342.
(a) For these statutes to be "law[s] ... which regulat[e] insurance," they must be "specifically directed toward" the insurance industry; laws of general application that have some bearing on insurers do not qualify. E. g., Pilot Life Ins. Co. v. Dedeaux, 481 U. S. 41, 50. However, not all state laws "specifically directed toward" the insurance industry will be covered by § 1144(b)(2)(A), which saves laws that regulate insurance, not insurers. Insurers must be regulated "with respect to their insurance practices." Rush Prudential HMO, Inc. v. Moran, 536 U. S. 355, 366. P. 334.
(b) Petitioners argue that the AWP laws are not "specifically directed" toward the insurance industry. The Court disagrees. Neither of these statutes, by its terms, imposes any prohibitions or requirements on providers, who may still enter exclusive networks with insurers who conduct business outside the Commonwealth or who are otherwise not covered by the AWP laws. The statutes are transgressed only when a "health insurer," or a "health benefit plan that includes chiropractic benefits," excludes from its network a provider who is willing and able to meet its terms. Pp. 334-336.
(c) Also unavailing is petitioners' contention that Kentucky's AWP laws fall outside § 1144(b)(2)(A)'s scope because they do not regulate an insurance practice but focus upon the relationship between an insurer and third-party providers. Petitioners rely on Group Life & Health Ins. Co. v. Royal Drug Co., 440 U. S. 205, 210, which held that third-party provider arrangements between insurers and pharmacies were not "the `business of insurance'" under § 2(b) of the McCarran-Ferguson Act. ERISA's saving clause, however, is not concerned (as is the McCarran-Ferguson Act provision) with how to characterize conduct undertaken by private actors, but with how to characterize state laws in regard to what they "regulate." Kentucky's laws "regulate" insurance by imposing conditions on the right to engage in the business of insurance. To come within ERISA's saving clause those conditions must also substantially affect the risk pooling arrangement between insurer and insured. Kentucky's AWP statutes pass this test by altering the scope of permissible bargains between insurers and insureds in a manner similar to the laws we upheld in Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S. 724, UNUM Life Ins. Co. of America v. Ward, 526 U. S. 358, and Rush Prudential, supra. Pp. 337-339.
(d) The Court's prior use, to varying degrees, of its cases interpreting §§ 2(a) and 2(b) of the McCarran-Ferguson Act in the ERISA saving clause context has misdirected attention, failed to provide clear guidance to lower federal courts, and, as this case demonstrates, added little to the relevant analysis. The Court has never held that the McCarran-Ferguson factors are an essential component of the § 1144(b)(2)(A) inquiry. Today the Court makes a clean break from the McCarran-Ferguson factors in interpreting ERISA's saving clause. Pp. 339-342.
227 F. 3d 352, affirmed.
Robert N. Eccles argued the cause for petitioners. With him on the brief were Karen M. Wahle, Jonathan D. Hacker, and Barbara Reid Hartung.
Elizabeth A. Johnson argued the cause for respondent. With her on the brief were Julie Mix McPeak and William J. Nold.
James A. Feldman argued the cause for the United States as amicus curiae urging affirmance. With him on the brief were Acting Solicitor General Clement, Deputy Solicitor General Kneedler, Howard M. Radzely, Allen H. Feldman, Nathaniel I. Spiller, and Gary K. Stearman.*
Kentucky law provides that "[a] health insurer shall not discriminate against any provider who is located within the geographic coverage area of the health benefit plan and who is willing to meet the terms and conditions for participation established by the health insurer, including the Kentucky state Medicaid program and Medicaid partnerships." Ky. Rev. Stat. Ann. § 304.17A-270 (West 2001). Moreover, any "health benefit plan that includes chiropractic benefits shall ... [p]ermit any licensed chiropractor who agrees to abide by the terms, conditions, reimbursement rates, and standards of quality of the health benefit plan to serve as a participating primary chiropractic provider to any person covered by the plan." § 304.17A-171(2). We granted certiorari to decide whether the Employee Retirement Income Security Act of 1974 (ERISA) pre-empts either, or both, of these "Any Willing Provider" (AWP) statutes.
Petitioners include several health maintenance organizations (HMOs) and a Kentucky-based association of HMOs. In order to control the quality and cost of health-care delivery, these HMOs have contracted with selected doctors, hospitals, and other health-care providers to create exclusive "provider networks." Providers in such networks agree to render health-care services to the HMOs' subscribers at discounted rates and to comply with other contractual requirements. In return, they receive the benefit of patient volume higher than that achieved by nonnetwork providers who lack access to petitioners' subscribers.
Kentucky's AWP statutes impair petitioners' ability to limit the number of providers with access to their networks, and thus their ability to use the assurance of high patient volume as the quid pro quo for the discounted rates that network membership entails. Petitioners believe that AWP laws will frustrate their efforts at cost and quality control, and will ultimately deny consumers the benefit of their cost-reducing arrangements with providers.
In April 1997, petitioners filed suit against respondent, the Commissioner of Kentucky's Department of Insurance, in the United States District Court for the Eastern District of Kentucky, asserting that ERISA, 88 Stat. 832, as amended, pre-empts Kentucky's AWP laws. ERISA pre-empts all state laws "insofar as they may now or hereafter relate to any employee benefit plan," 29 U.S.C. § 1144(a), but state "law[s] ... which regulat[e] insurance, banking, or securities" are saved from pre-emption, § 1144(b)(2)(A). The District Court concluded that although both AWP statutes "relate to" employee benefit plans under § 1144(a), each law "regulates insurance" and is therefore saved from pre-emption by § 1144(b)(2)(A). App. to Pet. for Cert. 64a-84a. In affirming the District Court, the Sixth Circuit also concluded that the AWP laws "regulat[e] insurance" and fall within ERISA's saving clause. Kentucky Assn. of Health Plans, Inc. v. Nichols, 227 F. 3d 352, 363-372 (2000). Relying on UNUM Life Ins. Co. of America v. Ward, 526 U. S. 358 (1999), the Sixth Circuit first held that Kentucky's AWP laws regulate insurance "as a matter of common sense," 227 F. 3d, at 364, because they are "specifically directed toward `insurers' and the insurance industry ...," id., at 366. The Sixth Circuit then considered, as "checking points or guide-posts" in its analysis, the three factors used to determine whether a practice fits within "the business of health insurance" in our cases interpreting the McCarran-Ferguson Act. Id., at 364. These factors are: "first, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry." Union Labor Life Ins. Co. v. Pireno, 458 U. S. 119, 129 (1982). The Sixth Circuit found all three factors satisfied. 227 F. 3d, at 368-371. Notwithstanding its analysis of the McCarran-Ferguson factors, the Sixth Circuit reiterated that the "basic test" under ERISA's saving clause is whether, from a commonsense view, the Kentucky AWP laws regulate insurance. Id., at 372. Finding that the laws passed both the "common sense" test and the McCarran-Ferguson "checking points," the Sixth Circuit upheld Kentucky's AWP statutes. Ibid.
We granted certiorari, 536 U. S. 956 (2002).
To determine whether Kentucky's AWP statutes are saved from pre-emption, we must ascertain whether they are "law[s] ... which regulat[e] insurance" under § 1144(b)(2)(A).
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