Source: https://supreme.justia.com/cases/federal/us/538/329/case.html
Timestamp: 2017-12-14 02:08:11
Document Index: 231203020

Matched Legal Cases: ['§ 1144', '§ 1144', '§ 1144', '§ 1144', '§ 1144', '§ 1144', '§ 1144', '§ 1144', '§ 4', '§ 1012', '§ 1144', '§ 1144', '§ 1144']

Kentucky Assn. of Health Plans, Inc. v. Miller, (full text) :: 538 U.S. 329 (2003) :: Justia US Supreme Court Center
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Kentucky Assn. of Health Plans, Inc. v. Miller,
(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.
Robert N. Eccles argued the cause for petitioners. With him on the brief were Karen M. Wahle, Jonathan D. Hacker, and Barbara Reid Hartung.
Briefs of amici curiae urging affirmance were filed for the State of Texas et al. by John Cornyn, Attorney General of Texas, Howard G. Baldwin, Jr., First Assistant Attorney General, Jeffrey S. Boyd, Deputy Attorney General, Julie Parsley, Solicitor General, and David C. Mattax and Christopher Livingston, Assistant Attorneys General, and by the Attorneys General and other officials for their respective jurisdictions as follows: Bill Lockyer, Attorney General of California, Gregory D'Auria, Associate Attorney General of Connecticut, M. Jane Brady, Attorney General of Delaware, Robert A. Butterworth, Attorney General of Florida, Earl I. Anzai, Attorney General of Hawaii, James E. Ryan, Attorney General of Illinois, Albert B. Chandler III, Attorney General of Kentucky, J. Joseph Curran, Jr., Attorney General of Maryland, W A. Drew Edmondson, Attorney General of Oklahoma, Annina M. Mitchell, Solicitor General of Utah, Darrell V. McGraw, Jr., Attorney General of West Virginia, and Anabelle Rodriguez, Attorney General of Puerto Rico; for the American College of Legal Medicine by Miles J. Zaremski, Gary Birnbaum, and Bruce A. Brightwell; for the American Medical Association et al. by Mark E. Rust and Stanley C. Fickle; and for the Council of State Governments et al. by Richard Ruda and Steven H. Goldblatt.
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 preempts 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 preemption 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 guideposts" 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
Petitioners claim that Kentucky's statutes are not "specifically directed toward" insurers because they regulate not only the insurance industry but also doctors who seek to form and maintain limited provider networks with HMOs. That is to say, the AWP laws equally prevent providers from entering into limited network contracts with insurers, just as they prevent insurers from creating exclusive networks in the first place. We do not think it follows that Kentucky
It is of course true that as a consequence of Kentucky's A WP laws, entities outside the insurance industry (such as health-care providers) will be unable to enter into certain agreements with Kentucky insurers. But the same could be said about the state laws we held saved from pre-emption in FMC Corp. and Rush Prudential. Pennsylvania's law prohibiting insurers from exercising subrogation rights against an insured's tort recovery, see FMC Corp., supra, at 55, n. 1, also prevented insureds from entering into enforceable contracts with insurers allowing subrogation. Illinois' requirement that HMOs provide independent review of whether services are "medically necessary," Rush Prudential, supra, at 372, likewise excluded insureds from joining an HMO that would have withheld the right to independent review in exchange for a lower premium. Yet neither case found the effects of these laws on noninsurers, significant though they may have been, inconsistent with the requirement that laws saved from pre-emption by § 1144(b)(2)(A) be "specifically directed toward" the insurance industry. Regulations "directed toward" certain entities will almost always disable
Both of Kentucky's AWP laws apply to all HMOs, including HMOs that do not act as insurers but instead provide only administrative services to self-insured plans. Petitioners maintain that the application to noninsuring HMOs forfeits the laws' status as "law[s] ... which regulat[e] insurance." § 1144(b)(2)(A). We disagree. To begin with, these noninsuring HMOs would be administering self-insured plans, which we think suffices to bring them within the activity of insurance for purposes of § 1144(b)(2)(A). Moreover, we think petitioners' argument is foreclosed by Rush Prudential HMO, Inc. v. Moran, 536 U. S. 355, 372 (2002), where we noted that Illinois' independent-review laws contained "some overbreadth in the application of [215 Ill. Compo Stat., ch. 125,] § 4-10 [(2000)] beyond orthodox HMOs," yet held that "there is no reason to think Congress would have meant such minimal application to noninsurers to remove a state law entirely from the category of insurance regulation saved from preemption."
"(b) No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance: Provided, That after June 30, 1948, the Act of July 2, 1890, as amended, known as the Sherman Act, and the Act of October 15, 1914, as amended, known as the Clayton Act, and the Act of September 26, 1914, known as the Federal Trade Commission Act, as amended, shall be applicable to the business of insurance to the extent that such business is not regulated by State law." 59 Stat. 34, 15 U. S. C. § 1012 (emphasis added).
We emphasize that conditions on the right to engage in the business of insurance must also substantially affect the risk pooling arrangement between the insurer and the insured to be covered by ERISA's saving clause. Otherwise, any state law aimed at insurance companies could be deemed a law that "regulates insurance," contrary to our interpretation of § 1144(b)(2)(A) in Rush Prudential, 536 U. S., at 364. A state law requiring all insurance companies to pay their janitors twice the minimum wage would not "regulate insurance," even though it would be a prerequisite to engaging in the business of insurance, because it does not substantially affect the risk pooling arrangement undertaken by insurer and insured. Petitioners contend that Kentucky's A WP statutes fail this test as well, since they do not alter or affect the terms of insurance policies, but concern only the relationship between insureds and third-party providers, Brief for Petitioners 29. We disagree. We have never held that state laws must alter or control the actual terms of insurance policies to be deemed "laws ... which regulat[e] insurance" under § 1144(b)(2)(A); it suffices that they substantially affect the risk pooling arrangement between insurer and insured. By expanding the number of providers from whom an insured may receive health services, AWP laws alter the scope
3 While the Ninth Circuit concluded in Cisneros v. UNUM Life Ins. Co. of America, 134 F.3d 939, 945-946 (1998), aff'd in part, rev'd and remanded in part, UNUM Life Ins. Co. of America v. Ward, 526 U. S. 358 (1999), that "the notice-prejudice rule does not spread the policyholder's risk within the meaning of the first McCarran-Ferguson factor," our test requires only that the state law substantially affect the risk pooling arrangement between the insurer and insured; it does not require that the state law actually spread risk. See supra, at 337-338. The noticeprejudice rule governs whether or not an insurance company must cover claims submitted late, which dictates to the insurance company the conditions under which it must pay for the risk that it has assumed. This certainly qualifies as a substantial effect on the risk pooling arrangement between the insurer and insured.
Our holdings in UNUM and Rush Prudential-that a state law may fail the first McCarran-Ferguson factor yet still be saved from pre-emption under § 1144(b)(2)(A)-raise more questions than they answer and provide wide opportunities for divergent outcomes. Maya state law satisfy any two of the three McCarran- Ferguson factors and still fall under the saving clause? Just one? What happens if two of three factors are satisfied, but not "securely satisfied" or "clearly satisfied," as they were in UNUM and Rush Prudential? 526 U. S., at 374; 536 U. S., at 373. Further confusion arises from the question whether the state law itself or the conduct regulated by that law is the proper subject to which one applies the McCarran-Ferguson factors. In Pilot Life, we inquired whether Mississippi's law of bad faith has the effect of transferring or spreading risk, 481 U. S., at 50,
4This approach rendered the third McCarran-Ferguson factor a mere repetition of the prior inquiry into whether a state law is "specifically directed toward" the insurance industry under the "common-sense view." UNUM Life Ins. Co. of America v. Ward, supra, at 375; Pilot Life Ins. Co. v. Dedeaux, 481 U. S. 41, 50 (1987).