Document: 458 U.S. 119 102 S.Ct. 3002 73 L.Ed.2d 647 UNION LABOR LIFE INSURANCE COMPANY, Petitioner,v.A. Alexander PIRENO. NEW YORK STATE CHIROPRACTIC ASSOCIATION, Petitioner, v. A. Nos. 81-389, 81-390. Argued April 27, 1982. Decided June 28, Syllabus As required by New York law, petitioner Union Labor Life Insurance Co. (ULL) issues health insurance policies covering certain policyholder claims for chiropractic treatments. Some ULL limit the company's liability to "reasonable" charges "necessary" medical care and services. In order determine whether particular chiropractors' treatments fees were necessary reasonable, arranged with State Chiropractic Association (NYSCA), a professional association of chiropractors, use advice its Peer Review Committee, which was established primarily aid insurers in evaluating treatments, is composed 10 practicing chiropractors. Respondent licensed chiropractor York. On number occasions referred his policyholders, those Committee review. The sometimes concluded that respondent's unnecessary or unreasonable. brought suit Federal District Court, alleging petitioners' peer review practices violated § 1 Sherman Act because petitioners had used as vehicle their conspiracy fix prices chiropractors would be permitted charge Court granted motion summary judgment, dismissing complaint on ground ULL's NYSCA's exempted from antitrust scrutiny 2(b) McCarran-Ferguson Act, applies "business insurance." Appeals reversed remanded action further proceedings. Held : does not constitute insurance" within meaning thus exempt scrutiny. Group & Health Ins. Royal Drug Co., 440 205, 99 1067, 59 261, controlling. Pp. 126-134. (a) There are three criteria relevant determining practice part laws 2(b): first, has effect transferring spreading policyholder's risk; second, an integral policy relationship between insurer insured; third, limited entities industry. supra. 126-129. (b) With regard first criterion, arrangement plays no underwriting risk, it logically temporally unconnected contract entered ULL, actual risk-transferring event. second distinct contracts constitutes separate third parties engaged business insurance. Nor challenged satisfy this criterion asserted directly involves "interpretation" "enforcement" contract, procedure deciding covered matter indifference policyholder, whose only concern claim paid, why paid. respects may assumed need denied exemption solely outside industry—namely, serving Committee. But such arrangements can hardly said lie at center legislative underlying 2(b), protection intra -industry cooperation risks. More importantly, prove contrary spirit well letter they have potential restrain competition noninsurance markets. 130-134. 2nd Cir., 650 F.2d 387, affirmed. T. Richard Kennedy, City, petitioners. Susan M. Jenkins, Washington, D. C., respondent. Barry Grossman, U. S. amicus curiae, special leave Court. Justice BRENNAN delivered opinion these cases we consider alleged eliminate price among means "peer committee" advised company "reasonable." question presented federal Act.1 2 * Petitioners (ULL), Maryland doing cover "the reasonable charges" "necessary services." App. 19a, 22a (emphasis added). Accordingly, when reimbursement must them reasonable. making some determinations, NYSCA advise 3 1971, treatments.2 It who serve voluntary basis. At request insurer, will examine chiropractor's case, render necessity reasonableness made them. based upon considerations treating experience specialty degrees; location office; visits time spent patient; patient's age, occupation, general physical condition, history previous treatment; X-ray findings. 4 been assert respondent treated patients "in manner calculated maximize unusually high." 389 (CA2 1981). Respondent, part, contends members "practice 'antiquated' techniques seek impose more innovative competitors." Ibid. This dispute resulted present suit, United States Southern Act.3 particular, he claimed others including respondent, He restrained providing services public freely fully, would-be recipients deprived benefits competition. requested, inter alia, declaratory injunctive relief against continued policyholders' claims. 5 After extensive discovery, judgment complaint, concluding Act. Pet. Cert. No. pp. 20a-37a. court noted requirements met obtain exemption: (1) insurance," (2) regulated state (3) amount "boycott, coercion, intimidation." Id., 27a-28a. court's view, all satisfied case. held constituted served "to define precise extent contractual obligations . under [its] policies." 29a-30a. Moreover, determined "involve[d] indispensable element 'business insurance.' " 30a.4 Respondents' accordingly dismissed prejudice. 6 Second Circuit reversed. 387 (1981). Relying Court's recent 261 (1979), erred holding insurance."5 We certiorari resolve conflict Courts presented.6 454 1052, 595, 70 587 II 7 issue before us "It axiomatic conduct nevertheless perfectly legal." supra, U.S., 210, n. 5, S.Ct., 1072, 5. Thus occasion address merits However, express "longstanding congressional commitment free markets open competition." Community Communications Boulder, 455 40, 56, 835, 843, 810 (1982); see also Topco Associates, Inc., 405 596, 610, 92 1126, 1134, 31 515 (1972). our precedents consistently hold exemptions construed narrowly. FMC Seatrain Lines, 411 726, 733, 93 1773, 1778, 36 620 (1973). principle implicit exemptions, 231, 1083, but statutory McKesson Robbins, 351 305, 316, 76 937, 943, 100 L.Ed. 1209 (1956). Drug, reexamine scope provided decision controlled Drug. 8 principal Texas company, Blue Shield, offered entitling insured persons purchase prescription drugs $2 each any pharmacy participating "Pharmacy Agreement" Shield; policyholders allowed nonparticipating pharmacy, event pay full reimbursed Shield price. Pharmacy Agreements pharmacies Texas, sell Shield's each, cost acquiring sold. "Thus, [could] afford distribute less than markup profitably participate plan." 209, 1072 (footnote omitted). 9 Respondents owners pharmacies. They sued several instrument conspired retail drugs. encouraged avoid pharmacies, constituting unlawful group boycott. other petitioners, disagreed, 1072. Looking structure history," id., 211, 1073, discussed characteristics Congress intended through 2(b). First, after noting one "indispensable characteristic "spreading risk," 211-212, 1073,7 observed parts "strongly suggest understood 220-221, 1077-1078. then contention involved activities. 11 "The merely goods Shield. By agreeing maximum drugs, effectively reduces total policyholders. enable minimize costs profits. Such cost-savings sound practice, inure ultimately benefit form lower premiums, 214, 1074 12 Second, identified insured" "[a]nother commonly aspect 215, 1075. that, enacting concerned 'relationship insured, type could issued, reliability, interpretation, enforcement—these core ' 215-216, 1075, quoting SEC National Securities, 393 453, 460, 89 564, 568, 21 668 (1969). rejected argument so closely related "reliability, enforcement" fall "This proves too much." 216, 13 "At most, demonstrated result savings reflected premiums if passed But, sense, every impact ratemaking, status reliable [and thus] included plainly language, exempts insurance' companies.' 216-217, 14 Finally, primary both representatives industry cooperative ratemaking efforts laws." 221, 1078. widespread view [was] very difficult underwrite risks informed responsible way without intra-industry cooperation." reluctant extend case it, "because involve wholly industry." 1083. 15 "There slightest suggestion contemplated mass industry, 224, 1079 16 sum, None necessarily determinative itself, examining respect criteria, do hesitate conclude Plainly, risk." Both "spreading" "underwriting" risk refer context transfer See 7, And below observed: 17 require treatment transferred [ULL] takes place policy, functions entire loss (the insured's treatment) [ULL]—that is, falls limits." F.2d, 393. 18 Petitioner argues Appeals' analysis "semantic unrealistic." Brief 17. reasons "[i]t inconceivable excluded device helps 'determine transferred' acts 'an transfer.' find merit argument, accomplished policies. effected policy—and complete entered. G. Couch, Cyclopedia Law §§ 39:53, 39:63 (2d ed. 1962). If limits coverage them, limitation measure actually insurer: To pays unreasonable reimbursed, incurring never instead always retained insured. Petitioner's contains unspoken premise completed, rather settled. fundamental defines 39:3; R. Keeton, 5.1(a) (1971). 19 Turning clear place, obviously sense resembles proposition 'between insured.' 568. Rather, recognized "separate sale distribution Similarly, 20 "directly 'interpretation' 'enforcement' contract." 16. essentially identical there contended "so affect[ed] 'reliability, enforcement' area." 1075 noted, however: promised except prescription. So long promise kept, basically unconcerned pharmacies." 213-214, (footnotes 22 reimbursement, decide decisions entirely ULL's, decisionmaking process shown, "cost policyholders." grant showing "would 217, 1076. 23 plain contrary, inevitably fact, deprecate importance. argue should "that simply company." 25. view: 24 nothing companies. stated, '[the Act's] language refers companies subject regulation, "regulating 459 [89 568]." original quoted opinion). 25 Asserting [New York] Superintendent regulate authority over adjustment procedures ULL," 26, despite involvement 26 assume parties, even dispositive, inquiry mandated analysis. there, protect "intra cooperation" 1078 Arrangements concern. Indeed, assertedly realize precisely potential: Respondent's provider market—the market services—rather market. 8a. cannot join depreciating fact intimately cases.8 III 27 Act.9 28 Affirmed. 29 REHNQUIST, whom THE CHIEF JUSTICE O'CONNOR join, dissenting. 30 Purporting rely today exposes designed promote fair efficient settlement. reaches conclusion spread relationship, Because I function heart committees clearly sphere activity laws.1 finds support predecessors. For many years statutes thought applicable insurance, having Paul Virginia, Wall. 168, 183, 357 (1869), "[i]ssuing transaction commerce." When South-Eastern Underwriters Assn., 322 533, 64 1162, 88 1440 (1944), interstate commerce responded quickly reestablish preeminence regulating business. Congress' response—the Act—sought insured: 32 "Under regime hand dealings Their negotiations, resulted, considered were, therefore, left regulation. threatened supremacy area. attempt turn back clock, assure activities dealing remain regulation." 459, 33 purpose 34 'The Undoubtedly, relate placed same class. whatever exact term, where focus was—it policyholder.' (quoting 568.) 35 Thus, else about risk-spreading, found essence Central adjustment—the determination payments losses contract. key representation expectation prompt payment occurs. commentator stated: 37 "Up until made, tangible evidence piece paper. words, real product proceeds. Selection prospect, qualifying him suits needs, delivery collecting perhaps years, changes meet changing situations, preambles secured, namely collect dollars unforeseen place." J. Wickman, Evaluating Risk 57 (1965).2 38 adjustor—in Committee—which determines what covered. errs concludes role "is insured," ante, 131, policyholder." Ante, 132. Few matters greater importance makes determination. Being critical component parcel protected 39 source guidance completely disregarded Court—the McCarran-Ferguson. passage preceded introduction Senate report bill prepared Commissioners. views NAIC particularly significant, large bill." Included seven specific apply, looked phrase 222, Among adjustment: shall apply joint service, adjustment, investigation, inspection agreement relating 90 Cong.Rec. A4406 (1944) Other statements protected: "[W]e come squarely regulation adequate handle provisions laws. A great fire-insurance cooperated mutual agreement—and necessity—through Southeastern rating bureaus, adjusting rates risks, classifying insurable property either co-insurance re-insurance, appraisals losses, working out systems improve fires. All done splendid success. pity indeed, government intervene. contracts. fidelity performance brook intervention." 6530 (remarks Rep. Satterfield) 40 6543 Jennings); 6550-6551 Ploeser). 41 unmistakably demonstrate settlement accorded followed fairer resolution committees. claimants virtually care, expenses requires expertise physician. spectrum human ailments involved, physician seldom sufficient; specialists fields medicine consulted. staff departments broad range physicians. make satisfactory experts 42 Although protests says liability, little doubt today's vastly curtail process. professionals willing expose themselves possible activity. misreads prior precedents, eliminates American redounded alike. Stat. 33, amended, U.S.C. 1011—1015. provides part: "(a) person therein, taxation "(b) No invalidate, impair, supersede law enacted unless specifically relates ." 2, 1012(a), (b). Nothing contained inapplicable boycott, coerce, intimidate, act 3, 1013(b). Committee's available patients, governmental agencies, themselves, users. 388 1, pertinent "[e]very combination trust otherwise, conspiracy, restraint trade States, foreign nations, declared illegal. turned Act's requirement, "regulated law." requirement met, well, observing "enacted pervasive scheme supervision prohibited unfair claims," proscribed complaint" Donnelly terms applied insurers. 31a-32a. neither "boycott" nor evidentiary claim. 33a-35a. actions consequently "exempt application 36a. Since reached conclusion, did definitively holdings 4, note, however, itself "appear requires." 390, Appeals, 395, 13, Fourth factually case." Bartholomew Virginia Chiropractors 612 812 (1979). explained: 'It accepted, accept slight fraction it.' 1:3 1959). 1.2(a) (1971) ('Insurance distributing risk'); Richards, (W. Freedman 5th 1952)." 1073 dissent adjustor" cases. post, 137. From since "claims Act," 138, follows enjoy exemption. fatal flaw syllogism adjustor. noted: "Opinions committee binding agree beforehand be." 388. ones, disregard evaluation. Even opinion, nonbinding nature evaluation ancillary reason Unlike occur industry—such itself—the "involve afoul pure cannot. renders questions law" declines reach likewise discuss it. regulated. commentators assessment settlement: (including payment) represents final brings 'to life' fashion far vivid single connection purchase, issuance, maintenance Butler, Loss Adjustment Fire Insurance, Property Liability Handbook 219 (J. Long Gregg eds. 1965). "Claim administration last link insurance—a begins actuarial continues sales, underwriting, investment, service. [T]he policyowner obligations, administration, important delivers sold policyowner." C. Cissley, Claim Administration: Principles Practices iii (1980). Apparently unable discern difference mere method paying agreement, "resembles Drug." 131. Agreement reimbursing policyowners medication expenses. otherwise plan. in-kind dispensers payments; played whatsoever assessing validity committees, fulfill role, quite unlike

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