Kentucky Assoc. of Health Plans, Inc. v. Miller - Opinion Announcement

Argument of Speaker

Mr. Speaker: The opinion of the Court in No. 00-1471 will be anoounced by Justice Scalia, the Kentuchy Healthcare Plan.

Argument of Justice Scalia

Mr. Scalia: This case Kentucky Association of Health plan versus Miller is here on writ of certiorar to the United States Court of Appeals for the Sixth Circuit.

The petitioners are health maintenance organizations that maintain exclusive provider networks with selected doctors, hospitals, and other healthcare providers.

The advantage of these exclusive arrangements according to petitioners is that the participating providers are willing to provide their services at a lower price in exchange for the increased volume that the exclusive arrangement assures them.

Kentucky however, does not like the insurers preventing people from going to their own doctors, and so has enacted two so-called Any Willing Provider statutes, which prohibit a health insurer from discriminating against any provider who is willing to meet the terms and conditions for participation established by the insurer.

There are similar statutes in other states.

Petitioners file this suit against respondent the Commissioner of Kentucky’s Department of Insurance asserting that the AWP laws are preempted by the Employee Retirement Income Security Act of 1974, commonly known feared as ERISA.

ERISA preempts all state laws, "in so far as they relate to any employee benefit plan", but in Section 1144(b)(2)(a) saves from preemption “laws which regulate insurance”.

The Court of Appeals Sixth Circuit concluded that each of these laws regulates insurance and is therefore safe from preemption by 1144(b)(2)(a).

We affirmed.

In our view Kentucky’s AWP statutes are laws which regulate insurance within the meaning off 1144(b)(2)(a).

Our precedents such as Pilot Life Insurance versus the Dedeaux established that to come within this provision, state laws must be specifically directed towards the the insurance industry, that is to say laws of general application that simply affect insurers as they do everybody else, do not qualify as laws that regulate insurance.

Although petitioners contend that the AWP laws are not specifically directed toward the insurance industry, we disagree.

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 common wealth or who are otherwise not covered by 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.

Also, unavailing in our view, is petitioner’s contention that Kentucky’s AWP laws fall outside 1144(b)(2)(a) because they do not regulate an insurance practice, but rather focus upon the relationship between an insurer and third party providers.

Petitioners rely on Group Life & Health Insurance versus Royal Drug, which held that third party provider arrangements between insurers and pharmacies were not the business of insurance under Section 2(b) of the McCarran-Ferguson Act.

ERISA's savings clause however is not concerned as is the McCarran-Ferguson Act provision with how to characterize conduct undertaken by private actors, but rather 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 savings clause, those conditons must also substantially affect the risk pulling arrangement between the insurer and the insured, Kentucky’s AWP statutes pass this test, we think by altering the scope of permissible bargains between insurers and insureds in a manner similar to the laws we upheld in Metropolitan Life Insurance versus Massachusetts, UNUM Life Insurance Company versus Ward, and Rush Prudential versus Moran.

The Court's decision is unanimous.