By Sandra K. Foreman, J.D., L.L.M. Candidate
Graduate Research Assistant, Spring 2003
In a decision dated April 2, 2003, the U.S. Supreme Court held that Kentucky’s any willing provider statutes (AWP) are laws which regulate insurance and, therefore, are saved from preemption under the Employee’s Retirement Income Security Act. (ERISA). Kentucky Ass’n of Health Plans, Inc. v. Miller, No. 00-1471 (U.S. April 2, 2003).
Petitioners included various health maintenance organizations (HMOs) and a Kentucky-based association of HMOs. Id. at 2. Petitioners filed suit against the Commissioner of Kentucky’s Department of Insurance in the United States District Court for the Eastern District of Kentucky. Id. They argued that ERISA preempts Kentucky’s AWP laws. Id. Petitioners asserted that ERISA preempts all state laws “insofar as they may now or hereafter relate to any employee benefit plan,” 29 U.S.C. Section 1144(a), but state “law[s]…which regulat[e] insurance… are saved from preemption, Section 1144 (b)(2)(A). Id. The District Court held that both AWP statutes “relate to” employee benefit plans under Section 1144(a); however, each law “regulates insurance” and is therefore saved from preemption. Id.
The Sixth Circuit affirmed the District Court decision. Id. The Sixth Circuit held that Kentucky’s AWP laws regulate insurance because the laws are “specifically designated toward insurers and the insurance industry…” Id. (citing UNUM Life Ins. Co. of America v. Ward, 526 U.S. 358, 366 (1999)). The Court held that three factors established to interpret the McCarran-Ferguson Act are relevant to determining whether a state law applies to “the business of health insurance.” Id. (citing UNUM at 364); (1) whether the state law has the effect of transferring or spreading a policyholder’s risk; (2) whether the state law is an integral part of the policy relationship between the insurer and the insured; and (3) whether the state law is limited to entities within the insurance industry. Id. (citing Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982)). Finding that all factors were satisfied, the Sixth Circuit upheld Kentucky’s AWP statutes. Id.
The Kentucky AWP Statute 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 is willing to meet the terms and conditions of participation established by the health insurer.” Id. at 1 (citing Ky. Rev. Stat. Ann. Section 304.17A-270 (West 2001)). Another Kentucky AWP provision states that 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.” Id. (citing Section 304.17A).
The U.S. Supreme Court granted certiorari to decide whether the ERISA preempts either, or both, of these “AWP” laws. Id. The Court affirmed the Sixth Circuit’s decision and clarified that it has never held that the McCarran factors are essential to an analysis of whether a state law is saved from ERISA preemption when the state law regulates insurance. Id. at 5. Instead, the Court held that for a state law to be saved from ERISA preemption because it regulates insurance, it must satisfy two requirements. Id. First, the state law must be specifically directed toward entities engaging in insurance. Id. (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 50; UNUM Life Ins. Co. of America v. Ward, 526 U.S. 358, 368 (1999); Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 366 (2002). Second, the state law must substantially affect the risk pooling arrangement between the insurer and the insured. Id. Applying these factors, the Court held that Kentucky’s AWP laws satisfied each requirement. Id.
The State of Texas is in the majority of states that has an any willing
provider law limited to pharmacists.* Given the Supreme Court’s interpretation
of the Kentucky AWP laws, Texas legislators may want to replicate Kentucky’s
statute for introduction in the 79th legislative session for coverage of
additional health care providers without the worry of ERISA preemption.
Such a statute would certainly provide more choices for patients.
* NATIONAL CONFERENCE OF STATE LEGISLATORS, Any Willing Provider, (viewed on May 14, 2003) http://www.ncsl.org/statefed/health/AWP.htm.