"Any willing provider" provision in state's health care law is within ERISA's savings clause, and thus is not preempted

Law Reporter, Jun 2003

Kentucky Ass'n. of Health Plans, Inc. v. Miller, __ U.S. __, No. 00-1471, 2003 WL 1726508 (Apr. 2, 2003).

The U.S. Supreme Court held that Kentucky statutes prohibiting health benefit plans from discriminating against providers willing to meet the plan's terms and conditions are not preempted by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. [sec][sec] 1000 et seq.

Here, Kentucky law includes two "any willing provider" (AWP) statutes. The statutes provide that (1) a health insurer shall not discriminate against any provider within the plan's geographic area who is willing to meet the terms and conditions for participation established by the insurer, and (2) a health benefit plan including chiropractic benefits shall permit any licensed chiropractor who agrees to abide by the terms and conditions of the plan to participate in the plan. Ky. Rev. Stat. Ann. [sec][sec] 304.17A-270, 304.17A171(2). A group of health maintenance organizations sued the state's insurance commissioner, claiming the statutes were preempted by ERISA.

The trial court found that the two statutes fall within ERISA's savings clause, 29 U.S.C. [sec] 144(b)(2)(A), which provides that a state law that regulates insurance, banking, or securities is not preempted by the act. The Sixth Circuit Court of Appeals affirmed.

Affirming, the Supreme Court noted that a state law must be "specifically directed toward" the insurance industry in order to fall within ERISA's savings clause; laws of general application that have some bearing on insurers do not apply. Moreover, die clause saves laws that regulate insurance, not insurers.

Rejecting petitioners' contention that a law mandating certain relationships between insurers and providers regulates conduct, the Court held that the law does not thereby fail to regulate insurance. A statute that imposes conditions on the right to engage in the business of insurance "regulates" insurance, the Court explained.

To be covered by the savings clause, the law must not only impose conditions on the right to engage in the business of insurance, but must also substantially affect the risk pooling arrangement between the insurer and insured, the Court stated. Otherwise, any state law aimed at insurers could be deemed to "regulate" insurance.

Here, AWP laws meet this criterion because they expand the number of providers from whom an insured may receive health benefits, thereby altering the scope of permissible bargains between the insurer and insured. Insureds may no longer choose among a closed network of providers in exchange for lower premiums.

The Court also announced a clean break from prior decisions construing the savings clause with regard to factors enunciated in [sec][sec] 2(a) and 2(b) of the McCarran-Ferguson Act, 15 U.S.C. [sec] 1012. For a state law to be one which "regulates insurance" under ERISA's savings clause, it must (1) be specifically directed toward entities engaged in insurance, and (2) substantially affect the risk pooling arrangement between the insurer and the insured. As Kentucky's statutes satisfy these criteria, they are not preempted by ERISA, the Court held.