Ky. Ass'n of Health Plans v. Miller - 538 U.S. 329, 123 S. Ct. 1471 (2003)

Rule:

The Employee Retirement Income Security Act of 1974 pre-empts all state laws insofar as they may now or hereafter relate to any employee benefit plan, 29 U.S.C.S. § 1144(a), but state laws which regulate insurance, banking, or securities are saved from pre-emption, § 1144(b)(2)(A).

Facts:

The Employee Retirement Income Security Act of 1974, as amended (ERISA) (29 USCS 1001 et seq.), which regulated employee welfare benefit plans, generally pre-empted, in 29 USCS 1144(a), state laws related to such plans. However, certain state laws, including those that regulated insurance, were saved from pre-emption under 29 USCS 1144(b)(2)(A). One Kentucky "Any Willing Provider" (AWP) statute prohibited a health insurer from discriminating against any provider who was willing to meet the conditions established by the insurer for participation in the insurer's health benefit plan, while another Kentucky AWP statute required a health benefit plan that included chiropractic benefits to permit any licensed chiropractor who agreed to abide by the plan's conditions to serve as a participating primary chiropractic provider. Several health maintenance organizations (HMOs)--which had contracted with selected physicians, hospitals, and other health-care providers to create exclusive provider networks--and a Kentucky-based association of HMOs filed, against the commissioner of Kentucky's department of insurance in the United States District Court for the Eastern District of Kentucky, a suit alleging that ERISA pre-empted the two AWP statutes. The District Court concluded that, although the statutes related to employee benefit plans under 1144(a), they were saved from pre-emption under 1144(b)(2)(A). The United States Court of Appeals for the Sixth Circuit affirmed.

Issue:

Were the state statute preempted by the Employee Retirement Income Security Act of 1974, as amended (ERISA) (29 USCS 1001 et seq.)?

Answer:

No.

Conclusion:

The U.S. Supreme Court unanimously held that the state statutes in fact regulated insurance and thus were not preempted by ERISA. The statutes were specifically directed toward entities engaged in insurance, regardless of the fact that the statutes also had the effect of prohibiting providers from entering into limited network contracts with the HMOs. Further, despite the statutory focus upon the relationship between the HMOs and third-party providers, the statutory prohibition substantially affected the type of risk pooling arrangements that the HMOs could offer and thus constituted regulation of the business of insurance.