KENTUCKY ASSOCIATION OF HEALTH PLANS, INC., et al. v. MILLER, COMMISSIONER, KENTUCKY DEPARTMENT OF INSURANCE

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
329 OCTOBER TERM, 2002
Syllabus
KENTUCKY ASSOCIATION OF HEALTH PLANS,
INC., et al. v. MILLER, COMMISSIONER,
KENTUCKY DEPARTMENT OF
INSURANCE
certiorari to the united states court of appeals for
the sixth circuit
No. 00–1471. Argued January 14, 2003—Decided April 2, 2003
Petitioner health maintenance organizations (HMOs) maintain exclusive
“provider networks” with selected doctors, hospitals, and other health-
care providers. Kentucky has enacted two “Any Willing Provider”
(AWP) statutes, which prohibit “[a] health insurer [from] discriminat-
[ing] against any provider who is . . . willing to meet the terms and
conditions for participation established by the . . . insurer,” and require
a “health benefit plan that includes chiropractic benefits [to] . . . [p]ermit
any licensed chiropractor who agrees to abide by the terms [and] condi-
tions . . . of the . . . plan to serve as a participating primary chiropractic
provider.” Petitioners filed this suit against respondent, the Commis-
sioner of Kentucky’s Department of Insurance, asserting that the AWP
laws are pre-empted by the Employee Retirement Income Security Act
of 1974 (ERISA), which pre-empts all state laws “insofar as they . . .
relate to any employee benefit plan,” 29 U. S. C. § 1144(a), but saves from
pre-emption state “law[s] . . . which regulat[e] insurance . . . ,”
§ 1144(b)(2)(A). The District Court concluded that although both AWP
statutes “relate to” employee benefit plans under § 1144(a), each law
“regulates insurance” and is therefore saved from pre-emption by
§ 1144(b)(2)(A). The Sixth Circuit affirmed.
Held: Kentucky’s AWP statutes are “law[s] . . . which regulat[e] insurance”
under § 1144(b)(2)(A). Pp. 334–342.
(a) For these statutes to be “law[s] . . . which regulat[e] insurance,”
they must be “specifically directed toward” the insurance industry; laws
of general application that have some bearing on insurers do not qualify.
E. g., Pilot Life Ins. Co. v. Dedeaux, 481 U. S. 41, 50. However, not all
state laws “specifically directed toward” the insurance industry will be
covered by § 1144(b)(2)(A), which saves laws that regulate insurance,
not insurers. Insurers must be regulated “with respect to their insur-
ance practices.” Rush Prudential HMO, Inc. v. Moran, 536 U. S. 355,
366. P. 334.

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
330 KENTUCKY ASSN. OF HEALTH PLANS, INC. v. MILLER
Syllabus
(b) Petitioners argue that the AWP laws are not “specifically di-
rected” toward the insurance industry. The Court disagrees. 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 Commonwealth or who are otherwise not
covered by the 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. Pp. 334–336.
(c) Also unavailing is petitioners’ contention that Kentucky’s AWP
laws fall outside § 1144(b)(2)(A)’s scope because they do not regulate an
insurance practice but focus upon the relationship between an insurer
and third-party providers. Petitioners rely on Group Life & Health
Ins. Co. v. Royal Drug Co., 440 U. S. 205, 210, which held that third-
party provider arrangements between insurers and pharmacies were
not “the ‘business of insurance’ ” under § 2(b) of the McCarran-Ferguson
Act. ERISA’s saving clause, however, is not concerned (as is the
McCarran-Ferguson Act provision) with how to characterize conduct
undertaken by private actors, but with how to characterize state laws
in regard to what they “regulate.” Kentucky’s laws “regulate” insur-
ance by imposing conditions on the right to engage in the business of
insurance. To come within ERISA’s saving clause those conditions
must also substantially affect the risk pooling arrangement between in-
surer and insured. Kentucky’s AWP statutes pass this test by altering
the scope of permissible bargains between insurers and insureds in a
manner similar to the laws we upheld in Metropolitan Life Ins. Co. v.
Massachusetts, 471 U. S. 724, UNUM Life Ins. Co. of America v. Ward,
526 U. S. 358, and Rush Prudential, supra. Pp. 337–339.
(d) The Court’s prior use, to varying degrees, of its cases interpreting
§§ 2(a) and 2(b) of the McCarran-Ferguson Act in the ERISA saving
clause context has misdirected attention, failed to provide clear guidance
to lower federal courts, and, as this case demonstrates, added little to
the relevant analysis. The Court has never held that the McCarran-
Ferguson factors are an essential component of the § 1144(b)(2)(A) in-
quiry. Today the Court makes a clean break from the McCarran-
Ferguson factors in interpreting ERISA’s saving clause. Pp. 339–342.
227 F. 3d 352, affirmed.
Scalia, J., delivered the opinion for a unanimous Court.
Robert N. Eccles argued the cause for petitioners. With
him on the brief were Karen M. Wahle, Jonathan D. Hacker,
and Barbara Reid Hartung.

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
331 Cite as: 538 U. S. 329 (2003)
Opinion of the Court
Elizabeth A. Johnson argued the cause for respondent.
With her on the brief were Julie Mix McPeak and William
J. Nold.
James A. Feldman argued the cause for the United States
as amicus curiae urging affirmance. With him on the brief
were Acting Solicitor General Clement, Deputy Solicitor
General Kneedler, Howard M. Radzely, Allen H. Feldman,
Nathaniel I. Spiller, and Gary K. Stearman.*
Justice Scalia delivered the opinion of the Court.
Kentucky law 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 who
is willing to meet the terms and conditions for participation
*Briefs of amici curiae urging reversal were filed for the American
Association of Health Plans, Inc., et al. by Daly D. E. Temchine, Stephanie
W. Kanwit, Jan S. Amundson, and Quentin Riegel; for Community Health
Partners et al. by Thomas C. Goldstein and Amy Howe; and for the Soci-
ety for Human Resource Management by Mark A. Casciari, Deborah S.
Davidson, and James M. Nelson.
Briefs of amici curiae urging affirmance were filed for the State of
Texas et al. by John Cornyn, Attorney General of Texas, Howard G. Bald-
win, Jr., First Assistant Attorney General, Jeffrey S. Boyd, Deputy Attor-
ney General, Julie Parsley, Solicitor General, and David C. Mattax and
Christopher Livingston, Assistant Attorneys General, and by the Attor-
neys General and other officials for their respective jurisdictions as fol-
lows: Bill Lockyer, Attorney General of California, Gregory D’Auria,
Associate Attorney General of Connecticut, M. Jane Brady, Attorney
General of Delaware, Robert A. Butterworth, Attorney General of Florida,
Earl I. Anzai, Attorney General of Hawaii, James E. Ryan, Attorney Gen-
eral of Illinois, Albert B. Chandler III, Attorney General of Kentucky, J.
Joseph Curran, Jr., Attorney General of Maryland, W. A. Drew Edmond-
son, Attorney General of Oklahoma, Annina M. Mitchell, Solicitor General
of Utah, Darrell V. McGraw, Jr., Attorney General of West Virginia, and
Anabelle Rodrı´guez, Attorney General of Puerto Rico; for the American
College of Legal Medicine by Miles J. Zaremski, Gary Birnbaum, and
Bruce A. Brightwell; for the American Medical Association et al. by Mark
E. Rust and Stanley C. Fickle; and for the Council of State Governments
et al. by Richard Ruda and Steven H. Goldblatt.

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
332 KENTUCKY ASSN. OF HEALTH PLANS, INC. v. MILLER
Opinion of the Court
established by the health insurer, including the Kentucky
state Medicaid program and Medicaid partnerships.” Ky.
Rev. Stat. Ann. § 304.17A–270 (West 2001). Moreover, 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.” § 304.17A–171(2). We granted certiorari to decide
whether the Employee Retirement Income Security Act of
1974 (ERISA) pre-empts either, or both, of these “Any Will-
ing Provider” (AWP) statutes.
I
Petitioners include several health maintenance organiza-
tions (HMOs) and a Kentucky-based association of HMOs.
In order to control the quality and cost of health-care deliv-
ery, these HMOs have contracted with selected doctors, hos-
pitals, and other health-care providers to create exclusive
“provider networks.” Providers in such networks agree to
render health-care services to the HMOs’ subscribers at dis-
counted rates and to comply with other contractual require-
ments. In return, they receive the benefit of patient volume
higher than that achieved by nonnetwork providers who lack
access to petitioners’ subscribers.
Kentucky’s AWP statutes impair petitioners’ ability to
limit the number of providers with access to their networks,
and thus their ability to use the assurance of high patient
volume as the quid pro quo for the discounted rates that
network membership entails. Petitioners believe that AWP
laws will frustrate their efforts at cost and quality control,
and will ultimately deny consumers the benefit of their cost-
reducing arrangements with providers.
In April 1997, petitioners filed suit against respondent,
the Commissioner of Kentucky’s Department of Insurance,
in the United States District Court for the Eastern District

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
333 Cite as: 538 U. S. 329 (2003)
Opinion of the Court
of Kentucky, asserting that ERISA, 88 Stat. 832, as
amended, pre-empts Kentucky’s AWP laws. ERISA pre-
empts all state laws “insofar as they may now or hereafter
relate to any employee benefit plan,” 29 U. S. C. § 1144(a),
but state “law[s] . . . which regulat[e] insurance, banking, or
securities” are saved from pre-emption, § 1144(b)(2)(A). The
District Court concluded that although both AWP statutes
“relate to” employee benefit plans under § 1144(a), each law
“regulates insurance” and is therefore saved from pre-
emption by § 1144(b)(2)(A). App. to Pet. for Cert. 64a–84a.
In affirming the District Court, the Sixth Circuit also con-
cluded that the AWP laws “regulat[e] insurance” and fall
within ERISA’s saving clause. Kentucky Assn. of Health
Plans, Inc. v. Nichols, 227 F. 3d 352, 363–372 (2000). Rely-
ing on UNUM Life Ins. Co. of America v. Ward, 526 U. S.
358 (1999), the Sixth Circuit first held that Kentucky’s AWP
laws regulate insurance “as a matter of common sense,” 227
F. 3d, at 364, because they are “specifically directed toward
‘insurers’ and the insurance industry . . . ,” id., at 366. The
Sixth Circuit then considered, as “checking points or guide-
posts” in its analysis, the three factors used to determine
whether a practice fits within “the business of health insur-
ance” in our cases interpreting the McCarran-Ferguson Act.
Id., at 364. These factors are: “first, whether the practice
has the effect of transferring or spreading a policyholder’s
risk; second, whether the practice is an integral part of the
policy relationship between the insurer and the insured; and
third, whether the practice is limited to entities within the
insurance industry.” Union Labor Life Ins. Co. v. Pireno,
458 U. S. 119, 129 (1982). The Sixth Circuit found all three
factors satisfied. 227 F. 3d, at 368–371. Notwithstanding
its analysis of the McCarran-Ferguson factors, the Sixth Cir-
cuit reiterated that the “basic test” under ERISA’s saving
clause is whether, from a commonsense view, the Kentucky
AWP laws regulate insurance. Id., at 372. Finding that
the laws passed both the “common sense” test and the

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
334 KENTUCKY ASSN. OF HEALTH PLANS, INC. v. MILLER
Opinion of the Court
McCarran-Ferguson “checking points,” the Sixth Circuit up-
held Kentucky’s AWP statutes. Ibid.
We granted certiorari, 536 U. S. 956 (2002).
II
To determine whether Kentucky’s AWP statutes are saved
from pre-emption, we must ascertain whether they are
“law[s] . . . which regulat[e] insurance” under § 1144(b)(2)(A).
It is well established in our case law that a state law must
be “specifically directed toward” the insurance industry in
order to fall under ERISA’s saving clause; laws of general
application that have some bearing on insurers do not qual-
ify. Pilot Life Ins. Co. v. Dedeaux, 481 U. S. 41, 50 (1987);
see also Rush Prudential HMO, Inc. v. Moran, 536 U. S. 355,
366 (2002); FMC Corp. v. Holliday, 498 U. S. 52, 61 (1990).
At the same time, not all state laws “specifically di-
rected toward” the insurance industry will be covered by
§ 1144(b)(2)(A), which saves laws that regulate insurance,
not insurers. As we explained in Rush Prudential, insurers
must be regulated “with respect to their insurance prac-
tices,” 536 U. S., at 366. Petitioners contend that Ken-
tucky’s AWP laws fall outside the scope of § 1144(b)(2)(A) for
two reasons. First, because Kentucky has failed to “spe-
cifically direc[t]” its AWP laws toward the insurance indus-
try; and second, because the AWP laws do not regulate an
insurance practice. We find neither contention persuasive.
A
Petitioners claim that Kentucky’s statutes are not “spe-
cifically directed toward” insurers because they regulate not
only the insurance industry but also doctors who seek to
form and maintain limited provider networks with HMOs.
That is to say, the AWP laws equally prevent providers from
entering into limited network contracts with insurers, just
as they prevent insurers from creating exclusive networks
in the first place. We do not think it follows that Kentucky

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
335 Cite as: 538 U. S. 329 (2003)
Opinion of the Court
has failed to specifically direct its AWP laws at the insur-
ance industry.
Neither of Kentucky’s AWP statutes, by its terms, imposes
any prohibitions or requirements on health-care providers.
See Ky. Rev. Stat. Ann. § 304.17A–270 (West 2001) (imposing
obligations only on “health insurer[s]” not to discriminate
against any willing provider); § 304.17A–171 (imposing obli-
gations only on “health benefit plan[s] that includ[e] chiro-
practic benefits”). And Kentucky health-care providers are
still capable of entering exclusive networks with insurers
who conduct business outside the Commonwealth of Ken-
tucky or who are otherwise not covered by §§ 304.17A–270
or 304.17A–171. Kentucky’s statutes are transgressed only
when a “health insurer,” or a “health benefit plan that in-
cludes chiropractic benefits,” excludes from its network a
provider who is willing and able to meet its terms.
It is of course true that as a consequence of Kentucky’s
AWP laws, entities outside the insurance industry (such as
health-care providers) will be unable to enter into certain
agreements with Kentucky insurers. But the same could be
said about the state laws we held saved from pre-emption in
FMC Corp. and Rush Prudential. Pennsylvania’s law pro-
hibiting insurers from exercising subrogation rights against
an insured’s tort recovery, see FMC Corp., supra, at 55, n. 1,
also prevented insureds from entering into enforceable con-
tracts with insurers allowing subrogation. Illinois’ require-
ment that HMOs provide independent review of whether
services are “medically necessary,” Rush Prudential, supra,
at 372, likewise excluded insureds from joining an HMO that
would have withheld the right to independent review in ex-
change for a lower premium. Yet neither case found the ef-
fects of these laws on noninsurers, significant though they
may have been, inconsistent with the requirement that laws
saved from pre-emption by § 1144(b)(2)(A) be “specifically
directed toward” the insurance industry. Regulations “di-
rected toward” certain entities will almost always disable

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
336 KENTUCKY ASSN. OF HEALTH PLANS, INC. v. MILLER
Opinion of the Court
other entities from doing, with the regulated entities, what
the regulations forbid; this does not suffice to place such reg-
ulation outside the scope of ERISA’s saving clause.1
1 Petitioners also contend that Ky. Rev. Stat. Ann. § 304.17A–270 (West
2001) is not “specifically directed toward” insurers because it applies to
“self-insurer or multiple employer welfare arrangement[s] not exempt
from state regulation by ERISA.” § 304.17A–005(23). We do not think
§ 304.17A–270’s application to self-insured non-ERISA plans forfeits its
status as a “law . . . which regulates insurance” under 29 U. S. C.
§ 1144(b)(2)(A). ERISA’s saving clause does not require that a state law
regulate “insurance companies” or even “the business of insurance” to be
saved from pre-emption; it need only be a “law . . . which regulates insur-
ance,” ibid. (emphasis added), and self-insured plans engage in the same
sort of risk pooling arrangements as separate entities that provide insur-
ance to an employee benefit plan. Any contrary view would render super-
fluous ERISA’s “deemer clause,” § 1144(b)(2)(B), which provides that an
employee benefit plan covered by ERISA may not “be deemed to be an
insurance company or other insurer . . . or to be engaged in the business
of insurance . . . for purposes of any law of any State purporting to regu-
late insurance companies [or] insurance contracts. . . .” That clause has
effect only on state laws saved from pre-emption by § 1144(b)(2)(A) that
would, in the absence of § 1144(b)(2)(B), be allowed to regulate self-insured
employee benefit plans. Under petitioners’ view, such laws would never
be saved from pre-emption in the first place. (The deemer clause presents
no obstacle to Kentucky’s law, which reaches only those employee benefit
plans “not exempt from state regulation by ERISA.”)
Both of Kentucky’s AWP laws apply to all HMOs, including HMOs that
do not act as insurers but instead provide only administrative services to
self-insured plans. Petitioners maintain that the application to noninsur-
ing HMOs forfeits the laws’ status as “law[s] . . . which regulat[e] insur-
ance.” § 1144(b)(2)(A). We disagree. To begin with, these noninsuring
HMOs would be administering self-insured plans, which we think suf-
fices to bring them within the activity of insurance for purposes of
§ 1144(b)(2)(A). Moreover, we think petitioners’ argument is foreclosed
by Rush Prudential HMO, Inc. v. Moran, 536 U. S. 355, 372 (2002), where
we noted that Illinois’ independent-review laws contained “some over-
breadth in the application of [215 Ill. Comp. Stat., ch. 125,] § 4–10 [(2000)]
beyond orthodox HMOs,” yet held that “there is no reason to think Con-
gress would have meant such minimal application to noninsurers to re-
move a state law entirely from the category of insurance regulation saved
from preemption.”

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
337 Cite as: 538 U. S. 329 (2003)
Opinion of the Court
B
Petitioners claim that the AWP laws do not regulate insur-
ers with respect to an insurance practice because, unlike the
state laws we held saved from pre-emption in Metropolitan
Life Ins. Co. v. Massachusetts, 471 U. S. 724 (1985), UNUM,
and Rush Prudential, they do not control the actual terms of
insurance policies. Rather, they focus upon the relationship
between an insurer and third-party providers—which in
petitioners’ view does not constitute an “insurance practice.”
In support of their contention, petitioners rely on Group
Life & Health Ins. Co. v. Royal Drug Co., 440 U. S. 205, 210
(1979), which held that third-party provider arrangements
between insurers and pharmacies were not “the ‘business
of insurance’ ” under § 2(b) of the McCarran-Ferguson Act.2
ERISA’s saving clause, however, is not concerned (as is the
McCarran-Ferguson Act provision) with how to characterize
conduct undertaken by private actors, but with how to char-
acterize state laws in regard to what they “regulate.” It
does not follow from Royal Drug that a law mandating cer-
tain insurer-provider relationships fails to “regulate insur-
ance.” Suppose a state law required all licensed attorneys
to participate in 10 hours of continuing legal education (CLE)
each year. This statute “regulates” the practice of law—
2 Section 2 of the McCarran-Ferguson Act provides:
“(a) The business of insurance, and every person engaged therein, shall
be subject to the laws of the several States which relate to the regulation
or taxation of such business.
“(b) No Act of Congress shall be construed to invalidate, impair, or su-
persede any law enacted by any State for the purpose of regulating the
business of insurance, or which imposes a fee or tax upon such business,
unless such Act specifically relates to the business of insurance: Provided,
That after June 30, 1948, the Act of July 2, 1890, as amended, known as
the Sherman Act, and the Act of October 15, 1914, as amended, known as
the Clayton Act, and the Act of September 26, 1914, known as the Federal
Trade Commission Act, as amended, shall be applicable to the business of
insurance to the extent that such business is not regulated by State law.”
59 Stat. 34, 15 U. S. C. § 1012 (emphasis added).

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
338 KENTUCKY ASSN. OF HEALTH PLANS, INC. v. MILLER
Opinion of the Court
even though sitting through 10 hours of CLE classes does
not constitute the practice of law—because the State has
conditioned the right to practice law on certain require-
ments, which substantially affect the product delivered by
lawyers to their clients. Kentucky’s AWP laws operate in a
similar manner with respect to the insurance industry: Those
who wish to provide health insurance in Kentucky (any
“health insurer”) may not discriminate against any willing
provider. This “regulates” insurance by imposing condi-
tions on the right to engage in the business of insurance;
whether or not an HMO’s contracts with providers constitute
“the business of insurance” under Royal Drug is beside the
point.
We emphasize that conditions on the right to engage in the
business of insurance must also substantially affect the risk
pooling arrangement between the insurer and the insured to
be covered by ERISA’s saving clause. Otherwise, any state
law aimed at insurance companies could be deemed a law
that “regulates insurance,” contrary to our interpretation of
§ 1144(b)(2)(A) in Rush Prudential, 536 U. S., at 364. A
state law requiring all insurance companies to pay their jani-
tors twice the minimum wage would not “regulate insur-
ance,” even though it would be a prerequisite to engaging in
the business of insurance, because it does not substantially
affect the risk pooling arrangement undertaken by insurer
and insured. Petitioners contend that Kentucky’s AWP
statutes fail this test as well, since they do not alter or affect
the terms of insurance policies, but concern only the relation-
ship between insureds and third-party providers, Brief for
Petitioners 29. We disagree. We have never held that
state laws must alter or control the actual terms of insurance
policies to be deemed “laws . . . which regulat[e] insurance”
under § 1144(b)(2)(A); it suffices that they substantially affect
the risk pooling arrangement between insurer and insured.
By expanding the number of providers from whom an in-
sured may receive health services, AWP laws alter the scope

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
339 Cite as: 538 U. S. 329 (2003)
Opinion of the Court
of permissible bargains between insurers and insureds in a
manner similar to the mandated-benefit laws we upheld in
Metropolitan Life, the notice-prejudice rule we sustained
in UNUM,3 and the independent-review provisions we ap-
proved in Rush Prudential. No longer may Kentucky in-
sureds seek insurance from a closed network of health-care
providers in exchange for a lower premium. The AWP pro-
hibition substantially affects the type of risk pooling ar-
rangements that insurers may offer.
III
Our prior decisions construing § 1144(b)(2)(A) have relied,
to varying degrees, on our cases interpreting §§ 2(a) and 2(b)
of the McCarran-Ferguson Act. In determining whether
certain practices constitute “the business of insurance”
under the McCarran-Ferguson Act (emphasis added), our
cases have looked to three factors: “first, whether the prac-
tice has the effect of transferring or spreading a policyhold-
er’s risk; second, whether the practice is an integral part of
the policy relationship between the insurer and the insured;
and third, whether the practice is limited to entities within
the insurance industry.” Pireno, 458 U. S., at 129.
We believe that our use of the McCarran-Ferguson case
law in the ERISA context has misdirected attention, failed
3 While the Ninth Circuit concluded in Cisneros v. UNUM Life Ins. Co.
of America, 134 F. 3d 939, 945–946 (1998), aff ’d in part, rev’d and re-
manded in part, UNUM Life Ins. Co. of America v. Ward, 526 U. S. 358
(1999), that “the notice-prejudice rule does not spread the policyholder’s
risk within the meaning of the first McCarran-Ferguson factor,” our test
requires only that the state law substantially affect the risk pooling ar-
rangement between the insurer and insured; it does not require that the
state law actually spread risk. See supra, at 337–338. The notice-
prejudice rule governs whether or not an insurance company must cover
claims submitted late, which dictates to the insurance company the condi-
tions under which it must pay for the risk that it has assumed. This
certainly qualifies as a substantial effect on the risk pooling arrangement
between the insurer and insured.

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
340 KENTUCKY ASSN. OF HEALTH PLANS, INC. v. MILLER
Opinion of the Court
to provide clear guidance to lower federal courts, and, as
this case demonstrates, added little to the relevant anal-
ysis. That is unsurprising, since the statutory language
of § 1144(b)(2)(A) differs substantially from that of the
McCarran-Ferguson Act. Rather than concerning itself
with whether certain practices constitute “[t]he business of
insurance,” 15 U. S. C. § 1012(a), or whether a state law
was “enacted . . . for the purpose of regulating the busi-
ness of insurance,” § 1012(b) (emphasis added), 29 U. S. C.
§ 1144(b)(2)(A) asks merely whether a state law is a “law . . .
which regulates insurance, banking, or securities.” What is
more, the McCarran-Ferguson factors were developed in
cases that characterized conduct by private actors, not state
laws. See Pireno, supra, at 126 (“The only issue before us is
whether petitioners’ peer review practices are exempt from
antitrust scrutiny as part of the ‘business of insurance’ ” (em-
phasis added)); Royal Drug, 440 U. S., at 210 (“The only issue
before us is whether the Court of Appeals was correct in
concluding that these Pharmacy Agreements are not the
‘business of insurance’ within the meaning of § 2(b) of the
McCarran-Ferguson Act” (emphasis added)).
Our holdings in UNUM and Rush Prudential—that a
state law may fail the first McCarran-Ferguson factor yet
still be saved from pre-emption under § 1144(b)(2)(A)—raise
more questions than they answer and provide wide opportu-
nities for divergent outcomes. May a state law satisfy any
two of the three McCarran-Ferguson factors and still fall
under the saving clause? Just one? What happens if two
of three factors are satisfied, but not “securely satisfied” or
“clearly satisfied,” as they were in UNUM and Rush Pru-
dential? 526 U. S., at 374; 536 U. S., at 373. Further confu-
sion arises from the question whether the state law itself or
the conduct regulated by that law is the proper subject to
which one applies the McCarran-Ferguson factors. In Pilot
Life, we inquired whether Mississippi’s law of bad faith has
the effect of transferring or spreading risk, 481 U. S., at 50,

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
341 Cite as: 538 U. S. 329 (2003)
Opinion of the Court
whether that law is integral to the insurer-insured relation-
ship, id., at 51, and whether that law is limited to the insur-
ance industry, ibid.4 Rush Prudential, by contrast, focused
the McCarran-Ferguson inquiry on the conduct regulated by
the state law, rather than the state law itself. 536 U. S.,
at 373 (“It is obvious enough that the independent review
requirement regulates ‘an integral part of the policy relation-
ship between the insurer and insured’ ” (emphasis added));
id., at 374 (“The final factor, that the law be aimed at a ‘prac-
tice . . . limited to entities within the insurance industry’ is
satisfied . . .” (emphasis added; citation omitted)).
We have never held that the McCarran-Ferguson factors
are an essential component of the § 1144(b)(2)(A) inquiry.
Metropolitan Life initially used these factors only to but-
tress its previously reached conclusion that Massachusetts’
mandated-benefit statute was a “law . . . which regulates
insurance” under § 1144(b)(2)(A). 471 U. S., at 742–743.
Pilot Life referred to them as mere “considerations [to be]
weighed” in determining whether a state law falls under the
saving clause. 481 U. S., at 49. UNUM emphasized that
the McCarran-Ferguson factors were not “ ‘require[d]’ ” in
the saving clause analysis, and were only “checking points”
to be used after determining whether the state law regulates
insurance from a “common-sense” understanding. 526 U. S.,
at 374. And Rush Prudential called the factors “guide-
posts,” using them only to “confirm our conclusion” that Illi-
nois’ statute regulated insurance under § 1144(b)(2)(A). 536
U. S., at 373.
Today we make a clean break from the McCarran-
Ferguson factors and hold that for a state law to be deemed
a “law . . . which regulates insurance” under § 1144(b)(2)(A),
4 This approach rendered the third McCarran-Ferguson factor a mere
repetition of the prior inquiry into whether a state law is “specifically
directed toward” the insurance industry under the “common-sense view.”
UNUM Life Ins. Co. of America v. Ward, supra, at 375; Pilot Life Ins.
Co. v. Dedeaux, 481 U. S. 41, 50 (1987).

538US2 Unit: $U38 [10-26-04 16:53:23] PAGES PGT: OPIN
342 KENTUCKY ASSN. OF HEALTH PLANS, INC. v. MILLER
Opinion of the Court
it must satisfy two requirements. First, the state law must
be specifically directed toward entities engaged in insurance.
See Pilot Life, supra, at 50, UNUM, supra, at 368; Rush
Prudential, supra, at 366. Second, as explained above, the
state law must substantially affect the risk pooling arrange-
ment between the insurer and the insured. Kentucky’s law
satisfies each of these requirements.
* * *
For these reasons, we affirm the judgment of the Sixth
Circuit.
It is so ordered.