In 1994, Kentucky enacted an “any willing provider” law which states that “health care benefit plans 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 for participation established by the health benefit plan.” The law was soon challenged by seven HMOs and a trade association representing health plans.

In Kentucky Association of Health Plans, Inc. v. Miller, the industry argued that the state law was preempted by the Employee Retirement Income Security Act, ERISA, because it “relates to” an employee benefit plan. However, the Sixth Circuit Court of Appeals ruled that the law regulates insurance and ERISA saves from preemption those state laws “which regulate insurance, banking, or securities.”

The industry appealed the case to the United States Supreme Court and argued to the Court that the ERISA savings provision did not apply because the any willing provider law was not specifically directed at the insurance industry but also affected others, including medical care providers.

In a unanimous decision, the Supreme Court recently affirmed the Sixth Circuit opinion and, thus, the any willing provider law. According to the Court, the Kentucky law was “saved” from preemption. While others might be affected by the law, this did not mean that the state did not specifically direct the measures toward the business of insurance: “Regulations ‘directed toward’ certain entities will almost always disable other entities from doing, with the regulated entities, what the regulations forbid; this does not suffice to place such regulation outside the scope of ERISA’s savings clause.”

The industry also argued that the law did not regulate an insurance practice but rather affected the relationship between the insurer and third party providers. The industry cited past Court cases that applied the three-part test used to determine if a practice fits within the business of insurances for purposes of the McCarran-Ferguson Act. However, the Court found that its previous reliance on McCarran-Ferguson Act case law was “misdirected” and held: “Today, we make a clear break from McCarran-Ferguson factors and hold that for a state law to be deemed a ‘law . . . which regulates insurance’ under [ERISA], it must satisfy two requirements. First, the state law must be specifically directed towards entities engaged in insurance. . . . Second, . . . the state law must substantially affect the risk pooling arrangements between the insurer and the insured.”

The case is significant because a number of states have enacted any willing provider laws similar to the Kentucky statute. These laws can be an important protection for safety net providers, minority providers and others who may be willing and able to participate in a health insurance plan but could otherwise be excluded.