DocketNumber： No. 98-6308
Judges： Holschuh, Kennedy, Norris
Filed Date： 9/7/2000
Status： Precedential
Modified Date： 11/4/2024
HOLSCHUH, D. J., delivered the opinion of the court, in which ALAN E. NORRIS, J., joined. KENNEDY, J. (pp. 372-84), delivered a separate dissenting opinion with respect to Part III of the majority opinion.
Plaintiffs are seven health maintenance organizations (HMOs) licensed under the laws of Kentucky, and the Kentucky Association of Health Plans, Inc., a non-profit association organized to promote the business interest of its HMO members (hereinafter referred to as “plaintiffs”). Plaintiffs filed this action against George Nichols III (“defendant”), in his official capacity as Commissioner of the Kentucky Department of Insurance. Plaintiffs argued that Kentucky Revised Statutes Annotated §§ 304.17A-110(3) and 304.17A-171(l)-(8) (Banks-Baldwin 1995), should be found preempted by the Employee Retirement Income Security Act of 1974 (“ERISA”), and sought injunctive relief from their enforcement. Both parties moved for summary judgment. The district court denied plaintiffs’ request for summary judgment and granted defendant’s cross-motion for summary judgment, concluding that §§ 304.17A-110(3) and 304.17A-171(2) were saved from preemption by ERISA because they “regulated insurance” under ERISA’s savings clause. Plaintiffs assert that the district court erred in this conclusion.
I. The State Statutes
In 1994, the Kentucky General Assembly enacted the Kentucky Health Care Reform Act (the “Act”). The Act contained an “Any Willing Provider” provision that stated: “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.” Ky.Rev.Stat. Ann. § 304.17A-110(3) (Banks-Baldwin 1995). The Act defined a health benefit plan as:
[Any] hospital or medical expense policy or certificate; nonprofit hospital, medical-surgical, and health service corporation contract or certificate; a self-insured plan or a plan provided by a multiple employer welfare arrangement, to the extent permitted by ERISA; health maintenance organization contract; and standard and supplemental health benefit plan as established in KRS 304.17A-160. § 304.17A-100(4)(a) (Banks Baldwin 1995).
In 1996, the Kentucky General Assembly added §§ 304.17A-170 and 171 to the code. The additions specifically regulate how “health benefit plans” can interact with chiropractors.
Sections 304.17A-110(3) and 304.17A-100(4)(a) were repealed by the Kentucky legislature effective July 1, 1999. The parties acknowledge that this appeal is not moot, however, as the legislature, through House Bill No. 315 (Ky.1998), replaced the repealed provisions with the same requirements, but substituted the term “health insurer” for “health benefit plan” in its any willing provider provision, now located at Kentucky Revised Statutes Annotated § 304.17A-270 (Banks-Baldwin 1999). The Bill’s definition of “insurer” was codified at Kentucky Revised Statutes Annotated § 304.17A-005(22) (Banks-Baldwin 1999), which defines “insurer” as:
[A]ny insurance company; health maintenance organization; self-insurer or multiple employer welfare arrangement not exempt from state regulation by ERISA; provider sponsored integrated health delivery network; self-insured employer-organized association, or nonprofit hospital, medical-surgical, dental, or health service corporation authorized to transact health insurance business in Kentucky.
The parties having agreed that this appeal is not rendered moot by the new language used in the present statutes, the court will consider the AWP laws in their present form in the court’s analysis of their validity, rather than adjudicating the validity of repealed statutes.
The chiropractic provisions contained in § 304.17A-171 and § 304.17A-170 were left intact by House Bill No. 315 and continue to remain unchanged.
The issue of the potential preemption of §§ 304.17A-270 and 304.17A-171(2) by ERISA is therefore properly before this court.
II. Preemption
We are required by this appeal to define the boundaries of preemption under ERISA § 514(a) and (b), 29 U.S.C. § 1144(a) and (b). Section 514(a), the preemption provision, reads:
Except as provided in subsection (b) of this section, the provisions of this sub-chapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title (emphasis added).
Section 514(b)(2)(A), the “savings” provision, reads:
Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking or securities.
Section 514(b)(2)(B), the “deemer” provision, reads:
Neither an employee benefit plan described in section 1003(a) of this title, which is not exempt under section 1003(b) of this title (other than a plan established primarily for the purpose of providing death benefits), nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.
The federal courts have addressed the scope of ERISA’s preemption of State law on numerous occasions; however, the wording of the Act combined with the obvious federalism concerns involved have made it difficult to discern clear boundaries. Many courts, including the Supreme Court, have commented on the vex-ingly broad and ambiguous nature of the provisions.
ERISA is a comprehensive act designed to regulate employee welfare and pension benefit plans, including those that provide “ ‘medical, surgical, or hospital care or benefits’ for plan participants or their beneficiaries ‘through the purchase of insurance or otherwise.’ ” New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 650-51, 115 S.Ct. 1671, 1674, 131 L.Ed.2d 695, 702 (1995) (discussing and quoting ERISA § 3(1), 29 U.S.C. § 1002(1)). To assure that the regulation of employee welfare benefits would remain an area of exclusive federal concern, Congress passed § 514(a) of ERISA, the preemption provision.
to ensure that plans and plan sponsors would be subject to a uniform body of benefits law; the goal was to minimize the administrative apd financial burden of complying with conflicting directives among States or between States and the Federal Government ..., [and to prevent] the potential for conflict in substantive law ... requiring the tailoring of plans and employer conduct to the peculiarities of the law of each jurisdiction.
Travelers, 514 U.S, at 656-57, 115 S.Ct. at 1677, 131 L.Ed.2d at 706 (alteration in original) (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct. 478, 484, 112 L.Ed.2d 474, 486 (1990)). In discussing the preemption provision, the Court has variously noted its extreme breadth, terming it “clearly expansive,” “broad [in] scope,”, “broadly worded,” “deliberately expansive,” and “conspicuous for its breadth.” California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 324, 117 5.Ct. 832, 837, 136 L.Ed.2d 791, 799 (1997) (internal citations omitted) (reviewing past Supreme Court case law addressing the scope of ERISA’s preemption prolusion). The preemption provision, however, is not without limits. As the Court noted in Travelers, § 514(a) preempts all state laws that relate to an employee benefit plan covered by ERISA, but, “[i]f “relate to’ were taken to extend to the furthest stretch of its indeterminancy, then for all practical purposes preemption would never run its course.” 514 U.S. at 655, 115 S.Ct. at 1677, 131 L.Ed.2d at 705.
Thus, to determine whether a law “relates to” an employee benefit plan, the Court has formulated a two part test, under which a “law ‘relate[s] to’ a covered employee benefit plan for purposes of § 514(a) if it [1] has a connection with or [2] reference to such plan.” Dillingham, 519 U.S. at 324, 117 S.Ct. at 837, 136 L.Ed.2d at 799 (internal quotations and citations omitted) (emphasis added). The district court found, and plaintiffs argue, that the Kentucky AWP provisions both refer to and have a connection with ERISA covered' employee benefit plans.
A. Reference To
The Supreme Court has provided guidance in several cases as to when a law “refers to” ERISA. In Dillingham the Court summarized its analysis, stating:
[W]e have held preempted a law that “impos[ed] requirements by reference to [ERISA],’’ District of Columbia v. Washington Bd. of Trade, 506 U.S. 125, 130-31, 113 S.Ct. 580, 121 L.Ed.2d 513 (1992); a law that specifically exempted ERISA plans from an otherwise generally applicable garnishment provision, Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825, 828 n. 2, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988); and a common-law cause of action premised on the existence of an ERISA plan, Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 140, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990). Where a State’s law acts immediately and exclusively upon ERISA plans, as in Mackey, or where the existence of ERISA plans is essen*359 tial to the law’s operation, as in Greater Washington Bd. of Trade and Ingersoll-Rand, that “reference” will result in preemption.
519 U.S. at 324-25, 117 S.Ct. at 837-38, 136 L.Ed.2d at 799.
In Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988), the Court discussed Georgia Code Annotated § 18-4-22.1 (1982), which specifically exempted ERISA plans from Georgia’s general garnishment law. The Court noted that even though Georgia’s legislature may have enacted § 18-4-22.1 to help effectuate ERISA’s underlying purpose, it would still be preempted if it fell within ERISA’s preemption provision. Finding that § 18-4-22.1 was indeed preempted, the Court stated:
[A]dhering to our precedents in this area, we hold Ga.Code Ann. § 18-4-22.1, which singles out ERISA employee welfare benefit plans for different treatment under state garnishment procedures, is preempted under § 514(a). The state statute’s express reference to ERISA plans suffices to bring it within the federal law’s preemptive reach.
Mackey, 486 U.S. at 830, 108 S.Ct. at 2186, 100 L.Ed.2d at 844. In a footnote, the Court indicated that the “different treatment” was illustrated not just by the express reference to ERISA plans in the statute’s language, but also in the disparate treatment accorded to non-ERISA pension and benefit plans under Georgia law. See id. at n. 4. The effect was that only ERISA welfare benefit plans were singled out for protection under the statute, an impermissible result.
The district court in the case at bar relied on Mackey in determining whether Kentucky’s AWP statutes referred to an ERISA plan. The district court first observed that under Kentucky’s statute, “health benefit plans” were defined to include, among other things, “a self-insured plan or plan provided by a multiple employer welfare arrangement, to the extent permitted by ERISA.” Based on this language, the court concluded that “it is clear that the AWP statutes ‘refer to’ ERISA employee benefit plans.” In support, the court cited De Buono v. NYSA-ILA Medical & Clinical Services Fund, 520 U.S. 806, 815, 117 S.Ct. 1747, 1752, 138 L.Ed.2d 21, 30 (1997), which cited Mackey for the principle that a provision that explicitly refers to ERISA in defining the scope of the state law’s application is preempted.
The district court noted that the Western District of Kentucky in Community Health Partners, Inc. v. Kentucky, 14 F.Supp.2d 991 (W.D.Ky.1998), disagreed with its analysis of the same statute. The Community Health Partners court, relying on language in Dillingham, found that Kentucky’s AWP statute did not “refer to” an ERISA plan because the law did not act “immediately and exclusively upon ERISA plans” and because the existence of ERISA plans was not essential to the law’s operation. Id. at 995-96. However, the district court in the present case disagreed with the Community Health Partners court, finding that “Mackey makes it clear that when a statute ‘singles out ERISA employee benefit plans for different treatment’ the statute’s ‘express reference to ERISA plans suffices to bring it within the federal law’s preemptive reach.’ ” J.A. at 12 n. 6.
Other courts have reached similar conclusions. The Eighth Circuit in Prudential Insurance Co. of America v. National Park Medical Center, Inc., 154 F.3d 812 (8th Cir.1998), found that an Arkansas AWP statute containing language comparable to Kentucky’s provisions was preempted due to its reference to employee benefit plans covered by ERISA. The court noted that the law expressly stated its provisions “shall not apply to self-funded or other health benefit plans that are exempt from state regulation by virtue of [ERISA].” Id. at 822. Accordingly, the court determined that § 23-99-209 of the Arkansas Patient Protection Act (“PPA”) referred to ERISA plans, as it “undeniably
Although in the recent case of Washington Physicians Service Association v. Gregoire, 147 F.3d 1039 (9th Cir.1998), cert. denied, 525 U.S. 1141, 119 S.Ct. 1033, 143 L.Ed.2d 42 (1999), the court found that Washington’s “every category of provider” statute did not contain a “reference to” or “connection with” employee benefit plans, the statute at issue is distinguishable from Kentucky’s AWP laws. The court noted that by the statute’s definition, “health carrier” only included disability insurers, health care service contractors, or health maintenance organizations. See id. at 1043. Employer-sponsored, self-funded plans were excluded not by a provision of the act, but rather by limiting the act’s application to only the mentioned entities. As a result, the act contained no reference whatsoever to ERISA-covered employee benefit plans.
While a mere reference to an ERISA plan, without more, may not be enough to cause preemption, Supreme Court precedent shows that if such a reference is combined with some effect on those plans, such as singling them out for different treatment, preemption will result. See, e.g., Mackey, 486 U.S. at 830 n. 4, 108 S.Ct. at 2186, 100 L.Ed.2d at 844; cf. District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 113 S.Ct. 580, 121 L.Ed.2d 513 (1992) (finding that a state law that imposes requirements merely by reference to ERISA is preempted).
We conclude that Kentucky’s AWP statutes “relate to” ERISA plans and are therefore preempted, unless they are found to be statutes that regulate “insurance” under the savings clause of § 514(b)(2)(A). This conclusion also involves consideration of the “deemer” clause, § 514(b)(2)(B), which ensures that ERISA employee benefit plans are not deemed to be engaged in the business of insurance in applying the savings clause. Under the deemer clause, state insurance laws that apply directly to ERISA self-insured plans do not fall within the savings clause and thus are preempted. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105. S.Ct. 2380, 85 L.Ed.2d 728 (1985); FMC Corp. v. Holliday, 498 U.S. 52, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990).
The Kentucky legislature, aware of its inability to regulate self-insured ERISA plans, sought to include such plans — as well as multiple employer welfare arrangements (MEWAs) — only “to the extent permitted by ERISA.” The effect of this provision is to exclude self-insured ERISA plans from coverage of the statute by virtue of the deemer clause and to include MEWAs only to the extent state regulation is permitted under 29 U.S.C. § 1144(B)(6).
The fact that the Kentucky legislature chose to allow for regulation of MEWAs and self-insured plans “to the extent permitted by ERISA” suggests that the legislature was well aware of the*361 preemptive force of ERISA. As noted by Defendant, the phrase appears merely to restate the “deemer clause” by exempting self-insured ERISA plans from the scope of the AWP statute. The “deemer clause” prevents a state law from “deeming” an employee benefit plan to be an insurance company for the purpose of any law purporting to regulate the business of insurance. 29 U.S.C. § 1144(b)(2)(B). The deemer clause thus effectively prevents states from subjecting self-insured plans to state insurance regulation. On the other hand, insured plans — plans that purchase insurance — are subject to state laws regulating the insurance industry. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 732, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985).
Id. at 995 n. 4.
As the Supreme Court noted in UNUM Life Insurance Co. v. Ward, 526 U.S. 358, 367 n. 2, 119 S.Ct. 1380, 1386, 143 L.Ed.2d 462, 472 (1999):
Self-insured ERISA plans ... are generally sheltered from state insurance regulation.
The Kentucky Act provides that shelter by its exclusion of ERISA self-insured plans from its coverage, but its reference to ERISA plans and its exclusion of self-insured ERISA plans from its coverage clearly bring the statute within the “refer to” prong of the “relate to” analysis.
B. Connection With
While the fact that the Kentucky statutes “refer to” ERISA employee benefit plans is enough to potentially preempt them on that basis alone, their “connection with” such plans offers an alternative basis for such preemption. Analysis under the “connection with” prong has changed somewhat after the Supreme Court’s opinion in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995).
Using the Travelers “connection with” analysis, the district court in the case at bar determined that Kentucky’s AWP laws had a connection with ERISA plans. The court found that while the law did not operate directly on ERISA plans, it effectively required benefit plans to purchase benefits of a certain structure, thereby bearing indirectly but substantially on all insured plans. As a result, the court concluded that the AWP statutes did more than just indirectly affect the 'cost of ERISA plans; the AWP statutes mandated benefit structures.
Two other district courts in Kentucky recently drew the same conclusion while' addressing the same statute. In Community Health Partners, Inc. v. Kentucky, 14 F.Supp.2d 991, 1000-01 (W.D.Ky.1998), the court found Kentucky’s AWP provision, located then at § 304.17A-110(3), to be similar in effect to the mandated benefit law in Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985). In Metropolitan, the Supreme Court held that the Massachusetts mandated benefit law “related to” ERISA plans because the statute bore indirectly, but substantially, on all insured employee benefit plans by effectively requiring the plans to purchase mental health benefits when purchasing a certain kind of common insurance policy. See id. at 739, 105 S.Ct. at 2388, 85 L.Ed.2d at 740. Similarly, the Community Health Partners court believed that the AWP law effectively mandated the benefit structure of ERISA plans and regulated the relationship between traditional ERISA entities, i.e., the plan, the employer, and the plan fiduciaries and beneficiaries. 14 F.Supp.2d at 997.
A recent memorandum opinion, Ward v. Alternative Health Deliver Systems, Inc., 55 F.Supp.2d 694 (W.D.Ky.1999), held that § 304.17A-171, which contains regulations of a health benefit plan’s use of chiropractic services, including an AWP provision, was preempted by ERISA due to its connection with employee benefit plans. Id. at 701. The judge found that:
By specifically prohibiting health organizations from offering networks with limited chiropractic providers, the statute mandates the plan’s structure. Moreover, the statute also dictates that all covered participants shall have access to the chiropractor of their choice. This too dictates a certain structure to which an employer’s health care plan must succumb. As such this claim also falls within the realm of ERISA preemption.
Id. at 699.
Some academic literature has suggested that the Supreme Court’s post-Travelers case law may represent a “sea change” in the “relation to” analysis; however, neither the Court’s nor the circuits’ opinions yet confirm this assertion.
We are convinced that even after the change of emphasis worked by Travelers on the “connection with” prong of the Supreme Court’s “relation to” preemption analysis, the district court in this case was correct in finding that former § 304.17A-110(3) (now § 304.17A-270) and present § 304.17A-171 were both “connected with” ERISA covered plans. They not only affect the benefits available by increasing the potential providers, they directly affect the administration of the plans.
The Kentucky statutes in question meet both prongs of the “relation to” analysis and thus are preempted, unless found to be statutes that regulate insurance under the savings clause of § 514(b)(2)(A).
III. Insurance Savings Clause
Having concluded that Kentucky’s AWP laws relate to ERISA covered employee benefit plans, and are thus within the scope of ERISA’s preemption provision, the Court must then determine whether the laws fall within ERISA’s savings clause. The savings clause states that, “[e]xcept as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking or securities.” ERISA § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A). This provision provides a broad and important exception to ERISA’s preemption provision, saving state laws that relate to ERISA plans from preemption so long as they “regulate insurance.” Much like the preemption provision itself, however, the scope of the savings clause has proved difficult to determine from its sparse language.
The Supreme Court has endeavored to provide guidance on what it means to “regulate insurance,” first addressing the issue in Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985), and most recently describing the test in UNUM Life Insurance of America v. Ward, 526 U.S. 358, 119 S.Ct. 1380, 143 L.Ed.2d 462 (1999), stating:
Our precedent provides a framework for resolving whether a state law “regulates insurance” within the meaning of the saving clause. First we ask whether, from a “common sense view of the matter,” the contested prescription regulates insurance. Second, we consider three factors employed to determine whether the regulation fits within the “business of insurance” as that phrase is used in the McCarran-Ferguson Act: “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.” (internal citations omitted).
The Court noted that the three McCar-ran-Ferguson factors are “ ‘considerations [to be] weighed’ in determining whether a state law regulates insurance” and that “[n]one of these criteria is necessarily determinative in itself.” See id. at 373, 119 S.Ct. at 1389, 143 L.Ed.2d at 476. Therefore, in determining whether Kentucky’s AWP laws are saved from preemption by ERISA § 514(b)(2)(A), one must first ask whether as a matter of common sense they regulate insurance, and then look to the McCarran-Ferguson factors as checking points or guideposts to aid- the analysis.
In Ward, the Court was faced with the question of whether California’s notice-prejudice rule
The California notice-prejudice rule controls the terms of the insurance relationship by “requiring the insurer to prove prejudice before enforcing proof-of-claim requirements.” Cisneros [v. UNUM Life Ins. Co. of America] 134 F.3d [939] at 945 [(9th Cir.1998)]. As the Ninth Circuit observed, the rule, by its very terms, “is directed specifically at the insurance industry and is applicable only to insurance contracts.” Ibid.; see Brief for United States as Amicus Curiae 12 (“[O]ur survey of California law reveals no cases where the state courts apply the notice-prejudice rule as such outside the insurance area. Nor is this surprising, given that the rule is stated in terms of prejudice to an ‘insurer’ resulting from untimeliness of notice.”). The rule thus appears to satisfy the .common-sense view as a regulation that homes in on the insurance industry and does “not just have an impact on [that] industry.” Pilot Life, 481 U.S. at 50, 107 S.Ct. 1549, 95 L.Ed.2d 39.
Ward, 526 U.S. at 368, 119 S.Ct. at 1386-87,1 43 L.Ed.2d at 472-73.
Ward makes it clear that the most important aspect of the test is whether from a common sense view of the matter the contested statute regulates insurance. The three McCarran-Ferguson factors are of secondary importance, serving only as “checking points” or “guideposts” and not as essential elements. Indeed, in Ward, the Court ignored the first McCarranFerguson factor altogether in its analysis of the challenged statute in that case.
The Kentucky Act meets the common sense test in that it clearly does regulate insurance. The fact that it includes within its reach HMOs as well as traditional insurance companies does not take it out of the realm of insurance regulation. We agree with the reasoning of the Ninth Circuit in Washington Physicians Service Association v. Gregoire, 147 F.3d 1039 (9th Cir.1998), in which the Court said:
The Washington law is “specifically directed” toward the insurance industry, Pilot Life, 481 U.S. at 50, 107 S.Ct. 1549, because it operates directly on HMOs and HCSCs, entities that are engaged in the business of health insurance. “The primary elements of an insurance contract are the spreading and underwriting of a policyholder’s risk.” Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 211, 99 S.Ct. 1067, 59 L.Ed.2d 261 (1979), citing 1 G. Couch, Cyclopedia of Insurance Law § 1:3 (2d*365 ed.1959)(“It is characteristic of insurance that a number of risks are accepted, some of which involve losses, and that such losses are spread over all the risks so as to enable the insurer to accept each risk at a slight fraction of the possible liability upon it.”). The only distinction between an HMO (or HCSC) and a traditional insurer is that the HMO provides medical services directly, while a traditional insurer does so indirectly by paying for the service, Anderson v. Humana, Inc., 24 F.3d 889, 890 (7th Cir.1994), but this is a distinction without a difference. Metropolitan Life, 471 U.S. at 741, 105 S.Ct. 2380 (explaining that nothing in ERISA “purports to distinguish between traditional and innovative insurance laws”); Klamath-Lake Pharmaceutical Ass’n v. Klamath Med. Serv. Bureau, 701 F.2d 1276, 1286-87 (9th Cir.1983). In the end, HMOs function the same way as a traditional health insurer: The policyholder pays a fee for a promise of medical services in the event that he should need them. It follows that HMOs (and HCSCs) are in the business of insurance.
Id. at 1045-46.
It is true that the statutes would reach certain self-insured health care benefit plans that are not under ERISA’s protective “deemer” clause, e.g., self-insured government plans and self-insured church plans, because they are excluded entirely from ERISA’s coverage under 29 U.S.C. § 1003(b). We do not see this fact, however, as any barrier to a finding that a common sense view is that the statutes regulate insurance. We know of no reason why it is not within the authority of a state in enacting laws dealing with insurance to include within such laws entities that act as self-insurers as well as entities who purchase insurance. As the author of a well-known treatise has said, “Self-insurance has often led courts and legislatures to struggle with the intriguing question of whether a party who has not purchased insurance, effectively acting as its own insurer, should be the equivalent of an insurer.” 1 Couch on Insurance 3d § 10.2. It is pointed out that this difficulty in modern practice is frequently removed by express statutory provisions specifying that a particular requirement does or does not apply to self-insured entities. Id. Kentucky has done this by expressly including self-insurers — to the extent permitted by ERISA— within the coverage of the statutes in question.
The state’s regulation of health benefit plans is set forth in Kentucky’s Insurance Code (Chapter 304 of Title XXV dealing with Business and Financial Institutions). Subtitle 17A of the Insurance Code deals with health insurers and health benefit plans. Section 304.17A-005 contains the definition of words used in that subtitle. Paragraph 22 provides:
“Insurer” means any insurance company; health maintenance organization; self-insurer or multiple employer welfare arrangement not exempt from state regulation by ERISA; provider-sponsored integrated health delivery network; self-insured employer-organized association, or nonprofit hospital, medical-surgical, dental, or health service corporation authorized to transact health insurance business in Kentucky.
“Health benefit plan” is also defined, the relevant portion of that definition tracking the above definition of “insurer:”
*366 “Health benefit plan” means any hospital or medical expense policy or certificate; nonprofit hospital, medical-surgical, and health service corporation contract or certificate; provider sponsored integrated health delivery network; a self-insured plan or a plan provided by a multiple employer welfare arrangement, to the extent permitted by ERISA; health maintenance organization contract; ...
Ky.Rev.Stat. Ann. § 304.17A-005(17).
The AWP provision of Kentucky’s Insurance Code specifically is directed at “insurers” by providing 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 established by the health insurer, including the Kentucky State Medicaid program and Medicaid partnerships (emphasis added).
Ky.Rev.Stat. Ann. § 304.17A-270.
The chiropractic AWP provision specifically adopts the definition of a health benefit plan as set forth in Kentucky Revised Statutes Annotated § 304.17A-005 and defines “health care insurer” as any entity “authorized by the state of Kentucky to offer or provide health benefit plans, policies, subscriber contracts, or any other contracts of similar nature which indemnify or compensate health care providers for the provision of health care services.” Ky. Rev.Stat. Ann. § 304.17A-170(7).
The Kentucky AWP laws are thus specifically directed toward “insurers” and the insurance industry and are ones that from a “common sense view” regulate insurance.
The fact that the deemer clause prevents ERISA self-insured plans from being considered as engaging in the business of insurance does not mean that self-insured plans, by their nature, do not involve the business of insurance and are beyond the reach of state regulations dealing with insurance. The distinction between plans funded by the purchase of insurance and plans that are funded by employers as self-insured plans results from “a distinction created by Congress in the ‘deemer clause,’ a distinction Congress is aware of and one it has chosen not to alter.” Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. at 747, 105 S.Ct. at 2393, 85 L.Ed.2d at 745. It is not a distinction based upon a concept that employers who choose to be self-insurers cannot be considered insurers subject to state regulations dealing with insurance. Therefore, the fact that the Kentucky statute reaches self-insurers who are not protected by ERISA’s deemer clause does not detract from its characterization as a statute regulating entities engaged in the business of health insurance.
As noted earlier, the Kentucky statutes exclude from their scope self-insured ERISA plans. If such a plan provides for a limited group of providers, the AWP laws would not compel a change in that plan, regardless of the nature of the entity administering the plan. It could not be enforced, in our opinion, against the employer who has a self-insured ERISA plan nor against the administrator of such a plan, even if the administrator is an entity, such as an HMO, which would be subject to the statute if it were acting not as a mere administrator but as an insurer of its own plan. In Light v. Blue Cross and Blue Shield, 790 F.2d 1247 (5th Cir.1986), the court rejected the argument that a state law could be enforced against the administrator of a self-insured ERISA plan because the deemer clause, § 514(b)(2)(B), which protects such plans from state regulation, does not expressly include plan administrators among the exempted entities. The court found the fact that administrators of self-insured plans are not mentioned in the deemer clause to be of no significance, and because the state law was preempted, the claim against the administrator of the plan based on that law could not be brought, even though the plan itself provided that the contracts between
In Prudential Insurance Company of America v. National Park Medical Center, Inc., 154 F.3d 812 (8th Cir.1998), the court found that an Arkansas statute that contained an AWP provision did not meet the common sense test because, in part, its scope included “employers and administrators of self-insured plans” (although the statute excluded ERISA self-funded plans). As noted above, however, we do not believe that inclusion of self-insurers not protected by the deemer clause, as well as purchasers of insurance, within the statute’s reach in itself removes the statute from being viewed a permissible regulation of insurance based upon “a common understanding of insurance regulation.” Also, unlike the Arkansas statute, the Kentucky statutes do not include “administrators of self-insured plans.” They are directed towards and limited to health care “insurers.”
Texas Pharmacy Association v. Prudential Insurance Company of America, 105 F.3d 1035 (5th Cir.1997), contains the statement that if a self-insured employer, not subject to the any willing provider statute, “signed up with an HMO or PPO, those organizations would be subject to the statute, even if there is no insurance company involved.” Id. at 1039. The court was presumably referring to the HMO or PPO acting as the administrator of the employer’s self-funded plan. We believe, however, that, as the court in Light observed, if ERISA preempts the state law with respect to self-funded plans, there is no state law to which the administrator of the self-funded plan must conform. Furthermore, as previously noted, the Kentucky statute is directed toward and applies to only insurers and not to plan administrators. Supra, note 14. A plan administrator that does nothing more than administer the plan of a self-insured employer is not engaged in “the underwriting and spreading of risk,” Group Life
In Metropolitan Life, 471 U.S. at 743-44, 105 S.Ct. at 2391, 85 L.Ed.2d at 743, the Supreme Court said:
Congress was concerned [in the McCar-ran-Ferguson Act] with the type of state regulation that centers around the contract of insurance.... The relationship between insurer and insured, the type of policy which could be issued, its reliability, its interpretation, and enforcement — these were the core of the “business of insurance.” [T]he focus [of the statutory term] was on the relationship between the insurance company and the policyholder. Statutes aimed at protecting or regulating this relationship, directly or indirectly, are laws regulating the “business of insurance.” SEC v. National Securities, Inc., 393 U.S. 453, 460, 89 S.Ct. 564, 568, 21 L.Ed.2d 668 (1969).
The Kentucky AWP laws deal directly with the relationship between insurers and insureds under health benefit plans. They affect restrictions by the insurers on the number of health care providers available to the insureds under such plans; they increase benefits to the insureds by giving them greater freedom to choose health care providers under the plans; and they are aimed at regulating this insurance relationship. They are part of a comprehensive subtitle of Kentucky’s insurance code regulating health benefit plans, and they are, in our view, clearly laws which, in a common sense view of the matter, “regulate insurance” and thus are saved from preemption.
Consideration of the three McCarran-Ferguson factors used in the second step of the analysis as “checking points” or “guideposts” does not require a different result. First, although certainly a debatable issue, we agree with the reasoning of the Fourth Circuit in Stuart Circle Hospital Corp. v. Aetna Health Management, 995 F.2d 500 (4th Cir.1993), that the first factor — -“transferring or spreading the policyholder’s risk” — is satisfied:
There are several components to the “policyholder’s risk.” They include the types of illness and injury that the insurance contract covers, provision for treatment, and the cost of treatment. The Virginia statute affects the type and cost of treatment available to an insured. If a PPO unreasonably restricts the providers of treatment, even though they meet the insurer’s standards, it denies an insured the choice of doctor or hospital that may best suit the insured’s needs, unless the insured is willing and able to pay all or part of the cost of the doctor or hospital that is not preferred*369 by the insurer. This is a restriction of the insured’s benefits. By its prohibition against unreasonable restriction of providers, the Virginia statute spreads the cost component of the policyholder’s risk among all the insureds, instead of requiring the policyholder to shoulder all or part of this cost when seeking care or treatment from an excluded doctor or hospital of his or her choice.
Id. at 503.
Plaintiffs point out that the Kentucky statutes in question do not require health benefit plans to contract with any additional provider, but only with providers who are willing to meet the network’s terms and conditions. While this is unquestionably true, it does not, in our view, change the fact that the statutes open an otherwise closed door, insofar as the availability of health care providers is concerned. Some may choose to go through that door and join the group of providers while others may not, but this does not mean that removal of a restriction on availability of providers is not a benefit conferred on the insureds. It effectively changes the terms of the policy, admittedly not in terms of covered medical conditions, but in terms of covered treatment by health care providers.
While Plaintiffs understandably rely on Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 99 S.Ct. 1067, 59 L.Ed.2d 261 (1979), in support of their position that the first factor is not present in this case, we believe Royal Drug does not require that conclusion. Unlike the health plans that are the subject of the Kentucky statutes, the insurer in Royal Drug did not restrict the number of providers in question. Blue Cross had offered to enter into a provider agreement with every licensed pharmacy in Texas. The benefit conferred on the insureds by the Kentucky AWP statutes — removal of restrictions on the number of providers— was already present in Royal Drug. The Supreme Court expressly noted, with reference to its discussion of contracts between the insurer and providers, “[t]his is not to say that the contracts offered by Blue Shield to its policyholders, as distinguished from its provider agreements with participating pharmacies, may not be the ‘business of insurance’ within the meaning of the [McCarran-Ferguson] Act.” Id. at 280 n. 37, 99 S.Ct. at 1082, 59 L.Ed.2d at 279. Unlike Royal Drug, policyholders in Kentucky will benefit under their policies by a new change in coverage, insofar as availability of providers is concerned.
The policyholders in Royal Drug were “basically unconcerned with arrangements made between Blue Shield and participating pharmacies.” Id. at 214, 99 S.Ct. at 1074, 59 L.Ed.2d at 270. They paid a fixed price ($2.00) to a participating pharmacy for each prescription, and consequently they were not concerned with Blue Shield’s cost for those prescriptions. Similarly, the policyholders in Kentucky are basically un
The Fifth Circuit has also distinguished Royal Drug in its discussion of a prior Texas AWP statute pertaining to pharmacies in Texas Pharmacy Association v. Prudential Insurance Co. of America, 105 F.3d 1035 (5th Cir.1997), agreeing with the reasoning of the Fourth Circuit in Stuart Circle Hospital Corp. “Unlike the third-party pharmacy agreements in Royal Drug, the prior Texas statute directly regulated the terms of the insurance policy between the insurer and the insured.” Id. at 1041.
Finally, it should be emphasized, in applying the McCarran-Ferguson factors, that “the focus of McCarran-Ferguson is upon the relationship between the insur-anee company and its policyholders,” and state statutes aimed at regulating that relationship, “directly or indirectly, are laws regulating the ‘business of insurance.’” United States Dep’t of the Treasury v. Fabe, 508 U.S. 491, 501, 113 S.Ct. 2202, 2208, 124 L.Ed.2d 449, 459 (1993). In Fabe, the Court held that, “[tjhere can be no doubt that the actual performance of an insurance contract falls within the ‘business of insurance,’ as we understood that phrase in Pireno and Royal Drug.” Id. at 503, 113 S.Ct. at 2209, 124 L.Ed.2d at 461. Furthermore, in Fabe, the Court distinguished Royal Drug on the ground that it was an antitrust law case, and the Court in that case was construing the words, “the business of insurance” contained in the second clause of § 2(b) of the McCarran-Ferguson Act, the antitrust law exemption (see 15 U.S.C. § 1012(b)).
The second McCarran-Ferguson factor is, in our view, unquestionably present in this case. The ability of an insured to select a physician of his or her choice to treat a medical condition covered by the insurance is an integral part of the policy relationship between the insurer and the insured. In Ward, the Supreme Court
We reject UNUM’s suggestion that because the notice-prejudice rule regulates only the administration of insurance policies, not their substantive terms, it cannot be an integral part of the policy relationship. See Metropolitan Life, 471 U.S. at 728 n. 2, 105 S.Ct. 2380, 85 L.Ed.2d 728 (including laws regulating claims practices and requiring grace periods in catalogue of state laws that regulate insurance).
526 U.S. at 375 n. 5, 119 S.Ct. at 1390, 143 L.Ed.2d at 477.
In Plaintiffs’ view, the second factor is not satisfied because the AWP provisions leave the contract terms between the insurer and the insured unaltered, the medical risks remain the same, and even if an insured’s provider decides to join the insured’s network, the medical coverage remains the same. While it is admittedly true that the AWP laws do not change the substantive terms of the insurance coverage, it is not necessary that the statutes do this before they can be found to be statutes regulating insurance. Id. Kentucky’s AWP laws do, however, directly impact the insurer-insured relationship because they affect restrictions on the network of providers available for treatment under the plan and they directly affect the administration of the plan. As in Ward, the statutes effectively create a mandatory contract term dealing with the manner in which the plan is administered by expanding covered treatment from a closed pool of providers to an open pool of providers. As the Fourth Circuit said in Stuart Circle Hospital Corp., 995 F.2d at 503, “We repeat, treatment and cost are important components of health insurance. Regulations governing these components, such as the Virginia statute, are integral parts of the relationship between insurer and insured.” In our view, the second McCar-ran-Ferguson factor is clearly satisfied.
We also conclude that the third factor— the statute’s limitations to entities within the insurance industry — is satisfied. For reasons stated earlier, we believe that entities such as HMOs and self-insurers are engaged in the business of insurance along with the more widely recognized and more traditional commercial insurance companies, and that entities acting solely as plan administrators and not as “health insurers” are not within the scope of the statute. As District Judge McKinley pointed out in Community Health Partners:
Whatever difference in form or structure that exists as between traditional insurance companies and HMOs, ME-WAs, and provider-sponsored integrated health delivery networks is insufficient to establish that Kentucky’s AWP law is not limited to entities within the insurance industry. To hold otherwise would require the Court to recognize form over substance and to refuse to recognize the natural evolution of the health insurance industry. Cf. SEC v. Variable Annuity Life Ins. Co., 359 U.S. 65, 71, 79 S.Ct. 618, 3 L.Ed.2d 640 (1959) (We realize that life insurance is an evolving institution. Common knowledge tells us that the forms have greatly changed even in a generation. And we would not undertake to freeze the concepts of “insurance” ... into the mold they fitted when these Federal Acts were passed.)
14 F.Supp.2d at 1003-04.
It must be reiterated and emphasized that the three McCarran-Ferguson factors are not required to be satisfied before a
IV. Conclusion
With respect to Kentucky’s AWP statute, Kentucky Revised Statutes Annotated § 304.17A-270 (Banks-Baldwin 1999), and Kentucky’s chiropractic AWP statute, Kentucky Revised Statutes Annotated § 304.17A-171(2) (Banks-Baldwin 1999), the judgment of the district court is affirmed. Because the district court opinion does not discuss the additional requirements imposed by provisions (1) and (3)-(8) of § 304.17A-171, dealing with chiropractors and health benefit plans, this case is remanded to the district court for consideration in the first instance of the issue of their preemption by ERISA.
. Section 304.17A-170(1) states that "health benefit plan” has the same meaning as in § 304.17A-005, which provides in pertinent part:
"Health benefit plan” means any hospital or medical expense policy or certificate; nonprofit hospital, medical-surgical, and health service corporation contract or certificate; provider sponsored integrated health delivery network; a self-insured plan or a plan provided by a multiple employer welfare arrangement, to the extent permitted by ERISA; health maintenance organization contract; or any health benefit plan that affects the rights of a Kentucky insured and bears a reasonable relation to Kentucky, whether delivered or issued for delivery in Kentucky....
§ 304.17A-005(17) (Banks Baldwin 1999).
. The "any willing provider” provision of § 304.17A-17R2) states:
A health benefit plan that includes chiropractic benefits shall:
(2) Permit 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.
. Specifically, health benefit plans are required to: include all primary chiropractic providers who are selected by a person covered by the plan; allow participants direct access to chiropractors of their choice without referral from a gatekeeper; appoint a
The district court apparently limited its analysis to Kentucky’s "Any Willing Provider” provisions, the general provision being located at § 304.17A-110(3) and the specific chiropractic provision being located at § 304.17A-171(2). The district court noted that the chiropractic statute imposed additional requirements, beyond those imposed by the general "any willing provider” statute, but because both statutes "similarly define 'health benefit plan’ ” the court referred to those statutes collectively. J.A. at 35. Because the court never explicitly addressed provisions (1) and (3)-(8) of § 304.17A-171, the chiropractic statute, we will remand the issue of their preemption for consideration in the first instance by the district court.
. The appeal taken from Community Health Partners v. Commonwealth of Kentucky, 14 F.Supp.2d 991 (W.D.Ky.1998), raised the question of whether § 304.17A-110(3) (replaced by § 304.17A-270) was preempted under ERISA and was argued the same day as this case. As a result, this opinion will necessarily dictate the outcome of that case as well.
. See, e.g., California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 335-36, 117 S.Ct. 832, 843, 136 L.Ed.2d 791, 805-06 (1997) (Scalia, J., concurring) (noting that the Court had taken 14 previous cases regarding ERISA preemption, and suggesting that neither the Court's prior decisions, nor its present one, succeeded in bringing clarity to the law); New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656, 115 S.Ct. 1671, 1677, 131 L.Ed.2d 695, 705 (1995) (remarking on the unhelpful nature of the statute’s text and the frustrating difficulty of defining its key terms); Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2389, 85 L.Ed.2d 728, 740 (1985) (observing that the provisions were “not a model of legislative drafting”); Prudential Ins. Co. of Am. v. National Park Med. Ctr., Inc., 154 F.3d 812, 818 (8th Cir.1998) (comparing efforts to discern the scope of ERISA preemption to unraveling the fabled Gordian knot).
. The Western District of Kentucky in Community Health Partners, Inc. v. Kentucky, 14 F.Supp.2d 991, 995-1001 (W.D.Ky.1998), also found the AWP provisions “related to” ERISA plans, but only under the “connection with” prong of the "relation to” analysis. That court did not believe that the statute referred to ERISA plans in the manner that Supreme Court precedent requires for preemption under the "reference to” prong. Specifically, the court believed that under Dillingham, a law will only "refer to” an ERISA plan for preemption purposes if it "acts immediately and exclusively upon ERISA plans” or "where the existence of ERISA covered plans is essential to the law's operation.” Id. at 995-96. We disagree with the district court’s "reference to” analysis for the reasons set forth in this opinion.
. 29 U.S.C. § 1144(B)(6) permits state laws that regulate insurance to apply to MEWAs under the circumstances set forth in that section.
. In De Buono v. NYSA-ILA Medical & Clinical Services Fund, 520 U.S. 806, 117 S.Ct. 1747, 138 L.Ed.2d 21 (1997), the Court explained its change in focus, stating that its earlier ERISA cases had not required a fine analysis of the scope of ERISA's "relate to” language, because the state laws at issue had a clear "connection with or reference to” ERISA benefit plans. De Buono, 520 U.S. at 813, 117 S.Ct. at 1751, 138 L.Ed.2d at 28-29. The Court explained that in Travelers, however, it was forced to confront directly whether ERISA's "relates to” language altered the normal starting presumption that Congress does not intend to supplant state law. See id.
. In changing its “relate to” analysis in Travelers, the Court appears to have been addressing only the "connection with” prong, as its statements in later cases indicate the “reference to” prong was unaffected. See De Buono, 520 U.S. at 815 n. 15, 117 S.Ct. at 1752, 138 L.Ed.2d at 30; Dillingham, 519 U.S. at 324, 117 S.Ct. at 837, 136 L.Ed.2d at 799.
. While Justice Scalia has suggested that the Court should really be applying field preemption, rather than the express preemption test it has created for analyzing ERISA’s preemption provisions, Dillingham, 519 U.S. at 335-36, 117 S.Ct. at 843, 136 L.Ed.2d at 806 (1997) (Scalia, J., concurring), absent further direction from the whole Court on this issue we must continue to apply the traditional analysis.
. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739-40, 105 S.Ct. 2380, 2389, 85 L.Ed.2d 728, 740 (1985), in which the Court stated:
[T]he sphere in which § 514(a) operates was explicitly limited by § 514(b)(2). The insurance savings clause preserves any stale law "which regulates insurance, banking, or securities.” The two pre-emption sections, while clear enough on their faces, perhaps are not a model of legislative drafting, for while the general preemption clause broadly preempts state law, the saving clause appears broadly to preserve the States' lawmaking power over much of the same regulation. While Congress occasionally decides to return to the States what it has previously taken away, it does not normally do both at the same time.
. The rule stales, "a defense based on an insured's failure to give timely notice [of a claim] requires’the insurer to prove that it suffered actual prejudice. Prejudice is not presumed from delayed notice alone. The insurer must show actual prejudice, not the mere possibility of prejudice.” Ward, 526 U.S. at 366-67, 119 S.Ct. at 1386, 143 L.Ed.2d at 472.
. As noted earlier, the Ninth Circuit in Gre-goire found that the Washington statute did not come within the scope of ERISA’s preemption clause. Nevertheless, the Court found that, even if it did, the statute dealt with the regulation of insurance and would therefore be saved from pre-emption.
. The dissent contends that Kentucky's AWP provisions apply to third parties that a self-insured ERISA plan hires to administer its plan benefits. This contention, however, is based upon the dissent’s reading of the repealed Kentucky statutes which prohibited “health care benefit plans” from discrimination and defined health benefit plans as including a health service corporation contract and a health maintenance organization contract. The present Kentucky statutes eliminate any ambiguity as to whether administrators under contracts with benefit plans are included within the scope of the statutes. They obviously are not. The current Kentucky statute prohibits only “a health insurer " from discrimination. Ky.Rev.Stat. Ann. § 304.17A-270. As the defendant correctly notes, "the new statute refers to health insurers which shall not discriminate among providers rather than health care benefit plans which strengthens Appellee’s arguments that the AWP law regulates insurance.” Brief of Defendant-Appellee, p. 3 n. 5. An entity that merely administers a plan for a health insurer and does not participate in the underwriting of the risk is not an "insurer” and is not within the scope of Kentucky's current statutes which are, by their express terms, directed solely at health insurers. This is acknowledged by the defendant:
The statutes establish that health insurers, which assume financial risk, cannot discriminate against qualified providers. Therefore, although the statute tenuously affects the relationship between insurers and providers, its focus is on the contractual relationship between the insurer and the insured.
Brief of Defendant-Appellee, p. 18.
Thus, under the current AWP statute, the insurer of a plan, including a self-insurer of a non-ERISA benefit plan, must not discriminate against qualified providers, and any health benefit plan of such insurer must conform to the statute. While not included as an entity subject to the statute, a plan administrator would necessarily be required to comply with the plan’s non-discriminatory requirement. With respect to self-insured ERISA benefit plans, the insurer of such plans is beyond the scope of the statute by its express terms, and the administrators of such plans who act solely as administrators and not as insurers are likewise beyond the scope of the statute because of its application only to health insurers.
. The dissent believes that the majority is “apparently saying that the law is clearly preempted and not saved insofar as it applies to plan administrators, and then arguing that due to this preemption, the statute does not apply to entities outside the insurance industry.” According to the dissent, this is an "attempt to dissect Kentucky’s AWP provisions, dismissing some of the provision’s applications as preempted and then applying saving clause analysis only to those applications it wishes to retain.” This is a misreading of the majority opinion. The majority does not say that the Kentucky statutes are preempted insofar as plan administrators are concerned. The majority is saying that insofar as self-insured ERISA plans are concerned, the Kentucky AWP laws could not be enforced against a plan administrator, as a matter of law, under the reasoning of Light, because if the law is preempted with respect to self-insured plans, "there is no applicable state law to which the administrator must conform.” More importantly, however, is the fact that the present Kentucky AWP statute, Ky.Rev.Stat. Ann. § 304.17A-270, prohibits only health insurers from discrimination and would have no application to an entity acting merely as an administrator of an insurer’s plan. Although the chiropractic statute still refers to a prohibition against "health benefit plans” discrimination, Ky.Rev.Stat. Ann. § 304.17A-171(2), the majority believes that, properly construed, this encompasses insurers of health benefit plans and not mere administrators of such plans.
. The dissent characterizes this conclusion as "mysterious.” There is no mystery, however, in the undeniable fact that there is a difference between a closed network of providers chosen by the insurer and an open network of providers consisting of all providers — including providers preferred by the insured patients — who are willing to agree to the same terms as the other network providers. It is an extremely significant difference and one which not only changes the conditions of the plan but, by opening an otherwise closed door, expands the potential for inclusion of additional equally competent medical providers. It is in this sense that the AWP laws change “the terms of covered treatment by health care providers.”
. In American Drug Stores, Inc. v. Harvard Pilgrim Health Care, Inc., 973 F.Supp. 60 (D.Mass.1997), the court, in considering a Massachusetts AWP statute, distinguished Royal Drug on the ground that, "[b]y directing insurers to open their networks, the Act should affect the availability of benefits to insureds by increasing their ability to select pharmacies of their choice. This does concern the relationship between insurer and policyholder, and thus may be considered part of the business of insurance.” Id. at 71-72.
. The dissent states that, “It is true that the AWP laws would likely force insurers to pay higher rates.” The economic effect of the AWP laws in question, however, is speculative at best. As one commentator has noted, "While AWP legislation could remove some of the incentive for health care providers to substantially discount their fees, provider reaction will most likely differ according to the number of MCOs (managed care organizations) and providers present in each market.” James W. Childs, Jr., You May Be Willing, But Are You Able?: A Critical Analysis of "Any Willing Provider" Legislation, 27 Cumb. L.Rev. 199, 210 (1996-1997). The same author reports that, insofar as any increase in consumer cost is concerned, there is some evidence that health care costs have not risen in those states that have enacted AWP legislation. Id. at 212. The possible economic effect on insurers must be weighed against "... the fact that managed care threatens Americans’ right to freely choose their provider, and AWP legislation protects that right.” Id. at 217-218. In any event, the decision of the Kentucky legislature to enact AWP laws is one left to the wisdom of that deliberative body, and the possible economic ramifications of its AWP laws should not concern this court.
. The Court in Royal Drug said, "It is well settled that exemptions from the antitrust laws are to be narrowly construed.” 440 U.S. at 231, 99 S.Ct. at 1083, 59 L.Ed.2d at 280.
. In American Drug Stores, Inc. v. Harvard Pilgrim Health Care, Inc., 973 F.Supp. 60
. Having concluded that Kentucky’s AWP statutes are valid, there is no reason for the majority opinion to discuss any question of ' severability. The dissent, however, in discussing the question of severability, states that the majority "fails to mention, let alone discuss, how it severs Kentucky’s AWP provision in such a manner that it no longer applies to third party plan administrators performing administrative functions for self-insured plans, thereby allowing it to conclude that the provision is saved in all other applications.” As noted earlier, supra, note 15, this is a misreading of the majority opinion. The majority does not hold that the AWP statutes are preempted as applied to administrators of ERISA self-insured plans. It holds, instead, that because the statutes exclude ERISA self-insured plans, they could not be applied against an administrator of such plans under the reasoning of Light and, more importantly, they prohibit only health insurers from discrimination and, therefore, exclude entities that act solely as administrators of the insurer’s health benefit plan.