Humana Inc. v. Forsyth,
525 U.S. 299 (1999)

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No. 97-303. Argued November 30, 1998-Decided January 20,1999

Between 1985 and 1988, plaintiffs-respondents, beneficiaries of group health insurance policies issued by defendant-petitioner Humana Health Insurance of Nevada, Inc. (Humana Insurance), received medical care at a hospital owned by defendant-petitioner Humana Inc. Humana Insurance agreed to pay 80% of the beneficiaries' hospital charges over a designated deductible. The beneficiaries bore responsibility for payment of the remaining 20%. But pursuant to a concealed agreement, the complaint in this action alleged, the hospital gave Humana Insurance large discounts on the insurer's portion of the hospital's charges for care provided to the beneficiaries. As a result, Humana Insurance paid significantly less than 80% of the hospital's actual charges for the care that beneficiaries received, and the beneficiaries paid significantly more than 20%. The beneficiaries brought suit in Federal District Court, alleging that Humana Insurance and Humana Inc. had violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO) through a pattern of racketeering activity consisting of mail, wire, radio, and television fraud. The Humana defendants moved for summary judgment, citing §2(b) of the McCarran-Ferguson Act, which provides: "No Act of Congress shall be construed to invalidate, impair, or supersede 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." RICO does not proscribe conduct that Nevada's laws governing insurance permit. But the federal and state remedial regimes differ. Both provide a private right of action. RICO authorizes treble damages; Nevada law permits recovery of compensatory and punitive damages. The District Court granted summary judgment for the Humana defendants. The Ninth Circuit reversed in relevant part. In its Merchants Home decision, handed down after the District Court rejected the beneficiaries' right to sue under RICO in this case, the Ninth Circuit adopted a "direct conflict" test for determining when a federal law "invalidate[s], impair[s], or supersede[s]" a state insurance law. As declared in Merchants Home, the McCarran- Ferguson Act does not preclude application of a federal statute prohibiting acts that are also prohibited under state insurance laws. Guided by Merchants Home, and assuming, inaccu-



rately, that Nevada law provided for administrative remedies only, the Ninth Circuit held that the McCarran-Ferguson Act did not bar the policy beneficiaries' suit under RICO.

Held: Because RICO advances the State's interest in combating insurance fraud, and does not frustrate any articulated Nevada policy or disturb the State's administrative regime, the McCarran- Ferguson Act does not block the respondent policy beneficiaries' recourse to RICO in this case. Pp. 306-314.

(a) The McCarran-Ferguson Act precludes application of a federal statute in face of state law "enacted ... for the purpose of regulating the business of insurance," if the federal measure does not "specifically relat[e] to the business of insurance," and would "invalidate, impair, or supersede" the State's law. RICO is not a law that "specifically relates to the business of insurance." This case therefore turns on the question whether RICO's application to the employee beneficiaries' claims would "invalidate, impair, or supersede" Nevada's laws regulating insurance. Under the standard definitions, RICO's application in this action would neither "invalidate"-i. e., render ineffective without providing a replacement rule-nor "supersede"-i. e., displace while providing a substitute rule-Nevada's insurance laws. The key question, then, is whether RICO's application here would "impair" Nevada's law. The Court rejects the Humana petitioners' suggestion that the word "impair," in the McCarran-Ferguson Act context, signals Congress' intent to cede the field of insurance regulation to the States, saving only instances in which Congress expressly orders otherwise. If Congress had meant generally to preempt the field for the States, Congress could have said either that "no federal statute [that does not say so explicitly] shall be construed to apply to the business of insurance" or that federal legislation generally, or RICO in particular, would be "applicable to the business of insurance [only] to the extent that such business is not regulated by state law." Moreover, § 2(b)'s second prohibition, barring construction of federal statutes to "invalidate, impair, or supersede" "any [state] law ... which imposes a fee or tax upon [the business of insurance]," belies any congressional intent to preclude federal regulation merely because the regulation imposes liability additional to, or greater than, state law. Were this not so, federal law would "impair" state insurance laws imposing fees or taxes whenever federal law imposed additional fees or greater tax liability. Under the federal system of dual taxation, however, it is scarcely in doubt that generally applicable federal fees and taxes do not "invalidate, impair, or supersede" state insurance taxes and fees within the meaning of § 2(b) where nothing precludes insurers from paying both. On the other hand, the

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