UNION LABOR LIFE INS. CO. v. PIRENO(1982)
As required by New York law, petitioner Union Labor Life Insurance Co. (ULL) issues health insurance policies covering certain policyholder claims for chiropractic treatments. Some ULL policies limit the company's liability to "reasonable" charges for "necessary" medical care and services. In order to determine whether particular chiropractors' treatments and fees were necessary and reasonable, ULL arranged with petitioner New York State Chiropractic Association (NYSCA), a professional association of chiropractors, to use the advice of its Peer Review Committee, which was established primarily to aid insurers in evaluating claims for chiropractic treatments, and which is composed of 10 practicing New York chiropractors. Respondent is a licensed chiropractor practicing in New York. On a number of occasions ULL referred his treatments of ULL policyholders, and his charges for those treatments, to the Committee for review. The Committee sometimes concluded that respondent's treatments were unnecessary or his charges unreasonable. Respondent brought suit in Federal District Court, alleging that petitioners' peer review practices violated 1 of the Sherman Act because petitioners had used the Committee as the vehicle for their conspiracy to fix the prices that chiropractors would be permitted to charge for their services. The District Court granted petitioners' motion for summary judgment, dismissing respondent's complaint on the ground that ULL's use of NYSCA's Peer Review Committee was exempted from antitrust scrutiny by 2(b) of the McCarran-Ferguson Act, which applies to the "business of insurance." The Court of Appeals reversed and remanded the action for further proceedings.
ULL's use of NYSCA's Peer Review Committee does not constitute the "business of insurance" within the meaning of 2(b) of the McCarran-Ferguson Act, and thus is not exempt from antitrust scrutiny. Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 , controlling. Pp. 126-134. [458 U.S. 119, 120]
BRENNAN, J., delivered the opinion of the Court, in which WHITE, MARSHALL, BLACKMUN, POWELL, and STEVENS, JJ., joined. REHNQUIST, J., filed a dissenting opinion, in which BURGER, C. J., and O'CONNOR, J., joined, post, p. 134.
[ Footnote * ] Together with No. 81-390, New York State Chiropractic Assn. v. Pireno, also on certiorari to the same court.
T. Richard Kennedy argued the cause for petitioners in both cases. With him on the briefs for petitioner in No. 81-389 were Edward Thompson and Philip R. Kastellec. Robert P. Borsody filed a brief for petitioner in No. 81-390.
Susan M. Jenkins argued the cause for respondent in both cases. With her on the brief was Ralph C. Wiegandt. [458 U.S. 119, 121]
Barry Grossman argued the cause for the United States as amicus curiae urging affirmance. With him on the brief were Solicitor General Lee, Assistant Attorney General Baxter, Deputy Solicitor General Shapiro, Jerrold J. Ganzfried, and Nancy C. Garrison.Fn
Fn [458 U.S. 119, 121] Briefs of amici curiae urging reversal were filed by Richard A. Whiting for the American Insurance Association et al.; by Sidney S. Rosdeitcher and Richard D. Friedman for the Health Insurance Association of America et al.; and by David Crump for the Legal Foundation of America. Briefs of amici curiae urging affirmance were filed for the State of Arizona et al. by Robert K. Corbin, Attorney General of Arizona, and Kenneth R. Reed, Special Assistant Attorney General, Steve Clark, Attorney General of Arkansas, and David L. Williams, Deputy Attorney General, J. D. MacFarlane, Attorney General of Colorado, and Thomas P. McMahon, Carl R. Ajello, Attorney General of Connecticut, and Robert M. Langer and John R. Lacey, Assistant Attorneys General, Richard S. Gebelein, Attorney General of Delaware, and Vincent M. Amberly, Deputy Attorney General, Tany S. Hong, Attorney General of Hawaii, and Sonia Faust, Deputy Attorney General, Tyrone C. Fahner, Attorney General of Illinois, and Thomas M. Genovese, Assistant Attorney General, Thomas J. Miller, Attorney General of Iowa, and John R. Perkins, Assistant Attorney General, William J. Guste, Jr., Attorney General of Louisiana, and John R. Flowers, Jr., Assistant Attorney General, Stephen H. Sachs, Attorney General of Maryland, and Charles O. Monk II, Assistant Attorney General, Frank J. Kelley, Attorney General of Michigan, and Edwin M. Bladen, Assistant Attorney General, Bill Allain, Attorney General of Mississippi, and Robert E. Sanders, Special Assistant Attorney General, John Ashcroft, Attorney General of Missouri, and William L. Newcomb, Jr., and Robert E. Dolan, Jr., Assistant Attorneys General, Michael T. Greely, Attorney General of Montana, and Jerome J. Cate, Assistant Attorney General, Paul L. Douglas, Attorney General of Nebraska, and Dale A. Comer, Assistant Attorney General, Jeff Bingaman, Attorney General of New Mexico, and James J. Wechsler and Richard H. Levin, Assistant Attorneys General, Rufus L. Edmisten, Attorney General of North Carolina, H. A. Cole, Jr., Special Deputy Attorney General, and John R. Corne, Associate Attorney General, William J. Brown, Attorney General of Ohio, and Eugene F. McShane, Dennis J. Roberts II, Attorney General of Rhode Island, and Patrick J. Quinlan, Assistant Attorney General, Mark White, Attorney General of Texas, and James V. Sylvester, Assistant Attorney General, David L. Wilkinson, Attorney [458 U.S. 119, 122] General of Utah, John J. Easton, Jr., Attorney General of Vermont, and Glenn A. Jarrett, Assistant Attorney General, and Bronson C. La Follette, Attorney General of Wisconsin, and Michael L. Zaleski, Assistant Attorney General; for the Association of American Physicians & Surgeons, Inc., by Kent Masterson Brown; and for Automotive Service Councils, Inc., by Donald A. Randall and Jonathan T. Howe. David J. Brummond filed a brief for the National Association of Insurance Commissioners as amicus curiae. [458 U.S. 119, 122]
JUSTICE BRENNAN delivered the opinion of the Court.
In these cases we consider an alleged conspiracy to eliminate price competition among chiropractors, by means of a "peer review committee" that advised an insurance company whether particular chiropractors' treatments and fees were "necessary" and "reasonable." The question presented is whether the alleged conspiracy is exempt from federal antitrust laws as part of the "business of insurance" within the meaning of the McCarran-Ferguson Act. 1
Petitioners are the New York State Chiropractic Association (NYSCA), a professional association of chiropractors, and the Union Labor Life Insurance Co. (ULL), a Maryland insurer doing business in New York. As required by New York law, ULL's health insurance policies cover certain policyholder claims for chiropractic treatments. But certain ULL policies limit the company's liability to "the reasonable charges" for "necessary medical care and services." [458 U.S. 119, 123] App. 19a, 22a (emphasis added). Accordingly, when presented with a policyholder claim for reimbursement for chiropractic treatments, ULL must determine whether the treatments were necessary and whether the charges for them were reasonable. In making some of these determinations, ULL has arranged with NYSCA to use the advice of NYSCA's Peer Review Committee.
The Committee was established by NYSCA in 1971, primarily to aid insurers in evaluating claims for chiropractic treatments. 2 It is composed of 10 practicing New York chiropractors, who serve on a voluntary basis. At the request of an insurer, the Committee will examine a chiropractor's treatments and charges in a particular case, and will render an opinion on the necessity for the treatments and the reasonableness of the charges made for them. The opinion will be based upon such considerations as the treating chiropractor's experience and specialty degrees; the location of his office; the number of visits and time spent with the patient; the patient's age, occupation, general physical condition, and history of previous treatment; and X-ray findings.
Respondent is a chiropractor licensed and practicing in the State of New York. On a number of occasions his treatments of ULL policyholders, and his charges for those treatments, have been referred by ULL to the Committee, which has sometimes concluded that his treatments were unnecessary or his charges unreasonable. Petitioners assert that respondent has treated his patients "in a manner calculated to maximize the number of treatments for a particular condition, and that his fees for these treatments are unusually high." 650 F.2d 387, 389 (CA2 1981). Respondent, for his part, contends that the members of the Committee "practice `antiquated' techniques that they seek to impose on their more innovative competitors." Ibid. [458 U.S. 119, 124]
This dispute resulted in the present suit, brought by respondent in the United States District Court for the Southern District of New York. Respondent alleged that the peer review practices of petitioners violated 1 of the Sherman Act. 3 In particular, he claimed that petitioners and others had used the Committee as the vehicle for a conspiracy to fix the prices that chiropractors, including respondent, would be permitted to charge for their services. He concluded that he had been restrained from providing his chiropractic services to the public freely and fully, and that would-be recipients of chiropractic services had been deprived of the benefits of competition. Respondent requested, inter alia, declaratory and injunctive relief against ULL's continued use of NYSCA's Peer Review Committee in evaluating policyholders' claims.
After extensive discovery, the District Court granted petitioners' motion for summary judgment dismissing respondent's complaint, concluding that ULL's use of NYSCA's Peer Review Committee was exempted from antitrust scrutiny by the McCarran-Ferguson Act. App. to Pet. for Cert. in No. 81-389, pp. 20a-37a. The court noted that three requirements must be met in order to obtain the McCarran-Ferguson exemption: The challenged practices (1) must constitute the "business of insurance," (2) must be regulated by state law, and (3) must not amount to a "boycott, coercion, or intimidation." Id., at 27a-28a. In the court's view, all three of these requirements were satisfied in the present case. In particular, the court held that petitioners' peer review practices constituted the "business of insurance" because they served "to define the precise extent of ULL's [458 U.S. 119, 125] contractual obligations . . . under [its] policies." Id., at 29a-30a. Moreover, the court determined that the peer review practices "involve[d] the spreading of risk, an indispensable element of the `business of insurance.'" Id., at 30a. 4 Respondents' Sherman Act claim was accordingly dismissed with prejudice.
The Court of Appeals for the Second Circuit reversed. 650 F.2d 387 (1981). Relying upon this Court's recent opinion in Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979), the Court of Appeals concluded that the District Court had erred in holding that ULL's use of NYSCA's Peer Review Committee constituted the "business of insurance." 5 Accordingly, the Court of Appeals remanded the action for further proceedings. We granted certiorari to resolve a conflict among the Courts of Appeals on the question presented. 6 454 U.S. 1052 (1981). [458 U.S. 119, 126]
The only issue before us is whether petitioners' peer review practices are exempt from antitrust scrutiny as part of the "business of insurance." "It is axiomatic that conduct which is not exempt from the antitrust laws may nevertheless be perfectly legal." Group Life & Health Ins. Co. v. Royal Drug Co., supra, at 210, n. 5. Thus in deciding these cases we have no occasion to address the merits of respondent's Sherman Act claims. However, the Sherman Act does express a "longstanding congressional commitment to the policy of free markets and open competition." Community Communications Co. v. Boulder, 455 U.S. 40, 56 (1982); see also United States v. Topco Associates, Inc., 405 U.S. 596, 610 (1972). Accordingly, our precedents consistently hold that exemptions from the antitrust laws must be construed narrowly. FMC v. Seatrain Lines, Inc., 411 U.S. 726, 733 (1973). This principle applies not only to implicit exemptions, see Group Life & Health Ins. Co. v. Royal Drug Co., supra, at 231, but also to express statutory exemptions, see United States v. McKesson & Robbins, Inc., 351 U.S. 305, 316 (1956). In Royal Drug, supra, this Court had occasion to reexamine the scope of the express antitrust exemption provided for the "business of insurance" by 2(b) of the McCarran-Ferguson Act. We hold that decision of the question before us is controlled by Royal Drug.
The principal petitioner in Royal Drug was a Texas insurance company, Blue Shield, that offered policies entitling insured persons to purchase prescription drugs for $2 each from any pharmacy participating in a "Pharmacy Agreement" with Blue Shield; policyholders were also allowed to purchase prescription drugs from a nonparticipating pharmacy, but in that event they would have to pay full price for the drugs and would be reimbursed by Blue Shield for only a part of that price. Blue Shield offered Pharmacy Agreements to all licensed pharmacies in Texas, but participating pharmacies were required to sell prescription drugs to Blue [458 U.S. 119, 127] Shield's policyholders for $2 each, and were reimbursed only for their cost in acquiring the drugs thus sold. "Thus, only pharmacies that [could] afford to distribute prescription drugs for less than this $2 markup [could] profitably participate in the plan." 440 U.S., at 209 (footnote omitted).
Respondents in Royal Drug were the owners of nonparticipating pharmacies. They sued Blue Shield and several participating pharmacies under 1 of the Sherman Act, alleging that the Pharmacy Agreements were the instrument by which Blue Shield had conspired with participating pharmacies to fix the retail prices of prescription drugs. Respondents also alleged that the Agreements encouraged Blue Shield's policyholders to avoid nonparticipating pharmacies, thus constituting an unlawful group boycott. The District Court granted summary judgment to Blue Shield and the other petitioners, holding that the challenged Agreements were exempt under 2(b) of the McCarran-Ferguson Act. But the Court of Appeals disagreed, holding that the Agreements were not the "business of insurance" within the meaning of that Act, and reversed. 440 U.S., at 210 . This Court affirmed. Looking to "the structure of the Act and its legislative history," id., at 211, the Court discussed three characteristics of the business of insurance that Congress had intended to exempt through 2(b).
First, after noting that one "indispensable characteristic of insurance" is the "spreading and underwriting of a policyholder's risk," id., at 211-212, 7 the Court observed that parts [458 U.S. 119, 128] of the legislative history of the McCarran-Ferguson Act "strongly suggest that Congress understood the business of insurance to be the underwriting and spreading of risk," id., at 220-221. The Court then dismissed Blue Shield's contention that its Pharmacy Agreements involved such activities.
Plainly, ULL's use of NYSCA's Peer Review Committee plays no part in the "spreading and underwriting of a policyholder's risk." Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S., at 211 . Both the "spreading" and the "underwriting" of risk refer in this context to the transfer of risk characteristic of insurance. See n. 7, supra. And as the Court of Appeals below observed:
Turning to the second Royal Drug criterion, it is clear that ULL's use of NYSCA's Peer Review Committee is not an integral part of the policy relationship between insurer and insured. In the first place, the challenged arrangement between ULL and NYSCA is obviously distinct from ULL's contracts with its policyholders. In this sense the challenged arrangement resembles the Pharmacy Agreements in Royal Drug. There the Court rejected the proposition that the Agreements were "`between insurer and insured.'" Group Life & Health Ins. Co. v. Royal Drug Co., supra, at 215, quoting SEC v. National Securities, Inc., 393 U.S., at 460 . Rather, it recognized those Agreements as "separate contractual arrangements between Blue Shield and pharmacies engaged in the sale and distribution of goods and services other than insurance." 440 U.S., at 216 . Similarly, ULL's use of NYSCA's Peer Review Committee is a separate arrangement between the insurer and third parties not engaged in the business of insurance.
Petitioner ULL argues that the challenged peer review practices satisfy this criterion because peer review "directly involves the `interpretation' and `enforcement' of the insurance contract." Brief for Petitioner ULL 16. But this argument is essentially identical to one made and rejected in [458 U.S. 119, 132] Royal Drug. Blue Shield there contended that its Pharmacy Agreements "so closely affect[ed] the `reliability, interpretation, and enforcement' of the insurance contract . . . as to fall within the exempted area." 440 U.S., at 216 (footnote omitted). This Court noted, however:
Finally, as respects the third Royal Drug criterion, it is plain that the challenged peer review practices are not limited to entities within the insurance industry. On the contrary, ULL's use of NYSCA's Peer Review Committee inevitably involves third parties wholly outside the insurance industry - namely, practicing chiropractors. Petitioners do not dispute this fact, but instead deprecate its importance. They argue that we should not conclude "that ULL's use of the peer review process is outside the scope of the `business [458 U.S. 119, 133] of insurance' simply because NYSCA is not an insurance company." Brief for Petitioner ULL 25. In petitioners' view:
We may assume that the challenged peer review practices need not be denied the 2(b) exemption solely because they involve parties outside the insurance industry. But the involvement of such parties, even if not dispositive, constitutes part of the inquiry mandated by the Royal Drug analysis. As the Court noted there, 2(b) was intended primarily to protect "intra-industry cooperation" in the underwriting of risks. 440 U.S., at 221 (emphasis added). Arrangements between insurance companies and parties outside the insurance industry can hardly be said to lie at the center of that legislative concern. More importantly, such arrangements may prove contrary to the spirit as well as the letter of 2(b), because they have the potential to restrain competition in noninsurance markets. Indeed, the peer review practices challenged in the present cases assertedly realize precisely this potential: Respondent's claim is that the practices restrain competition in a provider market - the market for chiropractic services - rather than in an insurance market. App. 8a. Thus we cannot join petitioners in depreciating the [458 U.S. 119, 134] fact that parties outside the insurance industry are intimately involved in the peer review practices at issue in these cases. 8
In sum, we conclude that ULL's use of NYSCA's Peer Review Committee does not constitute the "business of insurance" within the meaning of 2(b) of the McCarran-Ferguson Act. 9 The judgment of the Court of Appeals is accordingly
[ Footnote 2 ] The Committee's advice is also available to patients, governmental agencies, and chiropractors themselves, but insurers are the principal users. 650 F.2d 387, 388 (CA2 1981).
[ Footnote 3 ] 15 U.S.C. 1, which provides in pertinent part that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. . . ."
[ Footnote 4 ] The court then turned to the Act's second requirement, that the challenged practices be "regulated by state law." The court held that that requirement had been met, as well, observing that New York had "enacted a pervasive scheme of regulation and supervision of insurance," had prohibited "the unfair settlement of claims," and had proscribed "the conduct alleged in the complaint" in its state antitrust law, the Donnelly Act, which by its terms applied to insurers. App. to Pet. for Cert. in No. 81-389, pp. 31a-32a. Finally, the court determined that respondent had neither alleged a "boycott" on petitioners' part, nor offered evidentiary support for such a claim. Id., at 33a-35a. The court thus concluded that the Act's third requirement was satisfied in the present case, and that petitioners' actions were consequently "exempt from application of the antitrust laws." Id., at 36a.
[ Footnote 5 ] Since it reached this conclusion, the Court of Appeals did not definitively address the other holdings of the District Court. See n. 4, supra. The court did note, however, that petitioner NYSCA did not itself "appear to be regulated by state law in the manner 2(b) requires." 650 F.2d, at 390, n. 5.
[ Footnote 6 ] As noted by the Court of Appeals, id., at 395, n. 13, the decision below is contrary to that of the Court of Appeals for the Fourth Circuit "in a factually identical case." See Bartholomew v. Virginia Chiropractors Assn., 612 F.2d 812 (1979).
[ Footnote 7 ] As the Court explained: "`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.' 1 G. Couch, Cyclopedia of Insurance Law 1:3 (2d ed. 1959). See also R. Keeton, Insurance Law 1.2(a) (1971) (`Insurance is an arrangement for transferring and distributing risk'); 1 G. Richards, The Law of Insurance 2 (W. Freedman 5th ed. 1952)." 440 U.S., at 211 (footnote omitted).
[ Footnote 8 ] The premise of the dissent is that NYSCA's Peer Review Committee actually constitutes "the claims adjustor" in these cases. See post, at 137. From this premise the dissent reasons that since "claims adjustment is part and parcel of the `business of insurance' protected by the McCarran-Ferguson Act," post, at 138, it necessarily follows that the peer review practices at issue in these cases must enjoy the Act's exemption. The fatal flaw in this syllogism is that NYSCA's Peer Review Committee is not the claims adjustor. As the Court of Appeals noted: "Opinions of the committee are not binding unless the parties agree beforehand that they will be." 650 F.2d, at 388. Thus in a case such as the present ones, ULL is perfectly free to disregard the Committee's evaluation. Even if ULL were to act upon the Committee's opinion, the nonbinding nature of the Committee's evaluation means that, at most, peer review is merely ancillary to the claims adjustment process. We see no reason that such ancillary activities must necessarily enjoy the McCarran-Ferguson exemption from the antitrust laws. Unlike activities that occur wholly within the insurance industry - such as the claims adjustment process itself - the ancillary peer review practices at issue in these cases "involve parties wholly outside the insurance industry." See Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S., at 231 . Thus peer review falls afoul of the third Royal Drug criterion in a way in which pure claims adjustment activities cannot.
[ Footnote 9 ] This conclusion renders it unnecessary for us to address the questions whether the conduct challenged in respondent's complaint was "regulated by state law" or constituted a "boycott, coercion, or intimidation." See n. 5, supra.
JUSTICE REHNQUIST, with whom THE CHIEF JUSTICE and JUSTICE O'CONNOR join, dissenting.
Purporting to rely upon our recent decision in Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979), [458 U.S. 119, 135] the Court today exposes to antitrust liability an aspect of the business of insurance designed to promote fair and efficient claims settlement. The Court reaches this conclusion by determining that the peer review process does not spread risk, is not an integral part of the insurance relationship, and is not limited to entities within the insurance industry. Because I find the claims adjustment function of the Peer Review Committee to be at the heart of the relationship between insurance companies and their policyholders, I conclude that such committees are clearly within the sphere of insurance activity which the McCarran-Ferguson Act intended to protect from the effect of the antitrust laws. 1 This conclusion finds support in the legislative history of the Act and in Royal Drug and its predecessors.
For many years statutes such as the Sherman Act were thought not applicable to the business of insurance, this Court having held in Paul v. Virginia, 8 Wall. 168, 183 (1869), that "[i]ssuing a policy of insurance is not a transaction of commerce." When this Court held in United States v. South-Eastern Underwriters Assn., 322 U.S. 533 (1944), that the business of insurance was a part of interstate commerce subject to the Sherman Act, Congress responded quickly to reestablish the preeminence of States in regulating such business. Congress' response - the McCarran-Ferguson Act - sought primarily to protect the contractual relationship between the insurer and the insured:
Central to this contractual relationship is the process of claims adjustment - the determination of the actual payments to be made to the insured for losses covered by the insurance contract. The key representation of the insurance company and the principal expectation of the policyholder is that prompt payment will be made when the event insured against actually occurs. As one commentator has stated:
This conclusion finds support in a source of guidance completely disregarded by the Court - the legislative history of McCarran-Ferguson. The passage of the Act was preceded by the introduction in the Senate Committee of a report and a bill prepared by the National Association of Insurance Commissioners. "The views of the NAIC are particularly significant, because the Act ultimately passed was based in large part on the NAIC bill." Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S., at 221 (footnote omitted). Included in that bill were seven specific insurance practices to which the Sherman Act was not to apply, and to which the Court in Royal Drug looked for guidance as to the meaning of the phrase "business of insurance." See id., at 222. Among those seven protected practices was the process of claims adjustment: "the said Sherman Act shall not apply . . . to any cooperative or joint service, adjustment, investigation, or inspection agreement relating to insurance." 90 Cong. Rec. A4406 (1944) (emphasis added). Other statements in the legislative history support the conclusion that claims adjustment was to be protected: [458 U.S. 119, 139]
The role of claims adjustment in the insurance relationship and the legislative history of the Act thus unmistakably demonstrate that claims settlement procedures such as petitioners' Peer Review Committee were to be accorded protection from the antitrust laws as the "business of insurance." Few practices followed by insurance companies today present a fairer or more efficient means of claims resolution than professional peer review committees. Insurance claimants seek reimbursement for virtually every form of medical treatment and care, and determining the reasonableness and necessity of such expenses requires the expertise of a practicing physician. Because the entire spectrum of human ailments are involved, the views of one physician are seldom sufficient; specialists from many fields of medicine must be consulted. Few if any insurance companies can afford to staff their claims settlement departments with such a broad range of physicians. The companies thus must either make less than [458 U.S. 119, 140] satisfactory claims determinations, or must turn to an outside group of experts such as petitioners' Committee.
Although the Court protests that its decision says nothing about petitioners' antitrust liability, there can be little doubt that today's decision will vastly curtail the peer review process. Few professionals or companies will be willing to expose themselves to possible antitrust liability through such activity. The Court thus not only misreads the McCarran-Ferguson Act and our prior precedents, but also eliminates an aspect of the American insurance industry which has long redounded to the benefit of insurance companies and policyholders alike.
[ Footnote 1 ] Since the Court declines to reach the question of whether petitioners' Committee is regulated by state law as required by the McCarran-Ferguson Act, I likewise do not discuss it. I note, however, that the District Court found petitioners' Committee to be so regulated. App. to Pet. for Cert. in No. 81-389, pp. 31a-32a.
[ Footnote 2 ] Other commentators agree with this assessment of the importance of claims settlements: "The adjustment (including payment) of claims represents the final act in the insurance process. The payment of a claim by an insurance company brings the insurance contract `to life' in a fashion far more vivid than does any other single act in connection with the purchase, issuance, and maintenance of the contract." Butler, Loss Adjustment in Fire Insurance, in Property and Liability Insurance Handbook 219 (J. Long & D. Gregg eds. 1965). "Claim administration is the last link in the process of insurance - process that begins with actuarial analysis and continues through sales, underwriting, investment, and policy service. . . . [T]he expectation of the policyowner that an insurer is willing to meet its obligations, through claims administration, is an important part in the decision to purchase insurance. Indeed, it is the claim administration function that delivers on the product sold to the policyowner." C. Cissley, Claim Administration: Principles and Practices iii (1980).
[ Footnote 3 ] Apparently unable to discern the difference between a mere method of paying a claim and the more fundamental process of determining whether a claim is covered by the insurance agreement, the Court finds that petitioners' peer review procedure "resembles the Pharmacy Agreements in Royal Drug." Ante, at 131. But the Pharmacy Agreement at issue in Royal Drug was simply a method of reimbursing policyowners for medication expenses. The policyowners could obtain medication from participating pharmacies simply by paying the amount that otherwise would not be covered by the insurance plan. The pharmacies thus constituted nothing more than in-kind dispensers of insurance payments; they played no role whatsoever in the more fundamental process of assessing the validity of a claim and determining the amount to be paid. Peer review committees, which fulfill such a fundamental role, are thus quite unlike the arrangements considered by the Court in Royal Drug. [458 U.S. 119, 141]