Cite as: 538 U. S. 329 (2003)
Opinion of the Court
of permissible bargains between insurers and insureds in a manner similar to the mandated-benefit laws we upheld in Metropolitan Life, the notice-prejudice rule we sustained in UNUM,3 and the independent-review provisions we approved in Rush Prudential. No longer may Kentucky insureds seek insurance from a closed network of health-care providers in exchange for a lower premium. The AWP prohibition substantially affects the type of risk pooling arrangements that insurers may offer.
III
Our prior decisions construing § 1144(b)(2)(A) have relied, to varying degrees, on our cases interpreting §§ 2(a) and 2(b) of the McCarran-Ferguson Act. In determining whether certain practices constitute "the business of insurance" under the McCarran-Ferguson Act (emphasis added), our cases have looked to three factors: "first, whether the 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." Pireno, 458 U. S., at 129.
We believe that our use of the McCarran-Ferguson case law in the ERISA context has misdirected attention, failed
3 While the Ninth Circuit concluded in Cisneros v. UNUM Life Ins. Co. of America, 134 F. 3d 939, 945-946 (1998), aff'd in part, rev'd and remanded in part, UNUM Life Ins. Co. of America v. Ward, 526 U. S. 358 (1999), that "the notice-prejudice rule does not spread the policyholder's risk within the meaning of the first McCarran-Ferguson factor," our test requires only that the state law substantially affect the risk pooling arrangement between the insurer and insured; it does not require that the state law actually spread risk. See supra, at 337-338. The notice-prejudice rule governs whether or not an insurance company must cover claims submitted late, which dictates to the insurance company the conditions under which it must pay for the risk that it has assumed. This certainly qualifies as a substantial effect on the risk pooling arrangement between the insurer and insured.
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