OCTOBER TERM, 1998
Syllabus
certiorari to the united states court of appeals for the ninth circuit
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-
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