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.
Held : 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 , 99 S.Ct. 1067 , 59 L.Ed.2d 261 , controlling. Pp. 126-134 . (a) There are three criteria relevant in determining whether a particular practice is part of the "business of insurance" exempted from the antitrust laws by § 2 (b) : 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. Royal Drug Co. , supra . Pp. 126-129 .
(b) With regard to the first criterion, petitioners ' arrangement plays no part in the spreading and underwriting of a policyholder's risk, because it is logically and temporally unconnected to the contract entered by the policyholder and ULL, which was the actual risk-transferring event. As to the second criterion, ULL's use of NYSCA's Peer Review Committee is distinct from ULL's contracts with its policyholders, and constitutes a separate arrangement between the insurer and third parties not engaged in the business of insurance. Nor does the challenged arrangement satisfy this criterion on the asserted ground that it directly involves the "interpretation" and "enforcement" of the insurance contract, because ULL's procedure for deciding whether claims are covered is a matter of indifference to the policyholder, whose only concern is whether his claim is paid, not why it is paid. As respects the third criterion, it may be assumed that the challenged arrangement need not be denied the § 2 (b) exemption solely because it involves parties outside the insurance industry—namely, practicing chiropractors serving on the Peer Review Committee . But such arrangements can hardly be said to lie at the center of the legislative concern underlying § 2 (b) , which was with the protection of intra -industry cooperation in the underwriting of risks. 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. Pp. 130-134 .
T. Richard Kennedy , New York City , for petitioners .
Susan M. Jenkins , Washington , D. C. , for respondent .
Barry Grossman , Washington , D. C. , for U. S. as amicus curiae, by special leave of Court .
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." 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 advise 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.
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 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 , 99 S.Ct. 1067 , 59 L.Ed.2d 261 ( 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 , 102 .