Federal Preemption
When federal law displaces state law. Insurance runs the other way: McCarran-Ferguson protects state regulation unless Congress legislates about insurance.
Federal preemption is the doctrine that federal law can displace conflicting state law. Insurance is the field where that expectation is least reliable, because Congress deliberately turned the presumption around. Under the McCarran-Ferguson Act, a federal statute may not be read to “invalidate, impair, or supersede” a state law enacted to regulate the business of insurance unless that statute “specifically relates to the business of insurance.” State insurance regulation is the default, and federal law has to say so expressly to move it.
Three details decide most arguments here, and each one is a place where the analysis usually goes wrong. First, the protection is written against an “Act of Congress.” An executive order, an agency policy statement, or a federal enforcement priority is not an Act of Congress, so it never reaches this test at all. Second, the exception is worded as specifically relating to the business of insurance, which is narrower than merely affecting insurers. Third, the statute carves out the Sherman, Clayton, and Federal Trade Commission Acts, and even then only to the extent the business is not regulated by state law.
ERISA runs on a different mechanism and points partly the other way, which is why the two get confused. Its section 514 supersedes state laws that relate to an employee benefit plan, then saves any state law “which regulates insurance,” then adds the deemer clause: a plan may not be deemed an insurance company or to be engaged in the business of insurance for purposes of state insurance regulation. The practical line is funding. An employer that buys a policy has bought insurance a state can regulate, while a self-funded plan is one no state insurance department can reach. For AI, that decides whether a state insurance regulator or the federal Department of Labor is the one who can ask about a utilization model. Our analysis of the federal AI executive order and state insurance rules works this through for the current federal push, and the McCarran-Ferguson entry covers the 1945 statute itself.