Can Maryland insurance companies charge women different rates than men, or does the state Equal Rights Amendment forbid that?

Plain-English summary

A member of the Maryland House of Delegates, on behalf of the Constitutional and Administrative Law Committee, asked the Attorney General whether Article 46 of the Maryland Declaration of Rights, the state's Equal Rights Amendment, barred insurance companies from using sex as a factor in setting insurance rates. The opinion concluded it did not, for two connected reasons. First, the Equal Rights Amendment, though written in broad and unambiguous terms barring sex as a legal classification, had been read by the Attorney General's office to apply only to discrimination by the State itself or by private actors whose conduct is so entangled with the State that it amounts to constitutional "state action," not to purely private conduct. Second, the way Maryland regulated insurance rates, insurers filed their own proposed rates and rating rules with the Insurance Commissioner, who had a limited review period to disapprove a filing but otherwise let it take effect automatically, did not rise to the level of state action under the framework the U.S. Supreme Court had articulated for regulated private industries. Because the rates were set on the insurer's own initiative rather than ordered or actively directed by the State, and because a long line of federal and state cases had reached the same conclusion in closely analogous insurance and utility regulation contexts, the opinion found the Equal Rights Amendment simply did not reach the rate-setting question, without addressing whether sex-based rates would have been unlawful had the amendment applied.

Currency note

This opinion was issued in 1983. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Did Maryland's Equal Rights Amendment stop insurers from charging men and women different rates in 1983?
No, according to this opinion. It concluded the amendment did not apply to insurance rate setting at all, because the amendment only reaches sex discrimination by the State itself or by private conduct that amounts to constitutional "state action," and Maryland's insurance rate approval process did not meet that threshold.

Why didn't state approval of insurance rates count as "state action"?
The opinion explained that under Maryland's system, insurers filed their own proposed rates and rating rules, and those filings became effective automatically unless the Insurance Commissioner affirmatively found they violated the Insurance Code within a limited review window. Relying on U.S. Supreme Court and federal appellate precedent in closely analogous contexts, the opinion reasoned that a regulator's mere failure to disapprove a privately initiated practice, without the state actively ordering or requiring it, does not transform that private choice into the State's own action.

Did other states reach the same conclusion about insurance and the state action doctrine?
Yes. The opinion cited insurance-specific decisions from Pennsylvania and a disability insurance case from the Ninth Circuit applying California law, all finding no state action in comparable rate or policy-form approval schemes, plus a Pennsylvania Superior Court decision applying nearly identical reasoning to a state Equal Rights Amendment claim under a regulatory scheme the opinion said "closely parallels Maryland's."

Did the opinion decide whether sex-based insurance rates would otherwise be legal?
No. The opinion expressly declined to reach that question, since it found the Equal Rights Amendment inapplicable regardless of the answer. It also noted, without deciding, that a separate Maryland statute barring sex discrimination by state-licensed businesses (Article 49B, §8) and a related state-action-style analysis under the Insurance Code's "unfairly discriminatory" standard were separate questions not addressed by this opinion.

Background and statutory framework

Maryland's Equal Rights Amendment, adopted in 1972 as Article 46 of the Declaration of Rights, states that "equality of rights under the law shall not be abridged or denied because of sex," language the Court of Appeals had described as "clear and unambiguous" and meaning "that sex is not a factor" in the legal treatment of any person (citing Rand v. Rand and Condore v. Prince George's County). The opinion read prior Attorney General guidance (63 Opinions of the Attorney General 246, 250 (1978); 65 Opinions of the Attorney General 103 (1980)) to limit the amendment to discrimination by the State or by private parties whose conduct is fairly attributable to the State, an interpretation the opinion found supported, though not yet directly tested, by case law from Pennsylvania, Texas, and Washington applying similar state ERAs (citing Murphy v. Harleysville Mutual Ins. Co., Lincoln v. Mid-Cities Pee Wee Football Assoc., and MacLean v. First N.W. Indus. of America, Inc.).

Turning to Maryland's insurance regulatory scheme under Article 48A of the Maryland Code, the opinion described a filing system where insurers themselves formulated their rates and rating classifications, submitted them to the Insurance Commissioner, and saw those filings take effect automatically unless the Commissioner affirmatively found a violation within a limited review period (Article 48A, §242(d)(1), (d)(6)-(7), and (f)(1)). Applying the U.S. Supreme Court's state action framework from Blum v. Yaretsky, which required a "sufficiently close nexus" between the State and a private actor's challenged conduct such that the State could fairly be held responsible for it, the opinion relied heavily on Jackson v. Metropolitan Edison Co., where the Court held that a utility commission's approval of a privately initiated tariff provision, without the commission itself ordering the practice, did not transform the utility's choice into state action. The opinion found that reasoning directly applied by federal and state courts to insurance rate and policy-form approval in Broderick v. Associated Hospital Services, Jackson v. Associated Hospital Services of Philadelphia, and Life Ins. Co. of North America v. Reichardt, and, most directly, by the Pennsylvania Superior Court in Murphy v. Harleysville Mutual Ins. Co., which applied the identical analysis to a state Equal Rights Amendment claim under an insurance regulatory scheme the opinion described as closely paralleling Maryland's own. On that basis, the opinion concluded that Maryland's degree of insurance rate regulation was insufficient to constitute state action, so the Equal Rights Amendment did not apply to the rate-setting process, expressly leaving open whether sex-based rating would otherwise violate the amendment, a separate state anti-discrimination statute (Article 49B, §8), or the Insurance Code's own "unfairly discriminatory" standard (Article 48A, §242(c)(2)).

Citations

Statutes:

• Md. Declaration of Rights, Article 46 (Equal Rights Amendment)
• Md. Code Art. 48A, §242(d)(1) (insurer must file rates and rating rules with Insurance Commissioner)
• Md. Code Art. 48A, §242(d)(6) and (7) (Commissioner's review period for rate filings)
• Md. Code Art. 48A, §242(f)(1) (rate filing becomes effective absent disapproval)
• Md. Code Art. 48A, §242(c)(2) ("unfairly discriminatory" rate standard)
• Md. Code Art. 49B, §8 (prohibits sex discrimination by licensed/regulated persons)

Cases:

• Rand v. Rand, 280 Md. 508, 511-12 (1977)
• Condore v. Prince George's County, 289 Md. 516, 524 (1981)
• Murphy v. Harleysville Mutual Ins. Co., 422 A.2d 1097 (Pa. Super. Ct. 1981)
• Lincoln v. Mid-Cities Pee Wee Football Assoc., 576 S.W.2d 922 (Tex. Ct. App. 1979)
• MacLean v. First N.W. Indus. of America, Inc., 600 P.2d 1027 (Wash. Ct. App. 1979), rev'd on other grounds, 635 P.2d 683 (Wash. 1981)
• Blum v. Yaretsky, 457 U.S. 991, 1004-05 (1982)
• Jackson v. Metropolitan Edison Co., 419 U.S. 345 (1974)
• Broderick v. Associated Hospital Services, 536 F.2d 1 (3rd Cir. 1976)
• Jackson v. Associated Hospital Services of Philadelphia, 414 F.Supp. 315 (E.D. Pa. 1976), aff'd 549 F.2d 795 (3rd Cir.), cert. denied, 434 U.S. 832 (1977)
• Life Ins. Co. of North America v. Reichardt, 591 F.2d 499 (9th Cir. 1979)
• Hartford Accident and Indem. Co. v. Insurance Commissioner, 442 A.2d 382 (Pa. Commw. 1982), aff'd 482 A.2d 542 (Pa. 1984)
• Stern v. Massachusetts Indus. and Life Ins. Co., 365 F.Supp. 433 (E.D. Pa. 1973)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1983/Volume68_1983.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

Constitutional Law, Equal Rights Amendment, "State Action", Insurance, Ratemaking, Sex-Based Classifications, ERA Applies Only to State Action, Insurance Rate Setting in Maryland is not State Action.

March 7, 1983

The Honorable Helen L. Koss
Maryland House of Delegates

On behalf of the Constitutional and Administrative Law Committee, you have requested our opinion as to whether Article 46 of the Maryland Declaration of Rights, the Maryland Equal Rights Amendment, prohibits the use of sex as an insurance rate setting classification.

For the reasons given below, it is our opinion that: (i) the Equal Rights Amendment applies only to sex-based discrimination by the State itself or by entities whose activities so involve the State as to amount to "state action"; and (ii) the process by which insurance rates are set in Maryland does not amount to "state action". Therefore, the Equal Rights Amendment is inapplicable to the establishment of such rates.1

1 We advised you of our conclusion by letter dated February 22, 1983. This Opinion explains the reasons underlying our conclusion.

I
Scope of the Equal Rights Amendment

This State's Equal Rights Amendment ("ERA"), adopted in 1972 as Article 46 of the Maryland Declaration of Rights, provides that: "Equality of rights under the law shall not be abridged or denied because of sex." In interpreting the ERA, the Court of Appeals has said that the language is "clear and unambiguous" and "can only mean that sex is not a factor". Rand v. Rand, 280 Md. 508, 511-12 (1977). See also Condore v. Prince George's County, 289 Md. 516, 524 (1981). The essence of the ERA is as follows:

"[S]ex is not a permissible factor in determining the legal rights of women, or of men. This means that

the treatment of any person by the law may not be based upon the circumstances that such person is of one sex or the other. The law does, of course, impose different benefits or different burdens upon different members of society. That differentiation in treatment may rest upon particular characteristics or traits of the persons affected, such as strength, intelligence, and the like. But under the Equal Rights Amendment the existence of such a characteristic or trait to a greater degree in one sex does not justify classification by sex rather than by the particular characteristic or trait." Brown, Emerson, Falk, and Freedman, The Equal Rights Amendment: A Constitutional Basis for Equal Rights for Women, 80 Yale L.J. 871, 889 (1971) (cited with approval in Rand v. Rand, 280 Md. at 512).

However, it is the view of this Office that the ERA only prohibits discrimination by the State itself or by private persons if the State is responsible for their actions. "[T]he activities of private organizations not affected with State action do not appear to be within the ambit of [the ERA]." 63 Opinions of the Attorney General 246, 250 (1978). See also 65 Opinions of the Attorney General 103 (1980).

While there have been no decisions by the Maryland courts regarding this interpretation, our view that private organizations unaffected by "state action" are not subject to the ERA is supported by the case law in Pennsylvania, Texas, and Washington. See Murphy v. Harleysville Mutual Ins. Co., 422 A.2d 1097 (Pa. Super. Ct. 1981); Lincoln v. Mid-Cities Pee Wee Football Assoc., 576 S.W.2d 922 (Tex. Ct. App. 1979); MacLean v. First N.W. Indus. of America, Inc., 600 P.2d 1027 (Wash. Ct. App. 1979), rev'd on other grounds, 635 P.2d 683 (Wash. 1981).

II
Insurance Regulation under the State Action Doctrine

Because the Equal Rights Amendment only applies to "activities . . . affected with State action", the core issue here is whether the mechanism used by the State of Maryland for reg-

ulating the setting of insurance rates by insurers constitutes "state action". It is our view that the degree of governmental regulation is insufficient to constitute state action and, therefore, the ERA is inapplicable.2

A. Insurance Ratemaking

Under the Maryland Insurance Code, Article 48A of the Maryland Code, insurers themselves formulate the rates they will charge and the classifications of risk that underlie those rates. Each insurer must "file with the [Insurance] Commissioner every manual, . . . rating schedule or rating plan and every other rating rule . . . which it proposes to use". Article 48A, §242(d)(1). The Insurance Commissioner has no more than 60 working days to review a filing for compliance with the ratemaking principles set out in the Code. Article 48A, §242(d)(6) and (7). A rate filing becomes effective after this review period unless "the Commissioner finds that a filing does not meet the requirements of this section". Article 48A, §242(f)(1).

B. State Action Doctrine

The Supreme Court recently summarized the well-established legal principles for determining whether or not a state's regulation of a private business entity amounts to state action:

"First, . . . '[t]he mere fact that a business is subject to state regulation does not by itself convert its action into that of the State for purposes of the Fourteenth Amendment.' . . . The complaining

2 We caution that our conclusion in this regard is limited to the particular regulatory scheme in question. Because an analysis of whether or not "state action" is present turns significantly on factual and legal details, the resolution of the issue in one context is not necessarily controlling in another. "[T]he answer to the question of whether or not private conduct has been transformed into state action can change as circumstances change." Jackson v. Associated Hospital Services of Philadelphia, 414 F.Supp. 315, 322 (E.D. Pa. 1976) (discussed in Part II C below).

party must also show that 'there is a sufficiently close nexus between the State and the challenged action of the regulated entity so that the action of the latter may be fairly treated as that of the State itself.' . . . The purpose of this requirement is to assure that constitutional standards are invoked only when it can be said that the State is responsible for the specific conduct of which the plaintiff complains. The importance of this assurance is evident when, as in this case, the complaining party seeks to hold the State liable for the action of private parties.

"Second, although the factual setting of each case will be significant, our precedents indicate that a State normally can be held responsible for a private decision only when it has exercised coercive power or has provided such a significant encouragement, either overt or covert, that the choice must in law be deemed to be that of the State. . . . Mere approval of or acquiescence in the initiatives of a private party is not sufficient to justify holding the State responsible for those initiatives under the terms of the Fourteenth Amendment." Blum v. Yaretsky, 457 U.S. 991, 1004-05 (1982) (emphasis in original).3

Several courts have applied these broad principles to the situation in which a state official approves privately formulated rates. The leading case in this area is Jackson v. Metropolitan Edison Co., 419 U.S. 345 (1974).

Jackson involved an action against a privately-owned electric utility company regulated by the Pennsylvania Public Utility Commission. The asserted "state action" was the Commission's approval of a provision in a general tariff application that permitted the utility to discontinue service on reasonable notice for nonpayment of bills. The Supreme Court noted that the

3 In Blum, the Supreme Court held that, because a Medicaid-funded nursing home was not a state agency, and because its private doctors, not state officials, had made the decision at issue, the home's change in the level of care afforded a patient was not state action. This finding was made even though the physicians' "independent" decision was made in accordance with state guidelines.

tariff filing became effective within 60 days unless disapproved by the Commission.

In holding that this form of regulation of the utility by the Commission was insufficient to establish state action, the Supreme Court stated that:

"The nature of governmental regulation of private utilities is such that a utility may frequently be required by the state regulatory scheme to obtain approval for practices a business regulated in less detail would be free to institute without any approval from a regulatory body. Approval by a state utility commission of such a request from a regulated utility, where the commission has not put its own weight on the side of the proposed practice by ordering it, does not transmute a practice initiated by the utility and approved by the commission into 'state action'. At most, the Commission's failure to overturn this practice amounted to no more than a determination that a Pennsylvania utility was authorized to employ such a practice if it so desired. Respondent's exercise of the choice allowed by state law where the initiative comes from it and not from the State, does not make its action in doing so 'state action' for purposes of the Fourteenth Amendment." 419 U.S. at 357 (emphasis added).

C. State Action and Insurance Ratemaking

Given the analysis in Jackson, it is not surprising that efforts to find an element of "state action" in the rate setting activities of private insurers have been rejected. In Broderick v. Associated Hospital Services, 536 F.2d 1 (3rd Cir. 1976), the issue presented to the court was "whether the mere requirement that Pennsylvania approve Blue Cross and Blue Shield contracts and the rates to be charged their subscribers is sufficient to constitute 'state action'". 536 F.2d at 2. The court answered this question in the negative, finding an "absence of proof that Pennsylvania has 'put its own weight' [quoting

Jackson] on the side of the privately initiated . . . practice". 536 F.2d at 8.4

In Jackson v. Associated Hospital Services of Philadelphia, 414 F.Supp. 315 (E.D. Pa. 1976), aff'd 549 F.2d 795 (3rd Cir.), cert. denied, 434 U.S. 832 (1977), the United States District Court for the Eastern District of Pennsylvania rejected a similar claim brought against the state and various private insurers that offered maternity benefit plans. The plaintiffs sought to equate insurance regulation with "state action". In this case, the Insurance Department had investigated whether certain restrictions on maternity insurance coverage constituted sex discrimination. The court stated:

"If we read Jackson [v. Metropolitan Edison Co.] as holding that when a state regulatory agency focuses upon and investigates particular activities of a regulated business, this focus itself may tip the balance in favor of finding state action, we could perhaps find state action in this case. We do not so read Jackson, however. . . . Viewing the facts of this case in light of [Jackson], we cannot say that Pennsylvania had, either overtly or covertly, placed its imprimatur on the insurance practices complained of. Certainly it has not 'put its own weight on the side of the proposed practice by ordering it.' Rather it has challenged the practices and is currently investigating them. Under these circumstances and re-

4 The court noted that the gravamen of the plaintiffs complaint was the enrollment practices of the insurers, which imposed restrictions on married women. There was no evidence in the record to show that these practices had ever been presented for approval. However, the court did not say that state approval of these practices would have been sufficient state action. Rather, as in Jackson, the court apparently would still have required proof that "Pennsylvania has 'put its own weight' on the side of the privately initiated enrollment practice". 536 F.2d at 8. The Chief Judge concurred, and he emphasized that, in his opinion, "mere state approval of the practice or policy of the kind presented herein does not constitute state action, at least where the challenged practice or policy was not instituted or prompted by the State". 536 F.2d at 9.

lying on Jackson, we find, at least to date, no involvement of the State in the challenged insurance activities sufficient to transform those activities into state action." 414 F.Supp. at 321-22.5

In Life Ins. Co. of North America v. Reichardt, 591 F.2d 499 (9th Cir. 1979), female disability insurance policyholders sought relief against the California State Insurance Commissioner and various insurers. Under California law, insurers must submit policy forms to the Commissioner for approval, and policies may be issued only if the Commissioner approves them or if the Commissioner takes no action during a 30-day review period. The court found no state action:

"The Commissioner's act of approving a form of policy does not necessarily result in discrimination. The state does not command the discrimination. . . . The Commissioner has placed no official imprimatur on the practice of which [the plaintiff] complains." 591 F.2d at 502.

Finally, in Murphy v. Harleysville Mutual Ins. Co., 422 A.2d 1097 (Pa. Super. Ct. 1980), cert. denied, 454 U.S. 896 (1981), the issue of state action in automobile insurance rate setting was raised in the context of both the Fourteenth Amendment and the Pennsylvania Equal Rights Amendment. The Superior Court of Pennsylvania described a statutory scheme for the regulation of insurance that closely parallels Maryland's: the insurers are regulated by statute; insurance rates must conform with the law; the established rates are filed with the Commissioner of Insurance and become effective unless expressly disapproved within 60 days; and state law prohibits unfair discrimination in rate setting but permits differences between classes based on loss experience and underwriting and actuarial justifications. 422 A.2d at 1101-02. The court concluded as follows:

5 In both Broderick v. Associated Hospital Services of Philadelphia and Jackson v. Associated Hospital Services of Philadelphia, the complaints contained a pendent state claim for violation of the Pennsylvania Equal Rights Amendment. Both courts declined to reach the issue.

"[T]he degree of governmental regulation in the instant proceeding is analogous to that found insufficient in Jackson v. Metropolitan Edison Co., supra. . . . Moreover, the challenged acts were carried out by the private party on its own initiative under the provisions of the Rate Regulatory Act which permits the fixing of rates based upon measured risk of loss, but were not required by the Commonwealth. Although the Commissioner of Insurance failed to overturn the rate structure filed by appellee, this failure is analogous to that present in Jackson and 'amounted to not more than a determination that [appellee] was authorized to employ such a practice if it so desired.' . . . The fact that appellee elected to exercise the choice permitted by statute does not, under the Jackson rationale, transform its election into state action." 422 A.2d at 1102.6

D. Summary

In light of the analysis in the cases discussed above, we conclude that the involvement of the State of Maryland in the setting of insurance rates is insufficient to constitute "state action".

III
Conclusion

In summary, it is our opinion that: (i) the Maryland Equal Rights Amendment, Article 46 of the Declaration of Rights, applies only to sex-based discrimination by the State itself or

6 A finding of state action was made in Stern v. Massachusetts Indus. and Life Ins. Co., 365 F.Supp. 433 (E.D. Pa. 1973). However, that case predates the 1974 decision of the United States Supreme Court in Jackson v. Metropolitan Edison Co. and was not followed or even cited in Jackson v. Associated Hospital Services of Philadelphia, a case in which the same District Court found no state action.

by entities whose activities so involve the State as to amount to "state action"; and (ii) the process by which insurance rates are set in Maryland does not amount to "state action". Therefore, the Equal Rights Amendment is inapplicable to the establishment of such rates.7

Stephen H. Sachs, Attorney General
Linda H. Lamone, Assistant Attorney General
Avery Aisenstark, Chief Counsel, Opinions and Advice

7 Because we conclude that the ERA is inapplicable, we need not address whether it would prohibit sex-based insurance classifications if it were applicable. Cf. 65 Opinions of the Attorney General 103 (1980) (creation of State debt for benefit of single-sex college does not violate ERA); 65 Opinions of the Attorney General 108 (1980) (creation of shelter for homeless women does not violate ERA).

Moreover, we do not address the circumstances under which the Insurance Commissioner might determine that the use of sex as a classification criterion is "unfairly discriminatory" under the Insurance Code. See Article 48A, §242(c)(2) of the Maryland Code. In this regard, a lower court in Pennsylvania has held that the Commonwealth's Insurance Commissioner "did not exceed his statutory authority" when he "look[ed] to [Pennsylvania's Equal Rights Amendment] as an aid in interpreting his powers and duties under [the regulatory act]". The court thus affirmed the Commissioner's finding that the use of sex as a classification basis for automobile insurance rate differentials was "unfairly discriminatory" under the Pennsylvania statute. Hartford Accident and Indem. Co. v. Insurance Commissioner, 442 A.2d 382 (Pa. Commw. 1982). However, the court did not hold that the Equal Rights Amendment required this construction of the regulatory statute. We understand that this case is pending on appeal to the Pennsylvania Supreme Court. [Editor's Note: The lower court's decision has since been affirmed in Hartford Accident and Indem. Co. v. Insurance Commissioner, 482 A.2d 542 (Pa. 1984).]

Similarly, we do not address here whether sex-based insurance classifications might violate Article 49B, §8 of the Maryland Code, which prohibits persons licensed or regulated by the Department of Licensing and Regulation from discriminating against any person "because of the . . . sex . . . of [that] person". That particular issue is now pending in a proceeding before the Human Relations Commission. We understand that the applicability of the ERA to insurance classifications is also an issue in that proceeding. Because the Attorney General is not the legal advisor to the Human Relations Commission, this Opinion is not intended to mandate a particular result in the pending proceeding.