Only Congress has the authority to regulate employee benefits, said Robert Eccles, the attorney for a group of HMOs and an industry trade association.
Justices heard arguments in a key test of laws in about 25 states that require health plans to open closed networks, giving people more options when they choose a doctor.
Elizabeth Johnson, the lawyer defending Kentucky's law, said states are allowed to oversee insurance regulations and that the Supreme Court should let states help patients have more control over their health care.
The case brings up a common complaint about managed care plans: People want to be able to see their favorite physicians even if they are not in their network. Johnson told justices that there is a "very personal and unique relationship" between patients and doctors.
Under the "any willing provider" laws, health plans must enroll any health care professionals who agree to accept the insurer's reimbursement rates and other contract terms.
Many managed care companies have doctors and hospitals under exclusive contracts to serve patients enrolled in one plan. The doctors and hospitals agree to accept lower fees in return for a guaranteed stream of patients.
Eccles said the system keeps costs down for everyone and that HMOs can better control quality.
Justice Ruth Bader Ginsburg said managed care companies seem concerned that the laws would "spell the end of HMOs." Eccles said costs have gone up in states with willing provider laws.
The Supreme Court will decide by July whether to uphold Kentucky's 1994 law on closed HMO networks. If Kentucky wins, more states may pass similar laws allowing the networks to be opened.
The case will determine, more broadly, whether states may take up health concerns that have been debated for years by Congress but not resolved. Next week, the Supreme Court will review a second health care case involving the rising prices of prescription drugs. Justices will consider whether states may pressure drug companies to lower medicine costs for the poor.
Dana Muir, a business professor at the University of Michigan, said states are being called upon to pass health reform laws because of congressional inaction.
"Patients want more rights as they deal with their insurance companies," she said. "States are stepping in."
The Bush administration has urged the Supreme Court to affirm Kentucky's law. A lower court ruled that the state did not exceed its boundaries.
The Supreme Court sided with states in the last major health care case it reviewed. Justices ruled last year that patients in 42 states may demand an unbiased second opinion when their HMO says no to a surgery or treatment.
In other court action Tuesday:
- Justices voted 5 to 4 to uphold a death sentence for a man tried twice for the same killing. David Sattazahn's first jury sentenced him to life in prison but the second jury sent him to death row. After his first conviction for a 1997 murder, Sattazahn sought and won a new trial because of unrelated problems with the jury instructions given for his first trial. The second jury convicted Sattazahn anew, and prosecutors again asked for a death sentence.
The Court's majority said that Pennsylvania prosecutors were well within their rights to seek a death sentence the second time. The four more liberal justices dissented, arguing that defendants in Sattazahn's position would face a "perilous choice" over whether to appeal a life sentence.
- In a case concerning information states have to turn over to plaintiffs in lawsuits over accidents on state highways, the court overturned a Washington State Supreme Court decision and asked the state court to reconsider the case.
The dispute involved safety data that states have to give to the federal government in exchange for highway funding. Congress exempts that data from public scrutiny to protect against excessive lawsuits. But courts have disagreed over what is and isn't protected.
The matter before the court involved the family of an accident victim who, when suing the state, asked to see state safety data submitted for a funding package that the feds approved only after the accident occurred. The family won in local court, but the State Supreme Court ruled that the federal law requiring the safety data was unconstitutional in the first place.
The justices unanimously voted to define the statue as applying only to highway safety data collected expressly for getting federal funding, and found the law was constitutional.
- The Bush administration joined an Illinois whistle-blower in arguing before the Supreme Court that a person who suspects a local government is fraudulently collecting federal funds should be able to sue to help recover the money.
The case stems from efforts of psychologist Janet Chandler, who was fired after she alleged wrongdoing at a federally financed clinic run by Cook County. She responded by suing Cook County under the federal False Claims Act.