The Act also provides that federal anti-trust laws will not apply to the "business of insurance" as long as the state regulates in that area, but federal anti-trust laws will apply in cases of boycott, coercion, and intimidation.
The question before the Court was whether or not insurance was a form of "interstate commerce" which could be regulated under the Commerce Clause of the United States Constitution and the Sherman Anti-Trust Act. The general opinion in law before this case, according to the Court, was that the business of insurance was not commerce, and the District Court concurred with the opinion. The Supreme Court concluded that:
"4. Any enactment by Congress either of partial or of comprehensive regulations of the insurance business would come to us with the most forceful presumption of constitutional validity. The fiction that insurance is not commerce could not be sustained against such a presumption, for resort to the facts would support the presumption in favor of the congressional action. The faction therefore must yield to congressional action and continues only at the sufferance of Congress.
5. Congress also may, without exerting its full regulatory powers over the subject, and without challenging the basis or supplanting the details of state regulation, enact prohibitions of any acts in pursuit of the insurance business which substantially affect or unduly burden or restrain interstate commerce."
In short, while not changing the opinion of prevailing law, the Court stated that the conclusion that insurance was not commerce under the law rested with Congress, and that the Court would follow the lead of Congress.
As a result, on March 9 1945, The McCarran-Ferguson Act was passed by Congress. It allows state law to regulate the business of insurance without federal government interference. Among others, it allows for: