The preemption doctrine is founded on the Supremacy Clause of the United States Constitution which declares that the

When federal legislation or regulation is applicable to conduct which is also the subject of state law or regulation, whether the challenged state law or regulation survives is determined in accord with the preemption doctrine. This doctrine reflects judicial efforts to delineate the spheres of federal and state government authority within the federal system. The Supreme Court has established two criteria or tests in evaluating whether a particular state law or regulation is preempted: (1) the congressional intent test and (2) the conflict test.

First, the Court assumes that the police powers of the state are not to be superseded in the absence of a "clear and manifest purpose of Congress." Congressional preemptive intent may be found in explicit statutory command or inferred from the statute’s structure and purpose. If such intent is found, under the Supremacy Clause, the state law or regulation must give way—that is, it is preempted.

Second, even if there is no manifest congressional intent to preempt, the Court also seeks to ascertain whether state law conflicts with federal law. The criterion for ascertaining whether federal and state law are so inconsistent that the state law must be preempted is "whether, under the circumstances . . . [the state] law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Conflict clearly occurs when federal law mandates action prohibited by state law or vice versa. As the degree of state interference with the federal legislative scheme diminishes, the presence of conflict becomes more subtle.

The congressional intent and conflict tests under the preemption doctrine, being quite general, are subject to a wide range of judicial interpretations. The Court’s willingness to preempt state law has dramatically oscillated over time between a high degree of solicitude for federal interests (thereby heavily favoring preemption) and greater respect and tolerance of state concerns. In more recent years the latter tendency has been more common. Nevertheless, there is little doubt that, in the absence of McCarran Act protection, both actual preemptions and uncertainty as to whether future regulatory efforts will be preempted will tend to circumscribe state willingness and/or ability to respond to insurance regulatory problems.