"Constitutional regulation" of private actors: A new threat to free enterprise?

A recent decision of the US Court of Appeals for the Third Circuit held that workers' compensation insurers who unilaterally suspend payment of disputed bills to health care providers are "state actors," threatens to breach the barrier to constitutional regulation created by the state action doctrine. Sullivan v. Barnett, 139 F.3d 1 58 (3d Cir. 1998), petition for cert. pending, No. 97-2000. Although the decision specifically deals with regulated insurance companies, its reasoning has broader implications for all manner of regulated businesses, including self-insured employers and other heavily-regulated industries such as public utilities, telecommunications carriers, transportation companies, banks, and health care providers. If broadly construed, the Third Circuit's decision could greatly expand the scope of private commercial conduct subject to the constitutional constraints heretofore imposed only on governmental entities or those specifically acting as agents of the government. The court's reasoning, inconsistency with existing Supreme Court jurisprudence, and the implications of the decision for regulated businesses are explored.