About twenty states, including Vermont, have passed laws requiring all entities that provide health care services to report information to a state agency; these are called “all payer claims databases” or APCDs. Though they may have many purposes, they all generally are intended to enforce a universal and consistent (within the particular state, at least) submission of data that permits study, evaluation, manipulation and dissemination of the data, with an aim of improving health care outcomes and reducing costs. Of course, each state that establishes an APCD likely will have its own requirements, scope and format, which likely will differ in some respects from other states’ APCDs. And because a primary intent of ERISA was to avoid such patchwork, state-by-state regulation of employee benefit plans, a conflict was inevitable.
That conflict came to a head in Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936 (2016), and the Supreme Court held that ERISA won, by preempting Vermont’s APCD law.
Vermont’s APCD law requires health insurers, health care providers, health care facilities, and governmental agencies to report any “information relating to health care costs, prices, quality, utilization, or resources required” by the state agency, including data relating to health insurance claims and enrollment. Vermont expressly defined “health insurer” to include a “self-insured … health care benefit plan” and a “third party administrator” of such a plan. Under implementing regulations, “health insurers must report data about the health care services provided to Vermonters regardless of whether they are treated in Vermont or out-of-state and about non-Vermonters who are treated in Vermont.” Health insurers and other covered entities must register with the state and must submit data as frequently as monthly.
Liberty Mutual maintains a self-insured health plan providing benefits to over 80,000 present and former employees and family members nationwide. The plan uses Blue Cross Blue Shield of Massachusetts (Blue Cross) as a third party administrator. The Liberty Mutual Plan covers too few Vermont residents to mandate reporting in the state, but Blue Cross serves several thousand Vermont residents, so it must report.
In 2011, Vermont subpoenaed Blue Cross, demanding that it provide documents on members and claims. Liberty Mutual instructed Blue Cross not to comply, concerned that disclosing confidential information about participants would violate its fiduciary duties under the Plan. Liberty Mutual sued, arguing that ERISA preempts the Vermont APCD law.
The Supreme Court started with ERISA’s deceptively simple, and broad, preemption language: ERISA pre-empts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). The Court noted that it had previously held that, because almost anything can “relate to” almost anything else, it has recognized two categories of preemption:
First, ERISA pre-empts a state law if it has a “‘reference to’” ERISA plans. Ibid. To be more precise, “[w]here a State’s law acts immediately and exclusively upon ERISA plans … or where the existence of ERISA plans is essential to the law’s operation …, that ‘reference’ will result in pre-emption.” Dillingham, supra, at 325, 117 S.Ct. 832. Second, ERISA pre-empts a state law that has an impermissible “connection with” ERISA plans, meaning a state law that “governs … a central matter of plan administration” or “interferes with nationally uniform plan administration.” Egelhoff v. Egelhoff, 532 U.S. 141, 148, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001). A state law also might have an impermissible connection with ERISA plans if “acute, albeit indirect, economic effects” of the state law “force an ERISA plan to adopt a certain scheme of substantive coverage or effectively restrict its choice of insurers.” Travelers, supra, at 668, 115 S.Ct. 1671.
Liberty Mutual argued that Vermont’s law fell into the second category of preemption, and the Court agreed.
The Court explained that ERISA was designed “to make the benefits promised by an employer more secure by mandating certain oversight systems and other standard procedures. … These systems and procedures are intended to be uniform.” It noted that ERISA has extensive reporting, disclosure and recordkeeping requirements for welfare benefit plans like the Liberty Mutual Plan, and that the Secretary of Labor has the authority to modify and implement new reporting and disclosure requirements nationwide. The Secretary also can use all of this data for statistical and research purposes, and it can publish the data and results as he deems appropriate. ERISA also provides that violation of the reporting, disclosure and recordkeeping requirements can result in civil or criminal liability.
The Court summed up ERISA’s scheme: “As all this makes plain, reporting, disclosure, and recordkeeping are central to, and an essential part of, the uniform system of plan administration contemplated by ERISA. The Court, in fact, has noted often that these requirements are integral aspects of ERISA.”
With that explanation, the finding of preemption is inevitable:
Vermont’s reporting regime, which compels plans to report detailed information about claims and plan members, both intrudes upon “a central matter of plan administration” and “interferes with nationally uniform plan administration.” Egelhoff, 532 U.S., at 148, 121 S.Ct. 1322. The State’s law and regulation govern plan reporting, disclosure, and—by necessary implication—recordkeeping. These matters are fundamental components of ERISA’s regulation of plan administration. Differing, or even parallel, regulations from multiple jurisdictions could create wasteful administrative costs and threaten to subject plans to wide-ranging liability. See, e.g., 18 V.S.A. § 9410(g) (supplying penalties for violation of Vermont’s reporting rules); CVR § 10 (same). Pre-emption is necessary to prevent the States from imposing novel, inconsistent, and burdensome reporting requirements on plans.
The Court also rejected Vermont’s argument that Liberty Mutual needed to show that it suffered economic harm due to the reporting requirement in order to establish preemption: “A plan need not wait to bring a pre-emption claim until confronted with numerous inconsistent obligations and encumbered with any ensuing costs.”
The 6-2 majority opinion was written by Justice Kennedy, and joined by Roberts, Thomas, Breyer, Alito and Kagan There are concurring and dissenting opinions worth noting.
Justice Thomas wrote a concurring opinion “because I have come to doubt whether [29 U.S.C.] § 1144 [the ERISA preemption provision] is a valid exercise of congressional power and whether our approach to ERISA pre-emption is consistent with our broader pre-emption jurisprudence. He essentially argued that the Court should overrule prior precedent, interpret section 1144 as written, and conclude that it is unconstitutionally overbroad as written.
Justice Breyer also concurred to emphasize the serious administrative problems that would be created if plans like Liberty Mutual’s were required to comply with 50 potentially conflicting reporting requirements. He also noted that Vermont and other states can request the Secretary of Labor to require the type of reporting they want in order to populate their APCDs.
Justice Ginsberg, joined by Justice Sotomayor, dissented, explaining: “I would hold that Vermont’s effort to track health care services provided to its residents and the cost of those services does not impermissibly intrude on ERISA’s dominion over employee benefit plans.” In a nutshell, Justice Ginsberg concluded that not all “reporting” or “recordkeeping” is the same, and that the information that Vermont sought (claims data) was fundamentally different than the data that ERISA plans reported to the Department of Labor (solvency and actuarial data).