Supreme Court Rules That ERISA Preempts Vermont Claims Reporting Requirement

The Employee Retirement Income Security Act of 1974 (ERISA) made the regulation of employee benefit plans principally a matter of Federal concern. ERISA broadly and generally preempts—or renders inoperative—state laws that "relate to" employee benefit plans. Since 1974, the Supreme Court has developed a robust ERISA preemption jurisprudence in nearly two dozen cases.

On March 1, the Supreme Court handed down its most recent ERISA preemption decision. The case, Gobeille v. Liberty Mutual Insurance Company, struck down a Vermont law that required certain public and private entities (including health insurers) that provide and pay for health care services to report claims information to a state agency. Laws of this sort are sometimes described as establishing an "all-payer claims data base." According to a "friend-of-the-court" brief filed by the National Governors Association, some 17 states (Arkansas, Colorado, Connecticut, Kansas, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Oregon, Rhode Island, Tennessee, Utah, Virginia, Washington, and West Virginia) have enacted such laws. This post examines Gobeille's place in the Court's established body of ERISA preemption jurisprudence.

Case Overview

Gobeille involved a challenge to the Vermont all-payer claims data base law by Liberty Mutual Insurance Company on behalf of its group health plan. The plan, which covers employees and provides benefits to more than 80,000 active and former employees and their beneficiaries in all 50 states, is regulated under ERISA as an "employee welfare benefit plan." The plan is self-funded. This means that Liberty Mutual does not pass health care claims risk on to a third-party insurance company. As is the case with most self-funded group health plans, the plan's day-to-day operations are outsourced to a third-party administrator—in this case, Blue Cross Blue Shield of Massachusetts.

Concerned that the disclosure of claims data might violate its fiduciary duties, Liberty Mutual directed Blue Cross not to comply with the Vermont rules. When the State of Vermont issued a subpoena seeking to enforce the law, Liberty Mutual filed suit in Federal district court, seeking a declaration that ERISA preempts application of the Vermont statute. Liberty Mutual also asked the court to issue an injunction prohibiting Vermont from trying to acquire data about the plan or its members.

The district court ruled in Vermont's favor, concluding that the State's reporting scheme was not preempted. Liberty Mutual appealed to the Second Circuit, which reversed. Vermont then appealed to the Supreme Court. The Supreme Court affirmed in a 6 to 2 decision (with the death of Justice Scalia, there are currently only eight Justices). Justice Kennedy authored the opinion, joined by Justices Roberts, Breyer, Alito, and Kagan; Justices Thomas and Breyer filed concurring opinions; and Justices Ginsberg and Sotomayor dissented.

The Vermont Law

In 2005, the Vermont legislature established the Vermont Health Care Uniform Reporting and Evaluation System, a database populated by information on healthcare claims paid by insurers and other coverage providers. The law requires health insurers, health care providers, health care facilities, and governmental agencies to report to a state agency, the Green Mountain Care Board, "information relating to health care costs, prices, quality, utilization, or resources required," including data relating to health insurance claims and enrollment. Health insurers must submit claims data on members, subscribers, and policyholders.

Entities covered by the law (referred to as "reporters") are required to register with the State and must submit data...