Gobeille v. Liberty Mutual Insurance Company (14-181)

Issues 

Does the Employee Retirement Income Security Act of 1974 (ERISA) preempt Vermont data reporting laws, which require companies that process insurance claims to report certain medical claims data to the state?

Oral argument: 
December 2, 2015

Vermont enacted legislation that created a “unified health care database” designed to improve the affordability and quality of health care in Vermont by collecting and analyzing statewide data on insurance claims.  See Liberty Mut. Ins. Co. v. Donegan, 746 F.3d 497, 500–01 (2d Cir. 2014); see also Vt. Stat. Ann. tit. 18 § 9410(a)(1). Liberty Mutual offers a health insurance benefit plan to Vermont residents; the Employee Retirement Income Security Act of 1974 (“ERISA”) governs benefit plans. See id. ERISA requires benefits plans to make claim data reports to the Department of Labor, and generally preempts any state laws that relate to an employee benefit plan.  See id. at 503. In August 2011, the Vermont Department of Banking, Insurance, Securities and Health Care Administration (the “Department”) subpoenaed claims data from Blue Cross and Blue Shield of Massachusetts, the company that administers Liberty Mutual’s Plan. See id. at 502. In district court, Liberty Mutual sought to enjoin the subpoena, arguing ERISA preempted Vermont’s reporting requirements. See id. On appeal, the Court of Appeals for the Second Circuit held that ERISA did preempt the reporting requirements. See id. But Alfred Gobeille, chair of the Vermont Green Mountain Care Board, maintains that ERISA does not preempt Vermont’s law, because (1) Vermont’s law falls under the traditional state power to regulate health care, (2) the law does not infringe any core function of ERISA, and (3) Congress intended for states to retain the ability to collect health care data. See Brief for Petitioner, Alfred Gobeille at 25. Liberty Mutual counters, arguing that Vermont’s reporting requirements conflict with Congress’s intent to create a uniform federal reporting regime, and thus constitute precisely the kind of state law that Congress intended ERISA to preempt. See Brief for Respondent, Liberty Mut. Ins. Co. at 13. The Supreme Court’s resolution of this case will impact the cost to consumers of purchasing health care, the quality of that care, and the resources that the insurance companies must spend on claims data reporting procedures. See Brief of Amici Curiae AARP et al., in Support of Petitioner at 9-10, 11; Brief of Amici Curiae The American Benefits Council et al., in Support of Respondent at 24, 27-28.

Questions as Framed for the Court by the Parties 

May Vermont apply its health care database law to the third-party administrator for a self-insured ERISA plan?

Facts 

Liberty Mutual Insurance Company administers a health plan, the Liberty Mutual Medical Plan (the “Plan”), which covers 84,000 people nationwide and 137 people in Vermont. See Liberty Mut. Ins. Co. v. Donegan, 746 F.3d 497, 501 (2d Cir. 2014). The Plan is self-insured, which means that Liberty Mutual pays for all claims made under the Plan from its own assets. See id. To process claims, records, and payments under the Plan, Liberty Mutual contracted a third-party administrator (“TPA”), Blue Cross Blue Shield of Massachusetts (“Blue Cross”). See id. at 501–502.

The Plan pledges to keep the medical records of its participants confidential, but also states that it will “comply with all other state and federal law to the extent not preempted by [the Employment Retirement Income Security Act of 1974 (ERISA)] and to the extent such laws require compliance by the Plan.” See Donegan, 746 F.3d at 501 (internal quotation omitted). ERISA governs “most employee benefit plans, including self-insured health plans,” and requires health plan administrators to make “financial and actuarial” reports to the Department of Labor. See id. at 503. Additionally, “ERISA broadly preempts ‘any and all State laws insofar as they . . . relate to any employee benefit plan.’”  See id. (internal citation omitted).

The Vermont legislature created a “unified health care database” to, among other goals, “improv[e] the quality and affordability of patient health care.” See Donegan, 746 F.3d at 500 (internal quotation omitted); see also Vt. Stat. Ann. tit. 18 § 9410(a)(1). The law, section 9410, requires health insurers to file insurance claims data with the state as the Vermont’s Department of Banking, Insurance, Securities and Health Care Administration (the “Department”) deems necessary. See id. Additionally, Vermont enacted regulations to accompany section 9410, called the Vermont Healthcare Claims Uniform Reporting and Evaluation System (the “Reporting System”). See id. The Reporting System requires that health insurers submit reports on “myriad categories of claims data.” See id. at 501. Health insurers include health insurance companies, like Liberty Mutual, and may include “to the extent permitted under federal law, any administrator of an insured, self-insured, or publicly funded health care benefit plan.” See id. Health insurers with more than 200 members are Mandated Reporters, which must submit reports to the Department if requested. See id. All other insurers are Voluntary Reporters. See id. Because Liberty Mutual provides coverage to 137 people in Vermont, it is a voluntary reporter; however, Blue Cross qualifies as a mandated reporter, so it is required to report the data that it processes and collects. See id. at 502.

In August 2011, the Department subpoenaed claims data from Blue Cross. See Donegan, 746 F.3d at 502. “Liberty Mutual instructed Blue Cross not to comply and filed this suit,” in District Court for the District of Vermont, “seeking (1) a declaration that ERISA preempts [section 9410 and the Reporting System]; and (2) an injunction blocking enforcement of the subpoena.” See id.  On cross-motions for summary judgment, the district court held that ERISA did not preempt section 9410. See id. But on appeal, the Court of Appeals for the Second Circuit held that section 9410 and the Reporting System were preempted, because they prescribe methods of “reporting” claims data, “‘reporting’ is a core ERISA function,” and the Supreme Court has established that laws that “have a ‘connection with’ ERISA plans” are preempted.  See id. at 508. Alfred Gobeille, chair of the Vermont Green Mountain Care Board, which is currently tasked with administering the health care database, petitioned the Court for a writ of certiorari, which the Court granted on June 29, 2015. See Brief for Petitioner, Alfred Gobeille at ii, 2.

Discussion 

This case presents the Supreme Court with the opportunity to determine whether ERISA preempts state law data reporting requirements for third-party administrators of self-insured ERISA plans.  See Brief for Petitioner, Alfred Gobeille at 24–25; Brief for Respondent, Liberty Mut. Ins. Co. at 13–14. Gobeille maintains that Congress did not intend for ERISA to preempt state laws, such as section 9410, that generally regulate health care, because the courts recognize general health care regulation as a traditional power of the states. See Brief for Petitioner at 24–25. But Liberty Mutual argues that Vermont’s reporting requirements conflict with Congress’ intent to create a uniform federal reporting regime for benefit plans, and thus constitute precisely the kind of state law that Congress intended ERISA to preempt. See Brief for Respondent at 13–14. The Court’s resolution of this case may impact the cost to consumers of purchasing health care, the quality of that care, and the resources that insurance companies must spend on data reporting procedures. See, e.g., Brief of Amici Curiae AARP et al., in Support of Petitioner at 9–11; Brief of Amici Curiae The American Benefits Council et al., in Support of Respondent at 24, 27-28.

BALANCING THE BENEFITS OF DATA WITH THE NEED FOR UNIFORM REGULATION

The AARP and supporting amici assert that the All-Payer Claims Database (“APCD”) created by section 9410 ensures that participants receive affordable, quality healthcare by providing Vermont with data it can use to identify needs, reduce costs, and evaluate health care programs. See Brief of AARP at 9-11. AARP asserts that “accurate information” is key to Vermont’s efforts. See id. at 10. Without accurate information, for example, AARP contends that consumers and state regulators “cannot know if health care services are offered at a fair price, and whether and what type of regulation is needed to protect consumers.” See id. If regulators are left in the dark, the AARP maintains that the market for various treatments and services will not reflect the true cost of those treatments and services. See id. at 10–11. Similarly, the American Hospital Association (“AHA”) argues that APCDs provide research and policy opportunities to improve healthcare in the United States and asserts that it would be illogical to interpret ERISA as precluding states from improving their health care systems. See Brief of Amici Curiae American Hospital Association et al., in Support of Petitioner at 10. AHA asserts that the data collected by APCDs is important in light of the “unique” structure of the U.S. healthcare market, which is negotiated “between employers, insurers, and healthcare providers” and thus can lead to marked price variation. See id. at 14–15.

But the American Benefits Council and supporting amici argue that APCDs “conscript [healthcare] plans into the service of the States, turning [plans] into laboratories” for state experimentation, which runs contrary to Congress’ goal (as expressed in ERISA) that “the sole, exclusive purpose of employee benefit plans is to provide benefits to beneficiaries.” See Brief of The American Benefits Council et al. at 24–25. Additionally, the Benefits Council argues that APCD laws hurt beneficiaries by diverting plans’ resources from administering benefits to satisfying reporting requirements. See id. at 27–28. By diverting the plans’ attention, the Benefits Council contends that the states force plan fiduciaries to neglect their ERISA duty to administer plans “for the exclusive purpose * * * of providing benefits to participants and their beneficiaries[,] and defraying reasonable expenses of” administration. See id. at 26 (internal quotation omitted).

THE ADMINISTRATIVE BURDEN OF DATA COLLECTION LAWS

The National Association of Health Data Organizations (“NAHDO”) maintains that self-insured plans already have the data required to comply with Vermont law. See Brief of Amici Curiae National Association of Health Data Organizations (NAHDO) et al., in Support of Petitioner at 5. NAHDO explains that Vermont’s reporting law “follow[s] a common set of industry-driven technical standards” adopted in the Health Insurance Portability and Accountability Act of 1996 (HIPPA). See id. at 6. Because these standards are industry wide, NAHDO concludes that Blue Cross and other administrators will not be obliged to engage in any new methods of record keeping. See id. The National Governors Association concurs, stating that the data at issue in this case is already generated through the claims adjudication process, “i.e., the processes by which claims are submitted to and paid by health insurers.” See Brief of Amici Curiae National Governors Association et al., in Support of Petitioner at 14. Additionally, the Association claims that many large health insurers have begun efforts to standardize reporting techniques so that they align with state requirements. See id. at 15.

But the Blue Cross and Blue Shield Association asserts that Vermont’s reporting requirements are difficult to implement, because doing so will require extra full-time employees, “hundreds of additional employee hours,” and communication with state regulators. See Brief of Amici Curiae Blue Cross and Blue Shield Association, in Support of Respondent at 29–30. Blue Cross and Blue Shield explains that the reporting burden may include ERISA requirements and the “reporting requirements of any states where an employer” contracted with Blue Cross and Blue Shield has employees. See id. at 30. And Blue Cross and Blue Shield maintains that these burdens do not stop once administrators bring reporting practices in line with state regulation; administrators must continue to service their monitoring regime. See id. The National Coordinating Committee for Multiemployer Plans states that it takes a minimum of nine months to reprogram reporting systems to accommodate new data sets, forms, and structures under Vermont law. See Brief of Amici Curiae National Coordinating Committee for Multiemployer Plans, in Support of Respondent at 16 (internal citation omitted). The Committee argues that Vermont’s law combined with other state reporting requirements poses a risk of creating “incompatible” demands on third-party administrators of ERISA plans and negatively impacting plan participants. See id. at 18.

Analysis 

The Supreme Court will decide whether ERISA preempts state law data reporting requirements for benefit plans.  See Brief for Petitioner, Alfred Gobeille at 24–25; Brief for Respondent, Liberty Mut. Ins. Co. at 13–14. Gobeille contends that ERISA does not preempt Vermont’s health care database law. Gobeille argues that Congress did not intend for ERISA to preempt “generally applicable” healthcare regulation. See Brief for Petitioner at 25–31. Gobeille asserts that the Court has identified three core ERISA functions—enforcing plan fiduciaries’ roles as benefit providers, creating a mechanism to enforce ERISA, and creating uniform regulation for benefits providers—and that section 9410 does not intrude on those functions. See id. at 24–26, 31. And Gobeille claims that other legislation, such as the National Health Planning and Resources Development Act of 1974 (“NHPRDA”) and the Patient Protection and Affordable Care Act (“ACA”), demonstrate that Congress did not intend for ERISA to preempt states’ traditional role in creating generally applicable healthcare regulation. See id. at 46–49. But Liberty Mutual contends that ERISA’s preemption provision is necessarily expansive in order to minimize the risk of benefit plans’ navigating conflicting state and federal laws. See Brief for Respondent at 13–15. Liberty Mutual asserts that reporting requirements are a core concern of ERISA, and that Vermont’s law interferes with Congress’ design. See id. at 24, 32–33. And Liberty Mutual maintains that the NHPRDA and ACA do not show that Congress intended to allow the states to mandate data collection. See id. at 48–49.

STATES’ POLICE POWERS AND ERISA’S CORE FUNCTIONS

Gobeille contends that ERISA does not prevent states from enacting generally applicable healthcare regulation; rather, it preempts regulations that interfere with core ERISA functions. See Brief for Petitioner at 27–28. That is, Gobeille contends that “ERISA preempts state laws that direct the amount, type, or nature of benefits paid to beneficiaries; regulate the structure of the plan; or otherwise interfere with the relationship between the plan and its members.” See id. at 28. Gobeille explains that the database serves “the States’ traditional interests in protecting public health, regulating the health care industry, and developing health care policy”—all of which the Court has recognized as falling under states’ police powersSee id. at 32, 35. Gobeille argues that section 9410 asks for information that has nothing to do with core ERISA functions; nor does section 9410 encroach upon ERISA’s disclosure requirements, which relate purely to the “establishment, operation, and distribution” of ERISA plans, which in turn are aimed at protecting plan beneficiaries. See id. at 36–37 (internal quotation omitted). Gobeille explains that section 9410 applies to public and private health care payers and is aimed at improving public health, not auditing the inner workings of the plans. See id. at 38. Gobeille also disputes Liberty Mutual’s characterization of ERISA’s reporting requirements as a core function; instead, Gobeille asserts that the reporting requirements serve the three core functions above. See id. at 39–40. Also, Gobeille argues that Vermont’s law does not improperly burden Liberty Mutual, because Blue Cross and Blue Shield has the responsibility to report data; Liberty Mutual failed to present evidence demonstrating a burden; and regardless of evidence, there is not an “obvious” burden on Liberty Mutual. See id. at 53­–55.

Liberty Mutual argues that ERISA contains an expansive preemption provision that invalidates state laws that “have a connection with ERISA plans,” and asserts that Vermont’s law easily falls under this wide umbrella. See Brief for Respondent at 13–14 Liberty Mutual agrees that Congress intended for ERISA to protect beneficiaries, but contends that Congress intended to do so by creating a uniform regulatory scheme, which would create new efficiencies and benefits for plan participants. See id. at 15–19. The reporting requirements are part of that scheme, Liberty Mutual asserts. See id. at 17. Without broad preemption, including preemption of state reporting requirements, Liberty Mutual contends that the benefits of a uniform scheme would be undercut by the burden of navigating conflicting state and federal laws. See id. at 19–20. Liberty Mutual asserts that a lack of a uniform set of reporting standards could prove costly and harmful to plan beneficiaries. See id. at 21. Liberty Mutual states, “Congress’s central concern in enacting ERISA’s preemption clause was ensuring that plans could operate nationally, efficiently, and for the benefit of employees and beneficiaries without the burden and expense of complying with multiple, potentially conflicting state law requirements.” See id. at 24. Liberty Mutual contends that Vermont’s law is burdensome, governing the content, timing, and coding of plan reporting, and undercuts one of the core functions of ERISA. See id. at 32–33.

CONGRESSIONAL INTENT

Gobeille contends that legislation passed shortly after ERISA—for example, the National Health Planning and Resources Development Act of 1974 (“NHPRDA”)—encouraged states to regulate health care (including the collection of data), thus demonstrating that Congress did not intend for ERISA to preempt all state-level regulation. See Brief for Petitioner at 46. Gobeille contends that NHPRDA encouraged states to establish agencies to gather data about health resources. See id. at 46–47. In this context, Gobeille contends that it would be incongruous to conclude that Congress did not want states to interfere in health care regulation (ERISA) when it was simultaneously encouraging states to collect data about healthcare. See id. at 47. And Gobeille maintains that Congress continues to encourage states to take an active role in healthcare regulation, including data collection; for example, Congress has authorized the states to receive Medicare claims data. See id. at 48–49. Also, in enacting the Patient Protection and Affordable Care Act (“ACA”), Gobeille argues that Congress preserved the states’ regulatory role in health care by, for example, allowing for state-run exchanges. See id. at 49.

Liberty Mutual counters that the NHPRDA is not relevant here, because it did not direct the states to collect health care data from ERISA plans. See Brief for Respondent at 48. Furthermore, Liberty Mutual contends that Congress, in allowing the federal government to provide the states with health care data under the ACA, merely decided to give the federal government’s data to the states; but it did not intend for the states to be able to demand this data from plans directly. See id. at 49. Liberty Mutual explains that “the ACA imposes new federal reporting requirements on ERISA plans,” but that Congress made no change to the general preemption provision of ERISA. See id. at 50. Liberty Mutual contends that this reveals Congress’ intent not to unsettle the “understanding that reporting by employee benefit plans falls exclusively within the federal domain.” See id. at 51.

Conclusion 

In this case, the Supreme Court will consider whether ERISA preempts Vermont’s health care reporting requirements. See Brief for Petitioner, Alfred Gobeille at 24–25; Brief for Respondent, Liberty Mut. Ins. Co. at 13–14. Gobeille maintains that ERISA does not preempt Vermont’s law, because Vermont’s law falls under the traditional state power to regulate health care. Additionally, Gobeille argues that the law does not infringe any core function of ERISA and that Congress intended to preserve the states’ ability to collect health care data. See Brief for Petitioner at 27, 36, 49. Liberty Mutual counters, arguing that Vermont’s reporting requirements conflict with Congress’s intent to create a uniform federal reporting regime, and thus constitute the kind of state law that drove Congress to enact ERISA. See Brief for Respondent at 15, 17. The Court’s decision will impact the cost and quality of health care, and the administrative burden of reporting requirements placed on insurance companies. See, e.g., Brief of Amici Curiae AARP et al., in Support of Petitioner at 9–11; Brief of Amici Curiae The American Benefits Council et al., in Support of Respondent at 24, 27-28.

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