Supreme Court’s Liberty Mutual Decision Derails Healthcare Transparency
Patricia M. McGrath, Esq.
On March 1, 2016, the U.S. Supreme Court issued its opinion in Gobeille v. Liberty Mutual Insurance Company, 577, U.S. ____(2016).
At one level, the Liberty Mutual decision is a somewhat dry determination of the scope of the pre-emption provision of ERISA (the broad federal law that regulates employee benefit plans). However, this decision can be read to also tell us that one of the goals of the Affordable Care Act – to provide transparency of healthcare information available to the public – suffered a setback.
Vermont established the Vermont Health Care Uniform Reporting and Evaluation System in 2005. The system, described as an “all-payer claims data base,” or APCD, is a data base that collects information on health care claims paid by insurers and other providers. All of the other New England states, including New Hampshire, have enacted similar data bases. New Hampshire’s system, the New Hampshire Comprehensive Health Care Information System, or NHCHIS, was enacted to “continuously review health care utilization, expenditures, and performance in New Hampshire and to enhance the ability of New Hampshire consumers and employers to make informed and cost-effective health care choices.”
Liberty Mutual provides its employees health coverage through a self-insured plan, so that Liberty, as the employer, bears the risk of claim costs. Liberty utilizes Blue Cross Blue Shield of Massachusetts as its third party administrator to process claims. Vermont’s APCD requires administrators like Blue Cross to submit data for its client plans, including Liberty’s plan. Liberty directed Blue Cross to exclude its plan-specific data, citing Liberty’s fiduciary duties to its plan. In 2011, the State of Vermont subpoenaed Blue Cross to provide the information. Liberty directed Blue Cross not to respond and filed suit in Vermont’s Federal District Court, stating that Vermont’s law was pre-empted by ERISA. The District Court ruled in favor of Vermont. The Court of Appeals for the Second Circuit then reversed the District Court’s decision, finding for Liberty. Vermont appealed to the U.S. Supreme Court to review the case.
ERISA and “Pre-emption”
ERISA regulates most welfare and pension benefit plans. It is a federal law, intended to provide standards and accountability for employer-sponsored benefit plans offered across state lines. To do so, ERISA pre-empts state laws that “relate to” employer-sponsored plans. While that is a broad phrase, ERISA also specifically does not supersede state laws that “regulate insurance.” In other words, states can regulate insurers, but not employer plans. Furthermore, states have no direct authority over “self-insured” employer-sponsored health plans, since employers are not insurance companies.
How does ERISA pre-emption fit into this case? Consider that one area of ERISA governance is the reporting, disclosure and recordkeeping of plan information. In the Venn diagram of ERISA coverage and state law, then, the two regulatory circles overlap for fully insured plans, and so a state’s APCD can obtain data on those plans through their commercial insurers. However, self-insured plans are alone in the outlying crescent of the ERISA-circle, outside the scope of state regulation of health insurance. It is these plans – Liberty’s plan, for example – that argue that Vermont’s law does not apply to them.
The Court’s Discussion and Decision
The Supreme Court’s majority opinion noted Vermont’s argument that its data collection law asks for different information from ERISA’s reporting, disclosure and recordkeeping requirements, so the state law should not be pre-empted. In addition, Vermont argued that Liberty Mutual did not show that Liberty suffered any actual burden under the state reporting requirement.
However, the Court then determined that the application or effect of the law was not the issue. Rather, the law’s requirement that ERISA plans report their information under the Vermont law overlapped with ERISA’s domain. Period. It did not matter to the Court whether a specific burden resulted or not. The Court decided this case in a 6-2 vote. The dissent wrote that Vermont’s arguments had merit: the Vermont law serves different purposes from ERISA’s requirements, and Liberty Mutual did not show that the Vermont law imposed the level of burden on ERISA plans that would, to the minority, trigger a finding that ERISA preempts such a state law. The majority opinion went too far, said the dissent, in applying ERISA’s pre-emption rule to this case.
One should assume that this decision is equally applicable to New Hampshire’s version of the same law, so New Hampshire will likely need to reconsider the operation of its NHCHIS. While finding that ERISA pre-empts Vermont’s state law regarding the collection of information from ERISA plans, the majority opinion noted the Department of Labor (“DOL”) could establish new rules that would allow affected states to continue APCD-like data bases. In fact, both the DOL and the federal government argued, in filings in this case, that the Vermont statute was not pre-empted, emphasizing the importance of the state’s role in cost-containment under the Affordable Care Act and the connection between that goal and the states’ APCDs.
The win for Liberty Mutual is a loss for data transparency. No ERISA employer plan is required to provide the data that the Vermont law requests. This decision throws a monkey-wrench into an ACA goal of collecting data on health costs to allow users to make informed decisions about their healthcare. Employers who sponsor self-insured plans may be relieved that one more unwelcome reporting burden can be shelved. As a result, though, consumers will be prevented from obtaining as complete a picture of healthcare costs as they otherwise would.