HR Management & Compliance

Supreme Court’s ERISA ruling a victory for self-insured employers

The U.S. Supreme Court’s March 1 ruling in a Vermont case relieves self-insured employers from the obligation to report claims data to state governments that have established databases reflecting healthcare use and costs for citizens.

The reach of the ruling extends beyond Vermont to all self-insured plans. “It absolutely has national implications,” Linda J. Cohen, an attorney with Dinse, Knapp & McAndrew, P.C. in Burlington, Vermont, said after the ruling was released.

The Court ruled 6-2 in Gobeille v. Liberty Mutual that a Vermont data-collection law did not apply to self-funded insurance plans covered by the Employee Retirement Income Security Act (ERISA) because the Act preempts state laws.

Vermont and almost 20 other states maintain or are establishing “all-payer databases” that collect information on all healthcare claims paid for citizens in their states. Cohen explained that Vermont is “very active and innovative” in the health policy arena, which is why the state tried to compel insurers, even self-funded ERISA plans, to report the data.

Ashley Gillihan, an attorney with Alston & Bird LLP in Atlanta, said the Court’s ruling goes well beyond laws in Vermont and other states requiring reporting to state databases. “The holding extends beyond state laws that require plans to report or disclose information; it appears to extend to any state law that attempts to regulate anything within the fundamental purview of ERISA and not otherwise specifically carved out of ERISA’s preemption clause (such as insurance laws that regulate insurers),” he said.

John Hickman, also an attorney with Alston & Bird, agrees that the reach of the Court’s ruling is wide. “It is worth noting that the holding also affirms that a state law that steps into ERISA’s ‘area’ would be preempted even if the requirements under state law are parallel to those under ERISA,” he said. “This seems to close the door on arguments that a law is not preempted as long as it does not conflict with ERISA’s administrative scheme or . . . provide greater rights and protections than ERISA.”

The case arose when Liberty Mutual Insurance Co. directed its third-party administrator, Blue Cross Blue Shield of Massachusetts, Inc., not to report to Vermont’s all-payer database. Liberty Mutual claimed that ERISA provides the ability to run an insurance plan on a national and uniform basis and therefore should preempt the Vermont law.

The ruling’s message to employers, Cohen said, is that if they have an ERISA plan and the state tries to mandate reporting, they don’t have to comply. However, they can choose to report.

Cohen said an employer may not want to bear the cost and technical burden of filing data in a state database. Also, companies may have a privacy interest in not reporting. Some employers with ERISA plans may choose to report despite the Supreme Court’s ruling, however. For example, she said many hospitals in Vermont are self-insured, but they may choose to report from a public health planning standpoint.

In writing for the majority, Justice Anthony M. Kennedy said ERISA’s “reporting, disclosure, and recordkeeping are central to, and an essential part of, the uniform system of plan administration contemplated by ERISA.” He went on to say that Vermont’s reporting requirements interfere with nationally uniform plan administration.

In a dissenting opinion, Justice Ruth Bader Ginsburg argued that Vermont’s effort to track healthcare services and costs should not be judged to “impermissibly intrude on ERISA’s dominion over employee benefit plans.” She wrote that 17 other states besides Vermont have similar database systems to collect health claims data “to serve compelling interests, including identification of reforms effective [in] driv[ing] down health care costs, evaluation of relative utility of different treatment options, and detection of instances of discrimination in the provision of care.”