The US Supreme Court decided Gobeille v. Liberty Mutual Insurance (US Supreme Court 03/01/2016) this morning, holding (6-2) that ERISA preempts a Vermont statute that requires health insurers to report payments and other information relating to health care services to a state agency for compilation in an all-inclusive health care database. Liberty Mutual Insurance Company’s health plan – an ERISA "employee welfare benefit plan" – provides benefits in all 50 States. Vermont ordered Blue Cross – the plan administrator – to transmit its files on eligibility, medical claims, and pharmacy claims for the Plan’s Vermont members. Liberty Mutual, concerned that the disclosure of such confidential information might violate its fiduciary duties, instructed Blue Cross not to comply and filed suit, seeking a declaration that ERISA preempts application of Vermont’s statute and regulation to the Plan and an injunction prohibiting Vermont from trying to acquire data about the Plan or its members. The District Court granted summary judgment to Vermont, but the Second Circuit reversed, concluding that Vermont’s reporting scheme is preempted by ERISA. (Liberty Mutual Insurance v. Donegan, 746 F.3d 497 (2nd Cir 02/04/2014).) The US Supreme Court affirmed.
ERISA expressly preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U. S. C. §1144(a). Prior cases have established that this clause preempts a state law that has an impermissible "connection with" ERISA plans, that is, a law that governs, or interferes with the uniformity of, plan administration.
The Supreme Court looked at ERISA's objectives and "the nature of" the state law’s "effect . . . on ERISA plans to reach the conclusion that Vermont's law – as applied to ERISA plans – is preempted.
ERISA seeks to make the benefits promised by an employer more secure by mandating certain oversight systems and other standard procedures, and those systems and procedures are intended to be uniform. ERISA’s extensive reporting, disclosure, and recordkeeping requirements are central to, and an essential part of, this uniform plan administration system. Vermont’s law and regulation, however, also govern plan reporting, disclosure, and recordkeeping.
The Supreme Court said that preemption is necessary in order to prevent multiple jurisdictions from imposing differing, or even parallel, regulations, creating wasteful administrative costs and threatening to subject plans to wide-ranging liability. ERISA’s uniform rule design also makes clear that it is the Secretary of Labor, not the separate States, that is authorized to decide whether to exempt plans from ERISA reporting requirements or to require ERISA plans to report data such as that sought by Vermont.
Vermont argued that there's been no showing that the State scheme has caused Liberty Mutual to suffer economic costs, but Hey! – you don't need to wait until you're confronted with numerous inconsistent obligations and encumbered with any ensuing costs.
Vermont also argued that its regulation and ERISA regulation have different objectives. But that does not transform Vermont’s direct regulation of a fundamental ERISA function into an innocuous and peripheral set of additional rules.
Justice Thomas wrote a concurring opinion, but expressed doubts about whether §1144 is even constitutional:
"Just because Congress can regulate some aspects of ERISA plans pursuant to the Commerce Clause does not mean that Congress can exempt ERISA plans from state regulations that have nothing to do with interstate commerce."
Justice Ginsburg (joined by Justice Sotomayor) dissented. Her ideas followed the dissent in the Second Circuit opinion:
"The majority finds that the burden imposed by the Vermont reporting requirement warrants preemption of the [data-collection] statute. This conclusion falters for two primary reasons. First, the reporting requirement imposed by the Vermont statute differs in kind from the ‘reporting’ that is required by ERISA and therefore was not the kind of state law Congress intended to preempt. Second, Liberty Mutual has failed to show any actual burden, much less a burden that triggers ERISA preemption. Rather, the Vermont statute . . . does not interfere with an ERISA plan’s administration of benefits."