The Supreme Court ruled that ERISA pre-empts Vermont’s statute as applied to ERISA plans in Gobeille v. Liberty Mutual Insurance Co., decided on March 1, 2016.

Liberty Mutual maintains a self-insured employee health plan and some of those employees reside in Vermont. Vermont maintains a health-claims database (an “all-payor claims database” or APCD) that requires all health insurers and self-insured health plans operating in Vermont to report claims information. That information is then made available to insurers, employers, healthcare providers, and others to review issues such as utilization, cost, and quality with respect to healthcare in Vermont.

Blue Cross Blue Shield of Massachusetts is the third-party administrator for Liberty’s health plan. Blue Cross was required to report the health-claims data to the Vermont database, but had not been doing so. In 2011, Vermont issued a subpoena to Blue Cross demanding that it report the required data. Liberty instructed Blue Cross not to respond and then filed suit against the state seeking a declaration that the Vermont law was preempted by ERISA. The district court ruled that the state law was not preempted so Liberty appealed. The Second Circuit reversed the district court holding that the APCD law was preempted by ERISA.

Vermont asked the Supreme Court to review the case and made two arguments. First, it argued that the Second Circuit’s decision is inconsistent with Supreme Court precedents on ERISA preemption and improperly expands the scope of ERISA preemption. Second, it argued that the decision would have a profound impact on state healthcare regulation as there are 16 states with reporting programs similar to Vermont’s.

In Gobeille, the Court concluded that ERISA overrides Vermont’s requirement to include self-insured employer plan data in the state’s APCD. The Court reasoned that Vermont’s requirements are inconsistent with ERISA’s aim of providing a “single uniform national scheme for the administration of ERISA plans without interference from laws of the several States even when those laws, to a large extent, impose parallel requirements.”

This ruling substantially undermines the growing efforts at the state level to control rising health care costs. The opinion authored by Justice Kennedy invalidates state all-payer claims database (APCD) reporting requirements for self-funded employee health plans, thus depriving states of essential information on health care utilization, pricing, and quality in the state.

It’s helpful to know that APCDs are state-run databases that collect health care claims data and provider data from all payers in the state, including private insurers. More than 16 states have similar databases, which are seen as important tools in controlling health care costs. Without the information from self-funded health plans’ data, APCDs will be deprived of a significant chunk of data about private health insurance prices and services and therefore states will not be able to adequately address the growing problem of increasing health care costs.

While immediate reaction to the ruling characterized Gobeille as a win for insurers, some health insurers and self-insured employers, particularly smaller ones with less market power, would benefit significantly from greater price transparency and regulatory efforts to restrain the pricing power of dominant health care systems.

While Justices Ginsburg and Sotomayor, as well as the federal government, emphasized the important distinction between APCD data and the data ERISA plans generally report to federal regulators about their own finances and solvency, the majority did not. Unfortunately, the majority performed a perfunctory analysis of ERISA preemption, with sweeping and potentially devastating implications for state efforts to address health care cost control.

SCOTUS Blog information on the case available at: http://www.scotusblog.com/case-files/cases/gobeille-v-liberty-mutual-insurance-company/