Home PublicationsCommentary Supreme Court Decision Will Determine Fate of Data-Driven Health-Care Policy

Supreme Court Decision Will Determine Fate of Data-Driven Health-Care Policy

by Elaine Ding
Supreme Court o the United States

The rising cost of health care has long been an issue in the United States, but recent media scrutiny of the Affordable Care Act has highlighted the need for states to do more to address health-care costs. One step that states have taken is passing legislation to create a database that aggregates all health-care claims so that the state government can better understand the distribution and costs of health-care services and make evidence-based decisions about health-care policy. However, a case before the U.S. Supreme Court has called into question the viability of these databases.

In Gobeille v. Liberty Mutual Insurance Company the court will decide whether the Employee Retirement Income Security Act of 1974 (ERISA)—a federal law that sets minimum standards for pension and health plans in private industry—preempts Vermont’s health-care database law as applied to the third-party administrator for a self-insured employee health plan. If the court finds that ERISA does preempt state law, then Vermont would be prevented from collecting valuable data from health plan providers. Vermont’s database law seeks to provide comprehensive state-level information about the capacity, effectiveness, and costs of health-care services provided to state residents in order to improve the quality and affordability of health care. It does so by requiring health insurers, health-care providers, facilities, and governmental agencies to report information regarding the filing of health insurance claims, enrollment information, health-care costs, prices, quality, utilization, and resources. The law only requires health insurers with 200 or more enrolled or covered members living in or receiving services in Vermont to report.

The case was brought by Liberty Mutual, which operates its self-insured employee health plan through a third-party administrator (TPA), Blue Cross Blue Shield of Massachusetts, for its Vermont plan participants. As Liberty Mutual’s TPA, Blue Cross handles claims processing, review, and payment. This claims data must be reported to the state despite the fact Liberty Mutual is a “voluntary reporter,” with less than 200 covered members in the state, because Blue Cross qualifies as a “mandated reporter.” When Vermont subpoenaed claims data from Blue Cross, Liberty Mutual sued the state and argued that ERISA’s reporting requirements preempted the Vermont statute.

ERISA’s preemption clause states that its provisions preempt and void all state laws to the extent they relate to employer-sponsored health plans. A state law relates to an employee benefit plan “if it has a connection with or reference to such a plan.” Simply put, state laws may not directly regulate private employer-sponsored health plans or have substantial administrative or financial impact on them. Essentially, state statutes may not regulate any of ERISA’s core functions. The parties do not dispute this. The primary dispute is whether recordkeeping and reporting is one of ERISA’s core functions.

The State asserts that its law does not conflict with ERISA’s reporting requirements because the “focus and purpose of Vermont’s data collection” are for a fundamentally different purpose than ERISA’s financial reporting and disclosure requirements, and therefore do not impact ERISA’s core concern with the administration of benefits to beneficiaries. In addition, the Supreme Court has previously upheld state statutes that have only incidental burdens on ERISA plans. Gobeille contends the burdens imposed on Liberty Mutual are trivial because Liberty Mutual’s administrator already prepares and collects the data for its non-ERISA customers in Vermont, “and that the data is collected in a nationally standardized format that makes costs from inconsistency a minor irrelevancy.” Therefore ERISA should not preempt  generally applicable state laws, unrelated to the objectives of ERISA, merely because those laws involve data collection or record-keeping.

In contrast, Liberty Mutual argues for a broader interpretation of ERISA’s preemption clause, stating that state law should be preempted if it operates in the same area as federal law. Liberty Mutual contends that previously state statutes were only upheld because they fell outside the area of core concern of ERISA and merely had incidental economic impact on employee benefit plans. Liberty Mutual argues that record-keeping and reporting by employee benefit plans are core ERISA functions which should be shielded from potentially inconsistent and burdensome state regulation. In addition, if numerous states established all-payer databases with inconsistent data requirements, compliance would be burdensome.

The Court’s decision in Gobeille v. Liberty Mutual will have important implications on states’ ability to monitor their health-care markets and develop informed health-care policy. An increasing majority of workers receive coverage from self-insured employer plans. The reporting of self-insured employer data is critical to the quality and usefulness of a health-care database. Without such information, there would be gaps in the data and such a database would be unrepresentative and not useful in crafting health-care policy. Furthermore, government agencies would not be able to conduct useful analysis on the data and transparency in the health-care market would be greatly reduced.

Although Justice Stephen Breyer agrees “[Vermont] should have the information. I have no doubt about that,” he and other Justices share the concern that individual state reporting requirements would impose a significant burden on insurers. The Justices seemed divided on the matter. Chief Justice John Roberts and Justices Antonin Scalia and Samuel Alito challenged the State’s oral argument and suggested Vermont’s health-care database law fell within a core ERISA function because of a provision added to ERISA by the Affordable Care Act, giving the Secretary of Labor broad authority to collect such data. They believe this makes data collection a core ERISA function, thereby preempting Vermont’s law. In contrast, Justices Ruth Bader Ginsburg and Elena Kagan sided with Vermont’s argument that the purpose of Vermont’s all-payer database is so far removed from ERISA’s core function that ERISA should not prevent the data collection. Towards the middle were Justices Anthony Kennedy and Stephen Breyer.

Should the Supreme Court find that ERISA does preempt Vermont law, there are several possible options to ensure the continued collection and analysis of this information. Congress could amend ERISA to clarify the scope of its preemption. Alternatively, since much of the data is already collected under ERISA, the federal government could pass the relevant data to states for analysis. Lastly, states should be encouraging data standardization so cross-state comparisons are possible and the burden imposed on self-insured employers is lowered.

Given the importance of data for continued health-care reform and cost-savings, it is crucial that states find a way to continue this type of data collection and analysis on the health-care industry.

Image: Ted Eyton

You may also like

Show Buttons
Hide Buttons