The Supreme Court’s recent decision in Gobeille v. Liberty Mutual Insurance Company delivered a blow against states’ efforts to develop data-driven health-care policy. The Court struck down a Vermont law requiring health insurers to report data relating to “health-care costs, prices, quality, utilization or resources required” to the state, ruling that such state-mandated reporting requirements are preempted by the Employee Retirement Income Security Act of 1974 (ERISA). As a result, Vermont and the 17 other states with similar laws will no longer be able to require health insurers to report this data directly to them.
ERISA’s provisions preempt all state laws insofar as they “relate to any employee benefit plan.” A state law is preempted if it has an impermissible “connection with” or “relates to” ERISA plans. Meaning, a state law cannot govern matters central to ERISA plan administration or interfere with a nationally uniform plan administration. The Court held that ERISA’s extensive reporting, disclosure, and recordkeeping requirements indicated these functions are, in fact, “central to, and an essential part of,” the uniform system of ERISA plan administration. Thus the required reporting under Vermont’s data collection law was necessarily preempted.
Justice Anthony Kennedy delivered the 6-2 majority opinion, reasoning that “[d]iffering, or even parallel, regulations from multiple jurisdictions could create wasteful administrative costs and threaten to subject plans to wide-ranging liability.” Therefore preemption was necessary to prevent inconsistent and burdensome state reporting requirements on national health plans such as Liberty Mutual’s.
This interpretation of the preemption clause has broad implications for states’ ability to obtain data critical to developing informed health-care policy. As previously discussed, the efficacy of Vermont’s data collection law, and other state laws like it, depends on comprehensive reporting. Almost half of insured Americans receive coverage from their employers, and 61 percent of this population is covered by an employer’s self-insured plan. Prohibiting the collection of relevant claims data substantially inhibits states’ efforts to improve the quality and affordability of health care.
In her dissent, Justice Ruth Bader Ginsburg, joined by Justice Sonia Sotomayor, criticized the majority’s broad application of ERISA’s preemption. Justice Ginsburg pointed out that Vermont’s law requires Blue Cross (Liberty Mutual’s third-party administrator) to take information generated in the ordinary course of its operations and report that information to the state. She noted the majority’s finding of a burden “[e]ntirely overlooked … the technological capacity for efficient computer-based data storage, formatting, and submission,” arguing the imposition of some burdens on the administration of ERISA plans does not suffice to require preemption, but rather, the burden must be substantial in order to actuate preemption.
The majority’s holding effectively makes it impossible for states to, on their own, collect the data without running afoul of ERISA. However, as Justice Stephen Breyer noted in his concurring opinion, the preemption does not necessarily prevent states from obtaining the information. States may still obtain the necessary data if insurers voluntarily report the information, which most already do. Additionally, states may ask the federal government for appropriate approval to obtain the data they need. As the majority stated, the Secretary of Labor has the authority to establish additional reporting and disclosure requirements and thus “may be authorized to require ERISA plans to report data” to states. Justice Breyer also suggests the Department of Labor could develop reporting requirements that satisfy states’ needs, or it could delegate the authority to obtain data related to that state to the state itself.
While these options provide alternative means for states to obtain this data, as Justice Ginsburg put it, “[i]t is unsettling, however, to leave the states dependent on a federal agency’s grace.” In their respective amicus briefs, a number of states stressed the importance of the information provided by their data-collection laws in developing informed health-care policy. Access to this data is critical for continued health-care reform and it would be imprudent to leave the future of data-driven health-care policy up to the whims of a federal agency and voluntary efforts. Instead, the Department of Labor should establish additional reporting and disclosure requirements, and if it fails to act, Congress should force its hand. By doing so, the federal government should ensure states continue to receive this vital data while keeping the cost of compliance low.
Image: Joe Ravi.