The United States Supreme Court has ruled that federal law permits a self-funded health plan to disregard a Vermont statute requiring health care claims data to be reported to the state. Since this decision was issued on a 6-2 vote, it was unaffected by the death of Justice Anton Scalia in February.
The Vermont law in question established an all-inclusive health care database used to evaluate health outcomes and costs. The law requires health plans (among other entities) to report payments relating to health care claims, as well as other related information, into a state agency for compilation into the database. Seventeen other states, including Minnesota, have similar laws requiring this sort of reporting.
Federal Law Preempts
Liberty Mutual maintains a self-insured health plan under the Employee Retirement Income Security Act (ERISA) that provides coverage to over 80,000 individuals. A self-funded plan is not provided through insurance; it is provided through employer assets or a multiemployer trust. This type of plan actually covers more than 93 million people in America.
A Vermont state agency issued a subpoena to Liberty Mutual and its third-party administrator, Blue Cross Blue Shield of Massachusetts, to submit all files on member eligibility, medical claims and pharmacy claims for their Vermont employees and dependents in accordance with the state law. The penalty for noncompliance would be a fine of up to $2,000 per day and a suspension of Blue Cross’ authorization to operate in Vermont for as long as six months.
Liberty Mutual instructed Blue Cross to not provide the data because of concerns that the disclosure might violate its fiduciary duties under the Plan. Liberty Mutual then sued to obtain a declaration that ERISA preempts application of the Vermont law.
The Supreme Court sided with Liberty Mutual, declaring that Vermont cannot force Liberty Mutual to turn over its claims data. The court ruled that ERISA preempts the state statute because allowing Vermont and other states to maintain individual (and differing) requirements would be inconsistent with the federal goal of “a uniform national scheme” for ERISA plans. ERISA has its own reporting and disclosure obligations, and that should be enough for plans of this type.
Justice Kennedy wrote the majority opinion in which three other justices joined. Justice Thomas and Justice Breyer concurred with the result but offered a different rationale. Justice Ginsberg wrote a dissent, in which Justice Sotomeyer joined.
Bottom Line
This decision provides relief to employers who are subject to state regulation for self-insured health plan claims data. The demands of these various state laws can be onerous and are often coupled with threats of penalties and fines. Minnesota’s law, like those of the other states, likely will be ruled preempted as well.
Remember, however, that this decision only affects self-funded plans.
For more information, please contact Ruth Marcott at rmarcott@felhaber.com.