On March 1, 2016, in Gobeille v. Liberty Mut. Ins. Co., the US Supreme Court held that the Employee Retirement Income Security Act of 1974 (ERISA) preempts, as applied to ERISA plans, a Vermont law requiring entities, including health insurers and self-funded health plans, to report information related to health care claims and services for inclusion in a state health care database (No. 14–181, (Mar. 1, 2016)). According to the Court, preemption was necessary to prevent plans from having to comply with differing requirements in multiple jurisdictions.

The Vermont law at issue required health insurers (including self-funded health plans and third-party administrators (TPAs)), government agencies, and others that provided and paid for health care services to residents of the state to report certain information relating to health care. Among other information, covered entities were required to submit health care pricing and utilization data to the state, and information about individuals' health insurance enrollment and claims. The information was then compiled into a database (commonly known as an all-payer claims database) for use by insurers, employers, providers, and state agencies to review health care utilization, costs, and performance in the state. According to the Court, almost 20 states have or were implementing similar databases.

The employer/plan sponsor in this case, an insurance company (Liberty Mutual), maintained a self-funded ERISA health plan that was administered by a third-party administrator (TPA) (Blue Cross Blue Shield). The plan covered fewer than 200 individuals and was therefore only a voluntary reporter under the law. However, the plan's TPA, because it administered thousands of policies in the state, exceeded the 200-person threshold and was therefore subject to mandatory reporting. As a result, the TPA was required to report information about the employer's plan to the state.

The employer, concerned about potential ERISA fiduciary violations, instructed its TPA not to report data for the plan to the state (see Practice Note, ERISA Fiduciary Duties: Overview). The state then issued a subpoena to the TPA:

The employer filed an action in district court arguing that ERISA preempted the state law as applied to the plan. The district court granted summary judgment for the state, finding that the law's effect on health plans was so indirect that it could not be viewed as interfering with the structure or administration of a health plan. The US Court of Appeals for the Second Circuit reversed, however, holding that the reporting of information about plan benefits was a core ERISA function that must be governed by a uniform federal standard. The US Supreme Court subsequently granted certiorari to address the ERISA preemption issue.

The Supreme Court held that Vermont's state health database law was inconsistent with ERISA's goal of providing a single uniform national scheme for administering ERISA plans, and was therefore preempted.

Subject to exceptions, ERISA preempts state laws that relate to employee benefit plans (29 U.S.C. § 1144(a)). The Supreme Court has interpreted ERISA's preemption provision as superseding state laws that either reference or have an impermissible connection with ERISA plans (including laws that interfere with a central matter of plan administration or nationally uniform plan administration).

After discussing several of ERISA's key reporting (Form 5500 and Schedule H), disclosure, recordkeeping, and related penalty provisions, the Court observed that these requirements are central to uniform plan administration and integral to ERISA. The state database law, the Court reasoned, intruded upon ERISA's goal of national uniform plan administration by requiring plans to report detailed information about claims and plan enrollees. In the majority's view, differing (or parallel) requirements from multiple jurisdictions might result in wasteful administrative expenses and subject plans to wide-ranging liability. In addition, ERISA preemption of state laws such as Vermont's health database was necessary to prevent states from imposing "novel, inconsistent, and burdensome" administrative requirements on plans.

Under ERISA, the Court noted, decisions involving benefit plan reporting and related requirements are for the federal authorities, not the individual states. The majority added, however, that the Secretary of Labor, who is authorized to administer the reporting requirements of ERISA-governed plans, may be authorized to require plans to report data similar to that required under the Vermont law on a national level.

Though agreeing with the outcome, Justice Thomas wrote separately to question whether:

Specifically, Justice Thomas questioned if the Constitution authorizes Congress to prohibit the states from applying generally applicable civil laws to ERISA plans.

In a dissenting opinion, Justice Ginsburg (joined by Justice Sotomayor) disagreed that ERISA preempted the state law. According to the dissent, ERISA only preempts state reporting rules designed to serve the same purposes as ERISA's reporting requirements. The dissenting justices argued that the Vermont law and ERISA sought different information and served different purposes. Whereas ERISA requires ERISA-covered plans to file Form 5500 (so that the Department of Labor can evaluate a plan's management and solvency), the Vermont law collected data on paid health care claims so the state could better understand how its residents obtain health care and the effectiveness of that health care.

The dissent also argued that the imposition of some burdens on the administration of ERISA plans was not enough to require preemption. The justices reasoned that the state law imposed no burden on the employer because the law's compliance burden fell on its TPA. The justices noted that the TPA provided the required data to the state on behalf of several other ERISA-covered plans without issue. Additionally, they reasoned that the law's burden on the TPA was minimal because the law simply required it to take information generated in the ordinary course of business and report it in a prescribed format.

Finally, the dissent noted the importance of state collection of this type of data, citing the fact that several other states have developed similar health care data collection laws.

The majority's decision is welcome news for employers that sponsor ERISA health plans (and their TPAs), many of whom are already struggling to keep ahead of new plan reporting and disclosure obligations under the Affordable Care Act (ACA) (see Practice Notes, ACA Information Reporting: Forms 1095-C and 1094-C (Overview), ACA Information Reporting: Forms 1095-C and 1094-C Line Instructions, and ACA Information Reporting: Employee Statements). In its decision, the majority specifically addressed (without deciding) the employer's argument that the ACA's reporting requirements (which are incorporated into ERISA) further demonstrate why ERISA preempted Vermont's health database law. The Court noted that the ACA contains an "anti-preemption provision" under which the ACA is not construed to supersede state laws that do not prevent the ACA's applicability. The Court suggested that this rule might prevent new ACA-created reporting obligations from preempting state reporting regimes such as Vermont's. However, the Court set aside that issue for another day, and based its preemption ruling on ERISA's pre-ACA reporting, disclosure, and recordkeeping rules.