ERISA Pre-empts State Requirements for Health Plans

In a case regarding whether Liberty Mutual Insurance Company’s health plan for employees must be compelled to comply with a Vermont law requiring reporting of payments relating to health care claims and other information relating to health care services to a state agency for compilation in an all-inclusive health care database, the U.S. Supreme Court held that the Employee Retirement Income Security Act (ERISA) pre-empts Vermont’s statute as applied to ERISA plans.

The high court noted that the Vermont law governed or interfered with the uniformity of plan administration. In its opinion, it said ERISA seeks to make the benefits promised by an employer more secure by mandating certain oversight systems and other standard procedures, and those systems and procedures are intended to be uniform. “ERISA’s extensive reporting, disclosure, and recordkeeping requirements are central to, and an essential part of, this uniform plan administration system,” the court wrote. “Pre-emption is necessary in order to prevent multiple jurisdictions from imposing differing, or even parallel, regulations, creating wasteful administrative costs and threatening to subject plans to wide-ranging liability.”

Howard Shapiro, partner in the Employee Benefits, Executive Compensation & ERISA Litigation Practice Center at law firm Proskauer, says, “The Gobeille opinion is a forward step in preemption for self-funded plans. It permits self-funded plans to enjoy uniform reporting and disclosure responsibilities nationwide.  Almost 20 states are implementing similar all-payer claims data bases, so this is a helpful step.”

He says it is uncertain what the impact would be for fully insured plans. “Preemption for fully insured plans would turn on whether these laws are state laws regulating insurance.”

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Shapiro adds that, “The court recognizes that compliance with reporting and disclosure statutes from 50 separate states would undermine the goal of minimizing administrative and financial burdens on plan administrators, burdens borne ultimately by plan participants.”

The Supreme Court also noted that ERISA’s uniform rule design makes it clear that the Secretary of Labor, not the separate states, is authorized to decide whether to exempt plans from ERISA reporting requirements or to require ERISA plans to report data such as that sought by Vermont.

“The court notes that the Department of Labor has the authority to establish additional reporting and disclosure goals for plans, and if the DOL undertook such an effort, plan administrators would have one set of criteria to apply, nationwide,” Shapiro says.

Andrew Holly, a partner at the international law firm Dorsey & Whitney, says, "The Supreme Court's decision highlights the power of ERISA's preemption clause. The Court prevented Vermont from obtaining health data from the self-funded ERISA plan in question, even without any evidence that the law would have a meaningful adverse economic impact on the plan or the administrator.”

He adds that the decision will not directly affect many employers or plans since it has to do with a unique Vermont law, but “it will preclude states from any number of attempts to enact regulations that have an effect on ERISA plans.”  He concludes that, “Employers who sponsor self-funded ERISA plans should consider this decision any time they have concerns that state laws might affect the administration of their plans.”