Gobeille v. Liberty Mutual Ins., 2016 WL 782861 (U.S. 2016)
Affirming a decision by the Second Circuit (see our Checkpoint article), the U.S. Supreme Court has held that a Vermont law that requires reporting of health plan claims, cost, and other information to a state database is preempted by ERISA as applied to self-insured plans. The law targets health insurers, providers, and government agencies, and defines “health insurers” to include self-insured health plans and TPAs. A self-insured ERISA health plan sponsor challenged the law’s application to its plan and sought to prevent the collection of data from the plan’s TPA. As background, ERISA generally preempts—that is, supersedes—state laws that “relate to” ERISA plans. An exception to ERISA’s general preemption rule allows certain state regulation of insurers.
The Court explained that its prior decisions have found preemption of state laws that act immediately and exclusively on ERISA plans or have an impermissible “connection with” ERISA plans. The plan sponsor argued that the Vermont law falls into the second category since it interferes with nationally uniform plan administration. According to the Court, ERISA’s extensive reporting and disclosure rules, and the related requirement that plans keep detailed records to support and verify compliance with those rules, are integral to ERISA’s functioning. The detailed recordkeeping and reporting required by the Vermont law intrude on that integral function. Furthermore, similar requirements from multiple jurisdictions could “create wasteful administrative costs and threaten to subject plans to wide-ranging liability.” The Court concluded that preemption is necessary to avoid subjecting ERISA plans to inconsistent and burdensome state requirements.
Two dissenting justices disagreed and said that the law does not impose a significant economic or administrative burden on plans and serves a different purpose than ERISA’s reporting rules, but the majority dismissed these factors as irrelevant, concluding that the state law directly regulates a central matter of plan administration and noting that plans need not delay bringing preemption claims until they are encumbered with the costs of complying with inconsistent obligations. And the Court was unpersuaded that preemption should not apply because public health is traditionally an area of state regulation, explaining that reporting’s centrality to ERISA regulation indicates that Congress intended to preempt laws like this one. The Court distinguished state laws necessitating “incidental” reporting by ERISA plans (such as state hospital tax laws) as not preempted.
EBIA Comment: Although ERISA’s preemption provision is very broad, prior decisions have recognized that the term “relate to” would have no practical limits if read literally. But courts have struggled to articulate a limiting principle. With two justices dissenting from the majority opinion in this case, and two others filing concurring opinions, the boundaries of ERISA preemption continue to be unsettled. It remains to be seen whether this decision, with its focus on nationally uniform plan administration, marks a shift away from recent cases adopting a constricted view of ERISA preemption. A hint may be given if the Court decides to hear the appeal of a challenge to Michigan’s tax on claims paid by self-insured health plans (see our Checkpoint article)—a matter on the court’s docket for later this week. For more information, see EBIA’s ERISA Compliance manual at Sections XXXIX.C (“State Laws That ‘Relate to’ ERISA Plans Are Generally Preempted”) and XXXIX.H (“Preemption Analysis Applied to Specific State Laws”); see also EBIA’s Self-Insured Health Plans manual at Section V.E (“ERISA Preemption and the Application of State Mandates”).
Contributing Editors: EBIA Staff.