Supreme Court decision impacts price transparency efforts

As a result of a recent case decided by the U.S. Supreme Court, advocates of healthcare transparency may need to adjust their data collection strategies. 

In Gobeille v. Liberty Mutual Insurance Company, the Supreme Court considered a challenge to a Vermont law requiring disclosure of payments relating to healthcare claims and other information relating to healthcare services to a state agency.

The state had enacted an all-payer claims database (APCD) to collect data from health insurers, healthcare providers, healthcare facilities, and governmental agencies. Included as health insurers were health plans established by employers and regulated by the Employee Retirement Income Security Act of 1974 (ERISA).

Liberty Mutual Insurance Company (Liberty Mutual), the sponsor of a self-funded ERISA plan, objected to the application of the law to its health plan. The Supreme Court, in a 6-2 decision, agreed with Liberty Mutual and ruled that ERISA pre-empted the Vermont statute as it applies to ERISA plans.

Vermont’s law

APCDs are state-sponsored or state-designated databases for the collection, aggregation and analysis of various healthcare data, including pricing. Several states have established or are considering establishing such databases.

Vermont’s law requires the reporting of information relating to healthcare costs, prices, quality, utilization, or resources required by a state agency, including data relating to health insurance claims and enrollment.

The Vermont database is to be made available as a resource for insurers, employers, providers, purchasers of healthcare, and state agencies to continuously review healthcare utilization, expenditures, and performance.

The state agency overseeing the database issued regulations requiring reporting data regarding services provided to Vermonters regardless of whether the treatment is provided in Vermont or out-of-state and about non-Vermonters who are treated in Vermont.

The Vermont law is intended to:

• Determine the capacity and distribution of existing resources,

• Identify healthcare needs and inform healthcare policy,

• Evaluate the effectiveness of intervention programs on improving patient outcomes,

• Compare costs between various treatment settings and approaches,

• Provide information to consumers and purchasers of healthcare, and

• Improve the quality and affordability of patient healthcare and healthcare coverage.

The state included information from employer plans so the data collected would provide a more comprehensive picture of the healthcare system.

Submissions to the Court estimated that about half of those Americans with health insurance receive coverage from their employers and 61% of such persons are covered by a self-insured plan. In Vermont, about 20% of the database’s content originated from self-insured plans. Without including ERISA plans, the state believed, the data collected would be incomplete.

Liberty Mutual

Liberty Mutual’s self-insured health plan provides benefits in all 50 states to more than 80,000 individuals. Blue Cross Blue Shield of Massachusetts is the third-party administrator of the plan.

While Liberty Mutual on its own did not employ enough Vermonters to make it subject to the law’s mandatory reporting requirements, it was required to report because of its relationship with Blue Cross, which covers a large number of Vermonters and was required to report pursuant to the Vermont law.

Entities covered are required to submit data monthly, quarterly, or annually, depending on the number of individuals they serve, with entities like Blue Cross reporting more frequently than entities serving fewer customers.

Next: The Court’s position and key takeaways

The Court’s position

The Supreme Court has described two categories of state laws that are pre-empted by ERISA:

• First, a state law is pre-empted where it acts “immediately and exclusively” upon ERISA plans or “where the existence of ERISA plans is essential to the law’s operation.”

• Second, state laws that have an impermissible connection with ERISA plans, meaning a state law that governs “a central matter of plan administration” or “interferes with nationally uniform plan administration,” are also pre-empted.

The Court determined that the Vermont law interfered with the uniformity of plan administration and concluded that ERISA plans, like Liberty Mutual’s, are not subject to the Vermont law.

The Court noted that in ERISA, Congress intended to establish the regulation of employee welfare benefit plans as exclusively a federal concern. The Secretary of Labor, not the states, is authorized to administer the reporting requirements of plans governed by ERISA.

The Court saw the Vermont law as intruding upon “a central matter of plan administration” and “interfer[ing] with nationally uniform plan administration” because disclosure and recordkeeping are central components of federal regulation of ERISA plans.

Requiring ERISA plans to comply with different or even similar laws from 50 states would undermine the goal of minimizing administrative and financial burdens on plan administrators, and ultimately, plan beneficiaries, according to the Court. Even if different obligations have not yet been imposed, the Court stated, a plan need not wait to bring a pre-emption claim until confronted with inconsistent obligations and encumbered with additional costs. 

While Vermont was only interested in collecting data, not regulating ERISA plans, the Court decided the law was still pre-empted because it required the reporting of detailed information about the administration of benefits in a systematic manner, a fundamental ERISA function.

The Court disagreed with Vermont’s assertion that pre-emption was not appropriate because the state was applying its traditional power to regulate in the area of public health. The Court concluded that Congress intended to pre-empt all laws intruding upon ERISA, even those with different purposes. 

Takeaways for other plans/providers

States operating or planning APCDs will need to take the decision in Gobeille into consideration in formulating their data collection plans. The number of individuals covered by ERISA plans as a percentage of individuals whose data will be submitted to APCDs may vary from state to state, so the significance of including or excluding data from ERISA plans should be considered. 

If the data is considered important or essential, APCDs can ask ERISA plans to submit their data. While ERISA prevents APCDs from requiring ERISA plans to participate, it does not prohibit voluntary participation.

Employers with self-insured plans may find the data collected by APCDs useful to their own efforts to improve quality of care and customer satisfaction and to contain costs. By establishing uniform and user-friendly means of participation as well as access to useful data, APCDs can encourage such participation by ERISA plans. APCDs can also seek the assistance of the federal government in obtaining the data from ERISA plans. 

Finally, the data collected by some APCDs, like Vermont’s, go beyond collecting pricing data and seek insight into various aspects of the healthcare system. To obtain more limited pricing data, APCDs can look to alternative means of obtaining such information from providers and healthcare payers subject to state jurisdiction.

Deborah Dorman-Rodriguez is a partner at Freeborn & Peters LLP, and serves as leader of the Firm’s Healthcare Practice Group

David Kaufman is a partner at Freeborn & Peters LLP, and serves as a key member of the Firm's Healthcare Practice Group