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United States Supreme Court Rules That ERISA Preempts State Claims-Reporting Statutes

03.28.16

(Article from Insurance Law Alert, March 2016)

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The United States Supreme Court ruled that the reporting requirements set forth in the Employee Retirement Income Security Act (“ERISA”) preempt those of individual states.  Gobeille v. Liberty Mutual Ins. Co., 136 S. Ct. 936 (2016).

Vermont statutory law requires health insurers to report payments relating to health care claims and services to a state agency for compilation in a database.  The law encompasses health plans established by employers and regulated by ERISA.  Liberty Mutual’s health plan, which provides insurance benefits in all fifty states, is an “employee welfare benefit plan” under ERISA.  The plan’s third-party administrator, Blue Cross Blue Shield of Massachusetts, Inc., is subject to Vermont’s disclosure statute.  However, Liberty Mutual directed Blue Cross to withhold claim data from the state agency on the basis that it might violate its fiduciary duties with respect to customers’ confidential information.  Liberty Mutual filed suit seeking a declaration that ERISA preempted the Vermont statute, and an injunction preventing Vermont from seeking to obtain data about the plan or its members.  A Vermont district court ruled in favor of the state, finding that there was no preemption.  The district court reasoned that although the state scheme might have “some indirect effect”  on health benefit plans, the effect is “so peripheral that the regulations cannot be considered an attempt to interfere with the administration or structure of a welfare benefit plan.”  The Second Circuit reversed, concluding that Vermont’s reporting statute was preempted by ERISA because the state regime interferes with the uniformity of ERISA.  The Supreme Court affirmed.

The Supreme Court emphasized that reporting and record-keeping are integral aspects of ERISA.  Therefore, state regulations governing these same functions (whether the regulations  are “[d]iffering or even parallel”) could “create wasteful administrative costs and threaten to subject plans to wide-ranging liability.”  The Court therefore concluded that preemption is “necessary to prevent the States from imposing novel, inconsistent, and burdensome reporting requirements on plans.”