Supreme Court Decision Could Lower Health Care Costs


By Allen Smith December 4, 2015

The distribution of health claims data to different states in a variety of formats is costly for insurers and ultimately employers. The Supreme Court may step in and help reduce costs if it rules that the Employee Retirement Income Security Act (ERISA) doesn’t allow individual states to request such data.

The Supreme Court heard oral arguments in a case on Dec. 2 to determine whether ERISA bars the state of Vermont from requiring self-insured health plans to turn over claims data. The 2nd U.S. Circuit Court of Appeals struck down the Vermont Health Care Uniform Reporting and Evaluation System, ruling that ERISA pre-empted it.

“Every dollar spent on reporting could take away from dollars that could be spent on health care,” said Ann Caresani, an attorney with Tucker Ellis in Cleveland. She noted that the case could affect as many as 93 million people, as high health care administrative costs would be passed on to employers and employees.

“This is an old-fashioned pre-emption type of case,” noted Howard Shapiro, an attorney with Proskauer Rose in New Orleans. “Anything that is pre-emption-friendly should make HR’s work easier to do. It’s easier to have a single standard for a plan than multifaceted state-by-state types of regimens.”

Pre-emption Argument Examined

Justice Samuel Alito Jr. asked Bridget Asay, Vermont solicitor general, “Doesn’t the Affordable Care Act include in ERISA a section authorizing the secretary [of labor] to gather information from plans for the purpose of improving health outcomes?”

“Yes. The Affordable Care Act made a technical amendment to ERISA, which in turn incorporated the act’s amendments to the Public Health Services Act,” Asay answered. “Those do not change the test for ERISA pre-emption,” she asserted. The amendments do not impact the defendant Liberty Mutual Insurance Co. plan’s annual reporting to the Department of Labor, she added.

Asay explained that there are a couple of reasons for that. “One is that the Affordable Care Act itself has an anti-pre-emption provision,” she noted. And the part of ERISA that the Affordable Care Act amended was not an original part of the law; instead, the Health Insurance Portability and Accountability Act (HIPAA) added it.

“Why does it matter whether it was in ERISA as originally passed?” Alito asked. “It is in ERISA now.” He added, “And it is sort of true that there is an anti-pre-emption provision, but there is also a provision in the Affordable Care Act that says that the provisions that are added have no effect on the ERISA pre-emption provision.”

Justice Stephen Breyer asked whether states have to go to the Labor Department or the Department of Health and Human Services first and ask for a uniform rule, or whether the departments have to come to the states “when the rules of 50 states turn out to be a mess.”

“Because this is classic health care regulation for which states are responsible—insurance rate review, budget review, health care research—it is an area in which states are permitted to regulate,” Asay answered. “And they’re permitted to regulate even slightly differently from state to state.”

But Breyer remarked that without pre-emption, “There can be 50 states with 50 different sets of regulations imposing a huge financial burden upon health care. And were that to happen, suddenly all the people we’re trying to help under this plan will find themselves much worse off, and purely for bureaucratic reasons.”

However, Justice Sonia Sotomayor suggested that the differences between state requirements might not be so great. She asked whether all reporting is being done in one set of electronic claims transactions required by HIPAA, the ICD-10 (the International Statistical Classification of Diseases and Related Health Problems).

There is a national standard for how the data is collected and states already are following that, Asay responded.

But some of the justices didn’t seem persuaded.

“So you don’t think 50 different regimes of reporting is going to require a significant diversion of money away from benefits to administration?” Chief Justice John Roberts Jr. asked John Bash, assistant to the solicitor general with the U.S. Department of Justice, which was arguing for Vermont.

“Not on this record,” Bash responded. At a minimum, Liberty Mutual “could have had its own third-party administrator come in and say these reporting requirements are burdensome.” However, Bash said, Liberty Mutual didn’t do that.

‘Emerging Reality’

Seth Waxman, an attorney with WilmerHale in Washington, D.C., who is representing Liberty Mutual, argued that ERISA pre-emption was in order because letting states collect health data would be too burdensome.

He said small plans spend “up to 40 percent of their entire assets on state reporting.”

Waxman noted that in addition to Vermont’s data collection requirements, since the litigation began, Massachusetts has informed Liberty Mutual that it wants the following reporting data:

  • The premiums the plan charges.
  • Its actuarial assumptions.
  • The summary of its plan designs.
  • The plan’s reserves.
  • Its surplus.
  • Its provider payments.
  • Its provider levels.
  • Information about medical procedures whose claims are denied.

“Is that information—the laundry list you went through—already available at Blue Cross Blue Shield [Liberty Mutual’s third-party administrator] and being reported somewhere else?” Roberts asked.

“No, it is not,” Waxman answered. “Absolutely not.”

Waxman noted that the Department of Labor and the Department of Health and Human Services have the authority under ERISA “to impose the kind of record-keeping and reporting requirements that Vermont and now 17 or 19 other states do.”

The Supreme Court “has to take account of the possibility, which is the emerging reality, that all 50 states and the District of Columbia and Puerto Rico will have their own mandatory all-payer claims databases that will require different things,” Waxman added. Vermont alone requires “hundreds of data fields” to be completed and there is no national standard for data requests, he asserted.

The state data requests require that “we keep records that we don’t keep, and that we display them and provide information in ways that we don’t, and that differ from one state to another,” he concluded.

This case is Gobeille v. Liberty Mut. Ins. Co., No. 14-181 (No. 14-181).

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.


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