High Court Loss for State Seeking Insurance Data

WASHINGTON (CN) - Vermont's health care reporting law overburdens insurers already meeting federal requirements, the U.S. Supreme Court ruled Monday.

A challenge to the scheme erupted in federal court when Vermont subpoenaed Blue Cross Blue Shield of Massachusetts for various records on the several thousand Vermonters it serves. The state is one of roughly 20 states that have an all-inclusive health care database or are implementing such collections, also known as all-payer claims databases.

Though Blue Cross is a mandatory reporter under Vermont law, it processes claims for Liberty Mutual Insurance, which qualifies only as a voluntary reporter since it covers just 137 Vermonters.

Liberty did not want Blue Cross to comply with the subpoena, worried that any disclosure would divulge confidential information regarding its members in violation of its fiduciary duties.

With the state threatening fines against Blue Cross of up to $2,000 a day, plus a six-month suspension in the state, Liberty filed a federal complaint.

The insurer found success in the Second Circuit, which found that the Employee Retirement Income Security Act pre-empted Vermont's law.

In its first set of opinions since the death of Justice Antonin Scalia, the U.S. Supreme Court affirmed 6-2 Tuesday.

Emphasizing that "ERISA's reporting, disclosure, and recordkeeping requirements for welfare benefit plans are extensive," the ruling calls it unsurprising that plans must already keep detailed records as part of their federal compliance.

"Vermont's reporting regime, which compels plans to report detailed information about claims and plan members, both intrudes upon 'a central matter of plan administration' and 'interferes with nationally uniform plan administration," Justice Anthony Kennedy wrote for the majority.

Differing or parallel regulations are a common culprit of "wasteful administrative costs," plus they threaten plans to wide-ranging liability, the ruling states.

Kennedy said "pre-emption is necessary to prevent the states from imposing novel, inconsistent, and burdensome reporting requirements on plans."

Though Vermont wanted Liberty to show how its reporting rules caused economic costs, Kennnedy agreed with the plan that the mere "possibility of a body of disuniform state reporting laws" justified pre-emption.

"A plan need not wait to bring a pre-emption claim until confronted with numerous inconsistent obligations and encumbered with any ensuing costs," he wrote.

Though President Barack Obama's health care law may pre-empt state law as well, Kennedy this has no effect on the pre-emptive force of ERISA's reporting requirements.

"ERISA's express pre-emption clause requires invalidation of the Vermont reporting statute as applied to ERISA plans," he wrote. "The state statute imposes duties that are inconsistent with the central design of ERISA, which is to provide a single uniform national scheme for the administration of ERISA plans without interference from laws of the several States even when those laws, to a large extent, impose parallel requirements."

Justices Clarence Thomas and Stephen Breyer each penned concurring opinions, in addition to joining the ruling by Kennedy.

Thomas said precedent does dictate pre-emption, but that this statute may represent an invalid exercise of congressional power.

"Until we confront whether Congress had the constitutional authority to pre-empt such a wide array of state laws in the first place, the court - and lower courts - will continue to struggle to apply §1144," he wrote. "It behooves us to address whether Article I gives Congress such power and whether §1144 may permissibly be read to avoid unconstitutional results."

Breyer said Vermont's scheme must be pre-empted but that states still have other opportunities to obtain information from insurers.

"The federal agencies are more likely to be informed about, and to understand, ERISA-related consequences and health-care needs from a national perspective," he wrote. "Their involvement may consequently secure for the states necessary information without unnecessarily creating costly conflicts - particularly when compared with such alternatives as giving each state free rein to go its own way or asking nonexpert federal courts to try to iron out, regulation by regulation, such conflicts."

Justices Sonia Sotomayor meanwhile joined a dissent by Justice Ruth Bader Ginsburg that denies any intrusion by Vermont on federal law.

The conclusion stems from the fact that ERISA is concerned with the design and administration of employee benefit plans.

Its reporting requirements are geared toward ensuring that the plans provide the benefits they are supposed to.

"Vermont's data-collection statute, in contrast, aims to improve the quality and utilization, and reduce the cost, of health care in Vermont by providing consumers, government officials, and researchers with comprehensive data about the health care delivery system," Ginsburg wrote.

The dissent says Vermont is one of many states that has "informed the court of their urgent need for information yielded by their health care data-collection laws."

"Wait until the federal government acts is the court's response," Ginsburg wrote. "The Department of Labor's capacious grant of statutory authority, the court observes, might allow it to collect the same data Vermont and other states seek about ERISA plan health-benefit payments. Once the information is collected, the court conjectures, the department could pass the data on to the states. It is unsettling, however, to leave the states dependent on a federal agency's grace, i.e., the Department of Labor's willingness to take on a chore divorced from ERISA's objectives.

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