March 16, 2016

Supreme Court: ERISA Pre-empts Law Requiring Reporting to State Healthcare Database

Holland & Knight Alert
Louis L. Joseph


  • In a 6-2 decision, the Supreme Court holds that a Vermont state law requiring Employment Retirement Income Security Act (ERISA)-covered health plans to submit detailed reporting to a state agency has an impermissible "connection with" ERISA plans and is therefore pre-empted by ERISA.
  • The state's traditional interest in regulating matters of public health is not sufficient to save from pre-emption a law that "intrudes upon a central matter of plan administration" and "interferes with nationally uniform plan administration" for ERISA-covered plans.
  • A plan subjected to such a state law has standing to challenge its enforceability in court without waiting until the plan is subjected to inconsistent federal and state reporting obligations, and forced to incur additional costs of compliance.

In Gobeille v. Liberty Mut. Ins. Co., the U.S. Supreme Court held that the Employee Retirement Income Security Act of 1974 (ERISA) pre-empts a Vermont law that requires healthcare providers, including health insurers and self-funded employer health plans, to report information related to healthcare claims and services for inclusion in a state healthcare database. In its broadly sweeping decision, released on March 1, 2016, the Supreme Court stated that the Vermont statute cannot be enforced against ERISA-covered plans.

The Vermont Healthcare Database

The Vermont law at issue requires health insurers, self-funded health plans, third-party administrators, healthcare providers, healthcare facilities and government agencies to report certain information relating to healthcare to Vermont state agencies. This information includes medical claims data, pharmacy claims dates, member eligibility and provider data among other information. Additionally, the law permits a state agency to determine the types of information to be filed and the time, place and manner of such filing. The State of Vermont compiles the information into an all-payer claims database, which can be used by state agencies in addition to insurers and employers, to review the overall cost and utilization of healthcare.


This case arose after an ERISA plan's third-party administrator was directed to report plan data to a Vermont agency. The employer/plan sponsor, Liberty Mutual Insurance Company, instructed the third-party administrator not to disclose the information, believing that the disclosure would violate its fiduciary duties under ERISA. The state then issued a subpoena to the third-party administrator ordering that the specified data be reported, and threatening a fine of up to $2,000 per day and an in-state suspension for up to six months.

Liberty Mutual filed suit in U.S. district court, seeking a declaration that the Vermont law was pre-empted by ERISA. The district court granted summary judgment for Vermont, finding that the Vermont law was too indirect to impermissibly interfere with an ERISA health plan. The U.S. Court of Appeals for the Second Circuit reversed the district court holding, concluding that reporting by ERISA plans was an ERISA function that should remain solely subject to a national standard. Thereafter, the U.S. Supreme Court granted certiorari to address ERISA pre-emption.

The Supreme Court Holding

Reviewing the existing case law addressing ERISA pre-emption, the Court stated that ERISA pre-empts two categories of state law:

  • those state laws that have a "reference to" ERISA plans
  • those state laws that have an impermissible "connection with" ERISA plans

Specifically, the Supreme Court stated that an "impermissible connection" is presented where a state law attempts to "govern a central matter of plan administration," or "interferes with nationally uniform plan administration."

The Supreme Court ultimately held its decision based on the following:

  1. Plan reporting, disclosure and recordkeeping are fundamental components of ERISA's regulation of plan administration. Differing reporting regimes from multiple jurisdictions potentially impose wasteful administrative costs and wide-ranging liabilities for ERISA-covered plans.
  2. The Vermont law represents a direct regulation of a fundamental ERISA function. The fact that Vermont's purposes in requiring data reporting from ERISA plans may be different than those motivating the ERISA reporting scheme is irrelevant, as is the fact that the state may be acting within its traditional sphere of interest in addressing health-related concerns. Neither factor can validate a state law that enters a fundamental area of ERISA regulation.
  3. State laws that require reporting by ERISA-covered plans, even though imposing no substantive requirements with respect to plan benefits or coverage, still interfere with the congressional goal of allowing nationally uniform plan administration.

Practical Impact and Moving Forward

In its decision, the Supreme Court noted that nearly 20 states have implemented or are implementing health databases similar to that in effect in Vermont. Sponsors of ERISA-covered health plans in these states will need to consider the impact of the Liberty Mutual decision and decide whether to pull back from compliance with any similar state-mandated reporting requirements.

Additionally, the Supreme Court's reaffirmation and broad construction of ERISA pre-emption has already led to the scrutiny of other state healthcare-related statutes. On March 7, the Supreme Court ordered the U.S. Court of Appeals for the Sixth Circuit to reconsider its decision in Self-Insurance Institute of America v. Snyder. The appellate court had upheld against a claim of ERISA pre-emption a Michigan law that taxes all medical claims paid in-state, including those paid by ERISA-covered health plans.

Although the imposition of a state tax is different than a healthcare database, and the Supreme Court has previously upheld state tax laws against claims of ERISA pre-emption, the remand of the Snyder case for reconsideration in light of the Liberty Mutual decision may signal that the Court is prepared to revisit, and perhaps broaden, the scope of ERISA pre-emption of state tax laws.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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