By Ross Pollack.
On March 1, in Gobeille v. Liberty Mutual Insurance Co., the U.S. Supreme Court upheld a Second Circuit decision finding that a Vermont law requiring self-covered entities to report healthcare information was preempted by the Employee Retirement Income Security Act of 1974 (“ERISA” or the “Act”). At issue in the case was whether states could require self-funded and self-insured healthcare plans covered by ERISA (“covered entities”) to submit members’ information regarding healthcare claims and services for inclusion in a statewide database. After Vermont demanded this information from a third party insurer, Liberty Mutual, a plan covered by ERISA, asserted that the law should be preempted by ERISA.
Delivering the opinion of the Court, Justice Kennedy first noted the sweeping nature of the statute’s language, which explicitly preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U. S. C. §1144(a). He then moved to the Court’s recent jurisprudence, which limits the potentially all-encompassing statute to state laws that either (1) directly reference ERISA plans or (2) indirectly interfere with the core functions of ERISA plans. See, e.g., New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 650 (1995) and Egelhoff v. Egelhoff, 532 U.S. 141, 148 (2001).
Next, the Court held that because ERISA requires covered entities to submit similar types of data to the Secretary of Labor, such reporting is “central to, and an essential part of, the uniform system of plan administration contemplated by ERISA.” Thus, the Court ruled that Vermont’s law was preempted because it interfered with a core function governed by ERISA. Justice Ginsburg dissented, arguing that the law was not burdensome enough on covered plans to be preempted by ERISA.
The most intriguing part of the case was the concurrence written by Justice Thomas. He argued that ERISA’s preemption clause may be entirely unconstitutional. He contended that §1144(a) of the Act violated the Constitution’s Supremacy Clause because it regulates matters that are not interstate commerce even though they relate to ERISA. Should the Court adopt this view in future ERISA preemption cases, there could be a dramatic shift in the regulation of covered plans.