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Gobeille v. Liberty Mutual Ins. Co.

United States Supreme Court

March 1, 2016

ALFRED GOBEILLE, IN HIS OFFICIAL CAPACITY AS CHAIR OF THE VERMONT GREEN MOUNTAIN CARE BOARD, PETITIONER
v.
LIBERTY MUTUAL INSURANCE COMPANY

         [136 S.Ct. 938] December 2, 2015, Argued

          ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

          SYLLABUS

         [136 S.Ct. 939] [194 L.Ed.2d 26] Vermont law requires certain entities, including health insurers, to report payments relating to health care claims and other information relating to health care services to a state agency for compilation in an all-inclusive health care database. Respondent Liberty Mutual Insurance Company's health plan (Plan), which provides benefits in all 50 States, is an " employee welfare benefit plan" under the Employee Retirement Income Security Act of 1974 (ERISA). The Plan's third-party administrator, Blue Cross Blue Shield of Massachusetts, Inc. (Blue Cross), which is subject to Vermont's disclosure statute, was ordered to transmit its files on eligibility, medical claims, and pharmacy claims for the Plan's Vermont members. Respondent, concerned that the disclosure of such confidential information might violate its fiduciary duties, instructed Blue Cross not to comply and filed suit, seeking a declaration that ERISA pre-empts application of Vermont's statute and regulation to the Plan and an injunction prohibiting Vermont from trying to acquire data about the Plan or its members. The District Court granted summary judgment to Vermont, but the Second Circuit reversed, concluding that Vermont's reporting scheme is pre-empted by ERISA.

          Held:

          ERISA pre-empts Vermont's statute as applied to ERISA plans. Pp. 5-13.

         (a) ERISA expressly pre-empts " any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). As relevant here, the clause pre-empts a state law that has an impermissible " connection with" ERISA plans, i.e., a law that governs, or interferes with the uniformity of, plan administration. Egelhoff v. Egelhoff, 532 U.S. 141, 148, 121 S.Ct. 1322, 149 L.Ed.2d 264. Pp. 5-6.

         (b) The considerations relevant to the determination whether an impermissible connection exists -- ERISA's objectives " as a guide to the scope of the state law that Congress understood would survive," New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656, 115 S.Ct. 1671, 131 L.Ed.2d 695, and " the nature of" the state law's " effect . . . on ERISA plans," California Div. of Labor Standards Enforcement v. Dillingham [194 L.Ed.2d 27] Constr., N. A., Inc., 519 U.S. 316, 325, 117 S.Ct. 832, 136 L.Ed.2d 791-- lead to the conclusion that Vermont's regime, as applied to ERISA plans, is pre-empted. Pp. 6-12.

         (1) ERISA seeks to make the benefits promised by an employer more secure by mandating certain oversight systems and other standard procedures, Travelers, 514 U.S. at 651, 115 S.Ct. 1671, 131 L.Ed.2d 695, and those systems and procedures are intended to be uniform, id., at 656, 115 S.Ct. 1671, 131 L.Ed.2d 695. ERISA's extensive reporting, disclosure, and recordkeeping requirements are central to, and an essential part of, this uniform plan administration system. Vermont's law and regulation, however, also govern plan reporting, disclosure, and recordkeeping. Pre-emption is necessary in order to prevent multiple jurisdictions from imposing differing, or even parallel, regulations, creating wasteful administrative costs and threatening to subject plans to wide-ranging liability. ERISA's uniform rule design also makes clear that it is the Secretary of Labor, not the separate States, that is authorized to decide whether to exempt plans from ERISA reporting requirements or to require ERISA plans [136 S.Ct. 940] to report data such as that sought by Vermont. Pp. 7-10.

         (2) Vermont's counterarguments are unpersuasive. Vermont argues that respondent has not shown that the State scheme has caused it to suffer economic costs, but respondent need not wait to bring its pre-emption claim until confronted with numerous inconsistent obligations and encumbered with any ensuing costs. In addition, the fact that ERISA and the state reporting scheme have different objectives does not transform Vermont's direct regulation of a fundamental ERISA function into an innocuous and peripheral set of additional rules. Vermont's regime also cannot be saved by invoking the State's traditional power to regulate in the area of public health. Pp. 10-12.

         (c) ERISA's pre-existing reporting, disclosure, and recordkeeping provisions maintain their pre-emptive force regardless of whether the new Patient Protection and Affordable Care Act's reporting obligations also pre-empt state law. Pp. 12-13.

746 F.3d 497, affirmed.

         Bridget C. Asay argued the cause for petitioner.

         John F. Bash argued the cause for the United States, as amicus curiae, by special leave of court.

         Seth P. Waxman argued the cause for respondent.

         KENNEDY, J., delivered the opinion of the Court, in which ROBERTS, C. J., and THOMAS, BREYER, ALITO, and KAGAN, JJ., joined. THOMAS, J., and BREYER, J., filed concurring opinions. GINSBURG, J., filed a dissenting opinion, in which SOTOMAYOR, J., joined.

         OPINION

         KENNEDY, JUSTICE

         This case presents a challenge to the applicability of a state law requiring disclosure of payments relating to health care claims and other information relating to health care services. Vermont enacted the statute so it could maintain an all-inclusive health care database. Vt. Stat. Ann., Tit. 18, § 9410(a)(1) (2015 Cum. Supp.) ( V. S. A.). The state law, by its terms, applies [194 L.Ed.2d 28] to health plans established by employers and regulated by the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq. The question before the Court is whether ERISA pre-empts the Vermont statute as it applies to ERISA plans.

         I

         A

         Vermont requires certain public and private entities that provide and pay for [136 S.Ct. 941] health care services to report information to a state agency. The reported information is compiled into a database reflecting " all health care utilization, costs, and resources in [ Vermont], and health care utilization and costs for services provided to Vermont residents in another state." 18 V. S. A. § 9410(b). A database of this kind is sometimes called an all-payer claims database, for it requires submission of data from all health insurers and other entities that pay for health care services. Almost 20 States have or are implementing similar databases. See Brief for State of New York et al. as Amici Curiae 1, and n. 1.

         Vermont's law requires health insurers, health care providers, health care facilities, and governmental agencies to report any " information relating to health care costs, prices, quality, utilization, or resources required" by the state agency, including data relating to health insurance claims and enrollment. § 9410(c)(3). Health insurers must submit claims data on members, subscribers, and policyholders. § 9410(h). The Vermont law defines health insurer to include a " self-insured . . . health care benefit plan," § 9402(8), as well as " any third party administrator" and any " similar entity with claims data, eligibility data, provider files, and other information relating to health care provided to a Vermont resident." § 9410( j)(1)(B). The database must be made " available as a resource for insurers, employers, providers, purchasers of health care, and State agencies to continuously review health care utilization, expenditures, and performance in Vermont." § 9410(h)(3)(B).

         Vermont law leaves to a state agency the responsibility to " establish the types of information to be filed under this section, and the time and place and the manner in which such information shall be filed." § 9410(d). The law has been implemented by a regulation creating the Vermont Healthcare Claims Uniform Reporting and Evaluation System. The regulation requires the submission of " medical claims data, pharmacy claims data, member eligibility data, provider data, and other information," Reg. H-2008-01, Code of Vt. Rules 21-040-021, § 4(D) (2016) (CVR), in accordance with specific formatting, coding, and other requirements, § 5. Under the regulation, health insurers must report data about the health care services provided to Vermonters regardless of whether they are treated in Vermont or out-of-state and about non-Vermonters who are treated in Vermont. § 4(D); see also § 1. The agency at present does not collect data on denied claims, § 5(A)(8), but the statute would allow it to do so.

         Covered entities (reporters) must register with the State and must submit data monthly, quarterly, or annually, depending on the number of individuals that an entity serves. The more people served, the more frequently the reports must be filed. § § 4, [194 L.Ed.2d 29] 6(I). Entities with fewer than 200 members need not report at all, ibid., and are termed " voluntary" reporters as distinct from " mandated" reporters, § 3. Reporters can be fined for not complying with the statute or the regulation. § 10; 18 V. S. A. § 9410(g).

         B

         Respondent Liberty Mutual Insurance Company maintains a health plan (Plan) that provides benefits in all 50 States to over 80,000 individuals, comprising respondent's employees, their families, and former employees. The Plan is self-insured and self-funded, which means that Plan benefits are paid by respondent. The Plan, which qualifies as an " employee welfare benefit plan" under ERISA, 29 U.S.C. § 1002(1), is subject to " ERISA's comprehensive regulation," New York State Conference of Blue Cross & Blue Shield Plans [136 S.Ct. 942] v. Travelers Ins. Co., 514 U.S. 645, 650, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995). Respondent, as the Plan sponsor, is both a fiduciary and plan administrator.

         The Plan uses Blue Cross Blue Shield of Massachusetts, Inc. (Blue Cross) as a third-party administrator. Blue Cross manages the " processing, review, and payment" of claims for respondent. Liberty Mut. Ins. Co. v. Donegan, 746 F.3d 497, 502 (CA2 2014) (case below). In its contract with Blue Cross, respondent agreed to " hold [Blue Cross] harmless for any charges, including legal fees, judgments, administrative expenses and benefit payment requirements, . . . arising from or in connection with [the Plan] or due to [respondent's] failure to comply with any laws or regulations." App. 82. The Plan is a voluntary reporter under the Vermont regulation because it covers some 137 Vermonters, which is fewer than the 200-person cutoff for mandated reporting. Blue Cross, however, serves several thousand Vermonters, and so it is a mandated reporter. Blue Cross, therefore, must report the information it possesses about the Plan's members in Vermont.

         In August 2011, Vermont issued a subpoena ordering Blue Cross to transmit to a state-appointed contractor all the files it possessed on member eligibility, medical claims, and pharmacy claims for Vermont members. Id., at 33. (For clarity, the Court uses " Vermont" to refer not only to the State but also to state officials acting in their official capacity.) The penalty for noncompliance, Vermont threatened, would be a fine of up to $2,000 a day and a suspension of Blue Cross' authorization to operate in Vermont for as long as six months. Id., at 31. Respondent, concerned in part that the disclosure of confidential information regarding its members might violate its fiduciary duties under the Plan, instructed Blue Cross not to comply. Respondent then filed this action in the United States District Court for the District of Vermont. It sought a declaration that ERISA pre-empts application of Vermont's statute and regulation to the Plan and an injunction forbidding Vermont from trying to acquire data about the Plan or its members.

         Vermont filed a motion to dismiss, which the District Court treated as one for summary judgment, see Fed. Rule Civ. Proc. 12(d), and respondent filed a cross-motion for summary judgment. The District Court granted summary judgment to Vermont. It first held that respondent, despite being a mere voluntary reporter, had [194 L.Ed.2d 30] standing to sue because it was faced with either allegedly violating its " fiduciary and administrative responsibilities to the Plan" or assuming liability for Blue Cross' withholding of the data from Vermont. Liberty Mut. Ins. Co. v. Kimbell, No. 2:11-cv-204, *14, (D Vt., Nov. 9, 2012). The District Court then concluded that the State's reporting scheme was not pre-empted. Although that scheme " may have some indirect effect on health benefit plans," the court reasoned that the " effect is so peripheral that the regulation cannot be considered an attempt to interfere with the administration or structure of a welfare benefit plan." Id., at *38.

         The Court of Appeals for the Second Circuit reversed. The panel was unanimous in concluding that respondent had standing, but it divided on the merits of the pre-emption challenge. The panel majority explained that " one of ERISA's core functions -- reporting -- [cannot] be laden with burdens, subject to incompatible, multiple and variable demands, and freighted with risk of fines, breach of duty, and legal expense." 746 F.3d, at 510. The Vermont regime, the court held, does just that. Id., at 508-510.

         [136 S.Ct. 943] This Court granted certiorari to address the important issue of ERISA pre-emption. 576 U.S. ___, 135 S.Ct. 2887, 192 L.Ed.2d 923 (2015).

         II

          The text of ERISA's express pre-emption clause is the necessary starting point. It is terse but comprehensive. ERISA pre-empts

" any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a).

         The Court has addressed the potential reach of this clause before. In Travelers, the Court observed that " [i]f 'relate to' were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes pre-emption would never run its course." 514 U.S. at 655, 115 S.Ct. 1671, 131 L.Ed.2d 695. That is a result " no sensible person could have intended." California Div. of Labor Standards Enforcement v. Dillingham Constr., N. A., Inc., 519 U.S. 316, 336, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997) (Scalia, J., concurring). So the need for workable standards has led the Court to reject " uncritical literalism" in applying the clause. Travelers, 514 U.S. at 656, 115 S.Ct. 1671, 131 L.Ed.2d 695.

         Implementing these principles, the Court's case law to date has described two categories of state laws that ERISA pre-empts. First, ERISA pre-empts a state law if it has a " 'reference to'" ERISA plans. Ibid. To be more precise, " [w]here a State's law acts immediately and exclusively upon ERISA plans . . . or where the existence of ERISA plans is essential to the law's operation . .., that 'reference' will result in pre-emption." Dillingham, supra, at 325, 117 S.Ct. 832, 136 L.Ed.2d 791. Second, ERISA pre-empts a state law that has an impermissible " connection with" ERISA plans, meaning a state law that " governs . . . a central matter of plan administration" or " interferes with nationally uniform plan administration." Egelhoff v. Egelhoff, 532 U.S. 141, 148, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001). A state law also [194 L.Ed.2d 31] might have an impermissible connection with ERISA plans if " acute, albeit indirect, economic effects" of the state law " force an ERISA plan to adopt a certain scheme of substantive coverage or effectively restrict its choice of insurers." Travelers, supra, at 668, 115 S.Ct. 1671, 131 L.Ed.2d 695. When considered together, these formulations ensure that ERISA's express pre-emption clause receives the broad scope Congress intended while avoiding the clause's susceptibility to limitless application.

         III

         Respondent contends that Vermont's law falls in the second category of state laws that are pre-empted by ERISA: laws that govern, or interfere with the uniformity of, plan administration and so have an impermissible " 'connection with'" ERISA plans. Egelhoff, supra, at 148, 121 S.Ct. 1322, 149 L.Ed.2d 264; Travelers, 514 U.S. at 656, 115 S.Ct. 1671, 131 L.Ed.2d 695. When presented with these contentions in earlier cases, the Court has considered " the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive," ibid., and " the nature of the effect of the state law on ERISA plans," Dillingham, supra, at 325, ...


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