Liberty Mutual has won a reprieve from complying with Vermont's mandated health insurance claims reporting, a victory that may extend self-funded plan preemption to a range of state regulations.
In 2011, Liberty Mutual, which self-funds plans for its 180-some Vermont employees, told its third party administrator, Blue Cross Blue Shield of Massachusetts, not to share claims and other health data with Vermont's all-payer database and sued the state Department of Financial Regulation on the grounds of federal ERISA preemption.
A federal district court sided with the state, ruling that ERISA (the Employee Retirement Income Security Act) would not be enough to exempt self-funded employers like Liberty Mutual from complying with the state data collection law, since the state law doesn't specifically deal with "plan administration."
But two of three judges on the U.S. Court of Appeals for the 2nd Circuit in New York disagreed with the lower court and have handed a victory to Liberty Mutual that could very well leave other self-funded plans in Vermont and other states with similar health data reporting mandates feeling free to not participate.
Specifically, the appeals court majority ruled that data reporting should be considered a part of plan administration and thus exempted from mandatory submission of claims data to Vermont's Healthcare Claims Uniform Reporting and Evaluation System, now run by the Green Mountain Care Board.
While ERISA's preemption wording "is not self-reading" and its legal interpretations "not static," wrote Judge Dennis Jacobs, two constants remain: the intention "to avoid a multiplicity of burdensome state requirements for ERISA plan administration," and the "acknowledgment that 'reporting' is a core ERISA administrative function."
But one of the justices, Chester Staub, remained unconvinced of the merits of ERISA's broad application for two reasons.
"First, the reporting requirement imposed by the Vermont statute differs in kind from the 'reporting‛ that is required by ERISA and therefore was not the kind of state law Congress intended to preempt," he argued in a dissent. "Second, Liberty Mutual has failed to show any actual burden, much less a burden that triggers ERISA preemption."
Vermont's Department of Financial Regulation, which until last June managed the all-payer claims database, argued that ERISA was not intended to preempt state reporting laws because in the same year it was enacted, 1974, Congress also enacted the National Health Planning and Resources Development Act, authorizing state health planning, regulation (including the controversial Certificate of Need laws) and data collection and analysis.
The federal district court in Vermont agreed with that argument and that the all-payer claims database's reporting mandates don't disturb plan administration, but the fact that the National Health Planning Act was repealed in 1986 left the majority of the appeals court unwilling to consider it.
The Department of Financial Regulation has not said whether it will appeal. If they do, and if the Supreme Court took it up, the ruling would clarify what seems to be a fair amount of disagreement over the 40-year-old law's federal preemptions intentions, at a time when more and more employers are turning to self-funding to limit their exposure to regulatory mandates.
It might also clear up the current uncertainty over how self-funded and large group plans would operate in a single payer system of the sort Vermont is pursuing.