High Court Considers State Health-Care Databases

Daily Labor Report® is the objective resource the nation’s foremost labor and employment professionals read and rely on, providing reliable, analytical coverage of top labor and employment...

By Jacklyn Wille

Dec. 2 — Justice Stephen G. Breyer dominated U.S. Supreme Court oral argument over state health-care databases, repeatedly asking why the federal government doesn't do more to facilitate these efforts.

Breyer and other justices appeared convinced during argument Dec. 2 of the value of these databases, which more than a dozen states now use to shape health-care policy in an effort to improve outcomes and lower costs. He pressed counsel about why states have developed varying standards for data collection—which arguably creates administrative and financial burdens for health plans—rather than petitioning federal agencies such as the Labor Department to facilitate a more uniform system.

These so-called all-payer claims databases, which more than half the states have either implemented or are considering, collect information from parties that pay for medical services—such as insurance companies—about services provided to state residents. Proponents of the databases—including the DOL, which filed a brief and argued before the court—consider them a crucial tool in states' efforts to improve public health, control costs, aid research, provide transparency and foster competition among medical providers (229 DLR C-1, 11/30/15).

Critics, including the insurance company that brought the instant lawsuit against Vermont's program, say the databases burden health plans by forcing them to comply with varying and expensive state requirements. They also claim the programs are preempted by the Employee Retirement Income Security Act, to the extent that they apply to employers that fund their own health plans.

These data collection efforts hit a major roadblock in 2014, when the U.S. Court of Appeals for the Second Circuit barred Vermont from forcing employers that fund their own health insurance plans to turn over the required data. In a split ruling, the Second Circuit found that Vermont's attempt to collect data from self-funded plans encroached on the core functions of ERISA and was therefore preempted by the federal law.

Carmel Shachar, a clinical instructor at Harvard Law School’s Center for Health Law & Policy Innovation who filed a pro-database amicus brief, said the justices’ line of questioning was colored by recent high-profile decisions involving the Affordable Care Act, such as King v. Burwell. In that ruling in June, the high court upheld the availability of tax subsidies under the ACA to individuals who purchase their health insurance on the federal health-care exchange.

In those cases, the justices “were really grappling with, ‘what is the role of the federal government when it comes to health care?’ ” Shachar told Bloomberg BNA. “Certainly Vermont argues that health care is considered a very traditional province of the states, and you see pushback that you may not have seen even a few years ago on whether health care is a classic area of state concern or whether it's more of a federal-state hybrid.”

‘No Doubt.'

Sounding supportive of all-payer claims databases, Breyer said there was “no doubt” that states should have access to the information sought by programs like Vermont's. However, he noted the administrative and financial burdens of complying with up to 50 state databases and asked why the states didn't take a more uniform approach.

Specifically, Breyer queried why the states have chosen to create their own, differing databases, rather than petitioning federal agencies such as the DOL or the Department of Health and Human Services to adopt regulations allowing for a uniform system of claims data reporting. Breyer suggested that such a regulation could solve any ERISA preemption concerns while reducing the burden of compliance for employers and other entities that pay medical benefits, such as insurance companies.

“I think there are probably 100 or 200 people in the Department of Labor and HHS that could write regs that reconcile these problems and allow both,” Breyer said. “But I can't, because I'm a judge.”

Ian Samuel, an attorney with Jones Day’s New York office who filed an amicus brief on behalf of the American Hospital Association, said Breyer's comments in this regard underscored that everyone speaking at the oral arguments appeared to take the public value provided by these databases as a given.

Samuel credited these databases with helping providers provide better quality care, managing costs and improving services to particular populations that aren't well-served by the existing health-care system. That databases like Vermont's could promote these policy goals “seemed to be taken as a given by just about everybody,” Samuel told Bloomberg BNA.

Samuel spoke favorably but cautiously about Breyer's suggestion for federal action in this arena.

“To the extent that all-payer claims databases are very useful for Vermont, they're very useful for the whole country. So to the extent that they could be promoted and standardized by federal action, that would be great,” Samuel said.

However, he cautioned that “the devil is in the details.”

Echoing these points, Harvard Law's Shachar emphasized the potential for improving health care that these large claims databases offer.

“Now that we have the computing power to really tackle big data problems, the bigger the data set, the better, and the more things they can do with it,” Shachar said. “I think that everybody would be happier to have some sort of nationwide system collecting the data and really presenting it in a uniform format across states. Since DOL and HHS have chosen not to act on that, I think there is a real need for this data, and you can really only get it from those regulations that require everybody to report.”

Breyer's call for federal action received fairly mild pushback at the argument, with Justice Antonin Scalia asking the Vermont solicitor general, Bridget C. Asay, whether the DOL truly has the authority to require uniformity from the state databases. Seth P. Waxman, the Washington-based WilmerHale partner who argued on behalf of Liberty Mutual Insurance Co., which brought the instant lawsuit, also questioned the DOL's authority to eliminate ERISA preemption concerns through regulation.

Justice Elena Kagan raised a different concern, asking whether the uniformity proposed by Breyer would compromise the value added by allowing states to experiment with different types of databases.

Debating Burden

Although the justices and counsel spent little time debating the merits of all-payer claims databases, they devoted much more attention to whether these databases significantly burden employers and other entities that must report data.

In particular, Chief Justice John G. Roberts asked John F. Bash, assistant to the U.S. solicitor general, about whether the cost of compliance ultimately would be borne by the workers receiving health insurance.

“You don't think 50 different regimes of reporting is going to require a significant diversion of money away from benefits to administration?” Roberts asked Bash.

Kagan also appeared interested in the burden posed by compliance, saying it was “intuitive” that these various reporting requirements created administrative and financial burden. However, Kagan pressed Waxman for concrete data about the burden imposed by these databases, saying it was largely missing from the judicial record.

Justice Sonia Sotomayor's comments suggested that she was less inclined to see the databases as significantly burdensome, asking whether the requested data were standardized and available electronically. Asay contended that it was, arguing that the data sought by Vermont and other states was largely standardized to comply with the Health Insurance Portability and Accountability Act.

Asay and Waxman disagreed over the extent to which Vermont and other states sought data already in the possession of the entities responsible for reporting. While Asay argued that this data were regularly collected by third-party administrators in the ordinary course of business, Waxman disputed that notion and emphasized that specific types of plans—such as multiemployer plans covering union workers—typically collect only 70 percent to 80 percent of the data sought by Vermont.

Kathryn Wilber, senior counsel for health policy with the American Benefits Council in Washington, attended the argument and called it “heartening” that the justices spent so much time discussing the burdens associated with reporting to various state databases.

“I think what doesn't get mentioned enough in this debate is that while insurers may collect some of that data or maybe a lot of it, every state's requirements are a little different and sometimes a lot different,” Wilber told Bloomberg BNA.

Wilber pointed specifically to variations in whether nonresidents are counted in a state's database, saying these small differences could require changes to systems or even manual reporting.

“Those costs are ultimately borne by the plan sponsor and the plan participants,” she said. “I think that doesn't get enough attention sometimes when you talk about what is this burden exactly.”

The American Benefits Council filed an amicus brief jointly with several other employer groups supporting Liberty Mutual.

‘Very Troubled.'

Turning the discussion to more technical, legal questions, Justice Samuel A. Alito expressed skepticism at Vermont's argument that its database sought information about medical claims, which differ meaningfully from the type of financial information ERISA requires plans to report. According to Vermont, this difference counseled against finding the state's program ERISA-preempted.

Alito appeared to disagree with this characterization, pointing out that the ACA amended ERISA to require reporting of medical claims data.

Alito said he was “very troubled” by this fact, suggesting that he may be inclined to find these state databases partially preempted based on the recent ERISA amendments contained in the ACA.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

For More Information 
A transcript of the court's arguments is at http://src.bna.com/blr.