High Court to Consider ERISA Implications Of Vermont Health-Care Claims Database

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By Jacklyn Wille

June 29 — The U.S. Supreme Court will hear a case next term asking whether Vermont's attempt to collect health insurance claims data runs afoul of federal employee benefits law.

This move granting review June 29 may surprise court watchers, as the justices previously asked the U.S. solicitor general whether this dispute merited Supreme Court review. Last month, the solicitor advised the high court to wait until other federal courts have considered similar databases before wading into the dispute.

The case asks whether the Employee Retirement Income Security Act preempts the Vermont Health Care Uniform Reporting and Evaluation System (VHCURES), which requires self-insured health plans to submit claims data to a statewide unified health-care database.

Vermont argued that these types of databases—which several states use to collect information from medical providers and insurance companies—are useful in shaping health-care policy, evaluating existing health-care programs and improving the quality and affordability of patient care.

VHCURES hit a roadblock in 2014, when the U.S. Court of Appeals for the Second Circuit issued a split ruling striking the program down as preempted by ERISA. According to the two-judge majority, VHCURES placed a significant burden on reporting, which the majority called a “core ERISA function” (57 EBC 2009).

The Vermont case is the second ERISA dispute the justices have added to next term's docket. In March, the court announced that it will hear a case involving the scope of ERISA's equitable remedies provision and the extent to which ERISA-governed plans can seek reimbursement for overpaid benefits or benefits paid in error (Montanile v. Bd. of Trs. of Nat'l Elevator Indus. Health Benefit Plan, U.S., No. 14-723, cert. granted 3/30/15).

Solicitor's Advice Rejected 

The court's decision to reject the solicitor's recommendation after specifically asking for his advice is a departure from the court's recent practice in ERISA cases.

In general, the court has appeared increasingly willing to seek the solicitor's view in ERISA cases, doing so three times this past term. The court has typically followed the solicitor's advice in each case.

This was true in both of the court's most recent high-profile ERISA decisions, Tibble v. Edison Int'l, 135 S.Ct. 1823, 59 EBC 2461 (U.S. 2015), and Fifth Third Bancorp v. Dudenhoeffer, 134 S.Ct. 2459, 58 EBC 1405 (U.S. 2014).

In both Tibble and Dudenhoeffer, the justices took the solicitor's advice to grant review of one question presented and deny review of another.

Similarly, the court's decision granting review in Montanile came two years after the solicitor advised the court not to hear a different case presenting similar issues—advice the court took to heart (Thurber v. Aetna Life Ins. Co., U.S., No. 13-130, cert. denied 6/9/14).

Most recently—on the same day the court agreed to hear the Vermont case—it also declined to review a case asking how ERISA plan participants can demonstrate that a fiduciary's alleged misconduct caused losses to the relevant plan (RJR Pension Inv. Comm. v. Tatum, U.S., No. 14-656, cert. denied 6/29/15). That decision followed the express advice of the solicitor general.

The court also is waiting to hear from the solicitor on a pending case asking whether an ERISA plan sponsor can limit the courts in which a participant or beneficiary can file suit by including a venue selection clause in the terms of its plan (Smith v. Aegon Cos. Pension Plan, U.S., No. 14-1168, invitation to file brief 6/1/15).

State, Solicitor Challenge Preemption 

In the Vermont case, both the state and the U.S. solicitor general argued that VHCURES, the health-care database in question, wasn't preempted by ERISA.

According to the solicitor, the purpose of the Vermont law's reporting requirement was to create a statewide database for assessing and improving patient care. This differed significantly from ERISA's reporting requirements, which are aimed at ensuring the financial and actuarial soundness of employee benefit plans, the solicitor said.

Although the solicitor left open the possibility that some state health-care databases could impose reporting requirements broad enough to run afoul of ERISA, he said that the Vermont program didn't cross that line.

For its part, Vermont argued that the Second Circuit's preemption decision “undermines the efforts” of at least 16 states to establish and utilize these types of health-care databases.

In fact, six other states with similar databases or plans to create a similar database—including New York, Maryland, Massachusetts, New Hampshire, Oregon and Utah—filed an amicus brief urging the Supreme Court to save these databases from the Second Circuit's preemption analysis.

Vermont also defended its own database by saying that it “collects critical information that informs the State's health care policy.”

In particular, Vermont said that the database serves several important purposes, including:

• determining how to distribute existing resources;

• identifying health-care needs;

• informing policy decisions;

• evaluating the effectiveness of ongoing programs;

• comparing costs between different treatment practices;

• providing health-care information to state residents; and

• improving the quality and affordability of patient care.


Insurer: Database Preempted 

Taking up the other side of the debate, respondent Liberty Mutual Insurance Co. defended the Second Circuit's decision finding VHCURES to be ERISA-preempted.

Liberty argued that the requirements imposed by VHCURES caused the database to “fall squarely within the realm” that Congress reserved for ERISA plans, because they require such plans to “account and report to the state what the plan has paid out to whom as part of the plan's operations.”

On that point, Liberty said that Congress intended to protect plans “from the burdens of complying with conflicting state laws,” such as the differing rules that could be imposed by various states' health-care databases.

Vermont's petition for Supreme Court review was filed by Peter K. Stris of Stris & Maher LLP, Gardena, Calif., and William H. Sorrell and Bridget C. Asay of the Vermont Office of the Attorney General, Montpelier, Vt.

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

Text of the Second Circuit's opinion is at http://www.bloomberglaw.com/public/document/Liberty_Mut_Ins_Co_v_Donegan_No_124881cv_2014_BL_29193_2d_Cir_Feb.

Text of the solicitor general's brief is at http://www.bloomberglaw.com/public/document/Alfred_Gobeille_in_His_Official_Capacity_as_Chair_of_the_Vermont_/1.

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