By Ian Morrison, Sam Schwartz-Fenwick and Jim Goodfellow

In a closely observed federalism battle over the scope of ERISA preemption, the Supreme Court came down on the side of Federal power. Specifically, in Gobeille v. Liberty Mutual Insurance Company, the Court, in a 6-2 ruling, concluded that ERISA preempted a Vermont law.

The state law at issue required all health insurers, including self-insured health plans governed by ERISA, to provide the state with reports relating to claims data (e.g., claims submitted, claims paid) and other information related to health care. The purpose of the statute is to help provide information to consumers and to improve health care in Vermont.

Writing for the majority, Justice Kennedy concluded that because reporting, disclosure, and record keeping are central ERISA functions, and because violation of ERISA’s reporting requirements can result in civil and criminal liability, Vermont’s reporting regime intruded upon a central matter of ERISA plan administration and interfered with nationally uniform plan administration. The majority further observed that only the Secretary of Labor, not the states, may enact reporting requirements for ERISA plans. Justices Thomas and Breyer separately concurred in the Court’s decision. Justice Thomas’ opinion acknowledges that the outcome is correct under existing precedent, but questions whether ERISAs preemption provision is even constitutional or consistent with the limits on preemption applied to other federal laws.

Justices Ginsburg and Sotomayor dissented, concluding that Vermont’s reporting was designed to improve health care in the state, while ERISA’s reporting requirements were designed to eliminate fraud. This divergence in purpose was critical. The dissenters also noted that Vermont’s law would not significantly burden ERISA plans because the information Vermont seeks already is collected by plans, and the Vermont law does not require any additional administrative procedures.

For ERISA plan sponsors and administrator, this case reaffirms the broad preemptive scope of ERISA. That said, states are increasingly passing legislation related to health and retirement plans in the face of Congressional inaction. As this trend continues, it is almost certain that Gobeille will not be the Court’s last word on ERISA preemption.