Liberty Mutual Insurance v. Donegan
746 F.3d 497
2d Cir.2014Background
- Liberty Mutual operates a self-insured ERISA-governed employee health plan that covers 137 Vermont residents and ~80,000 nationwide; Blue Cross (a TPA) administers claims for Vermont participants.
- Vermont enacted a statute and regulation creating the Vermont Healthcare Claims Uniform Reporting and Evaluation System, requiring broad, periodic submission of medical, pharmacy, eligibility, provider, and related claims data from "health insurers," including entities that administer self-insured plans.
- The regulation classifies data into restricted/unrestricted categories, permits disclosure beyond the State subject to Department discretion, and allows the Department to change reporting specifications.
- Vermont subpoenaed Blue Cross for Liberty Mutual’s claims and eligibility files; Liberty Mutual instructed noncompliance and sued seeking a declaration that ERISA preempts the state law and an injunction blocking enforcement.
- The district court upheld Vermont; the Second Circuit reversed, holding the Vermont reporting scheme (as applied to compel Liberty Mutual plan data) is preempted by ERISA because reporting is a core ERISA administrative function and the State’s requirements impose burdens that threaten national uniformity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ERISA preempts Vermont's mandatory health-care claims reporting statute and regulation | Liberty Mutual: ERISA preempts because the Vermont scheme compels plan reporting, imposes burdens and privacy risks, and undermines uniform federal administration | Vermont: statute regulates health-care data broadly, targets all payors/providers, is within traditional state police powers, and imposes only incidental/clerical burdens | Held: ERISA preempts the Vermont reporting law as applied to compel Liberty Mutual plan data (preemption reversed) |
| Whether Liberty Mutual has Article III standing to seek preemption relief | Liberty Mutual: faces imminent injury because complying or indemnifying TPA creates concrete, redressable harms | Vermont: subpoena issued to TPA, not Liberty Mutual | Held: Liberty Mutual has standing; choice to permit disclosure or indemnify TPA gives injury-in-fact and causation |
| Whether the State law "references" or "connects with" ERISA plans under Shaw test | Liberty Mutual: law has a sufficient connection (compels reporting, formats, frequency) to implicate ERISA core functions | Vermont: law is generally applicable, does not single out ERISA plans, and serves traditional state purposes | Held: The law does not "reference" ERISA exclusively but has a sufficient "connection with" ERISA plans to trigger preemption |
| Whether Travelers-era presumption against preemption saves Vermont law | Vermont: presumption applies because health regulation is a traditional state field; state interests outweigh preemption | Liberty Mutual: reporting is a core ERISA function; a multiplicity of state schemes would disrupt uniform plan administration | Held: The presumption does not save the statute as applied; ERISA’s objective to avoid multiple, inconsistent reporting obligations (and protect reporting as core function) controls |
Key Cases Cited
- Shaw v. Delta Air Lines, 463 U.S. 85 (Shaw two-prong test: state law is preempted if it "has a connection with or reference to" an ERISA plan)
- N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) (presumption against preemption in traditional state fields; state law survives if effect on ERISA plans is only indirect)
- Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) (ERISA aims to avoid a multiplicity of state rules; uniform nationwide administration rationale)
- Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141 (2001) (preemption to avoid differing state regulations that interfere with claims processing & benefit payments)
- Cal. Div. of Labor Standards Enforcement v. Dillingham Constr., 519 U.S. 316 (1997) (distinguishing laws that "refer to" ERISA plans and those that merely have indirect effects)
- De Buono v. NYSA-ILA Medical & Clinical Servs. Fund, 520 U.S. 806 (1997) (applies presumption against preemption where state law operates in traditional health-care field)
- HMI Mech. Sys., Inc. v. McGowan, 266 F.3d 142 (2d Cir. 2001) (upheld limited state subpoenas seeking information readily obtainable and not specifying a burdensome record-keeping form)
- Burgio & Campofelice, Inc. v. N.Y. State Dep’t of Labor, 107 F.3d 1000 (2d Cir. 1997) (upheld modest reporting obligations that do not impede uniform benefit administration)