Policy vs. legal perspectives on healthcare price transparency

April 5, 2016

A recent Supreme Court decision shines the spotlight on the healthcare price transparency debate.

On March 1, 2016, the Supreme Court decided the case of Gobeille v. Liberty Mutual Insurance Co. The matter before the Court involved a Vermont law requiring certain entities, including health insurers, to report payments relating to healthcare claims and other information relating to healthcare services to a state agency for compilation in an all-inclusive healthcare database. 

The case was brought by Liberty Mutual Insurance Company’s self-funded, self-insured health plan, which provides benefits in all 50 states and is not subject to regulation by Vermont, and the Court invalidated the statute. 

This decision is proving more controversial in health policy circles, where transparency is seen as a public policy attribute that should be expanded, than it is in legal circles where the matter is viewed as one of legislative jurisdiction that potentially is subject to change by uniform federal executive branch action or congressional legislation.

In an important victory for preemption advocates, the Court held that this law was preempted by The Employee Retirement Income Security Act of 1974 (ERISA), which expressly preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” And that includes any state law that has an impermissible “connection with” ERISA plans, i.e., a law that governs, or interferes with the uniformity of, plan administration. 

The court’s stance

In the context of the Gobeille case, preemption is necessary in order to prevent multiple jurisdictions from imposing differing, or even parallel, regulations, creating wasteful administrative costs and threatening to subject plans to wide-ranging liability.

ERISA’s uniform rule design also makes clear that it is the Secretary of Labor, not the separate States, that is authorized to decide whether to exempt plans from ERISA reporting requirements or to require ERISA plans to report data such as that sought by Vermont.

The Court went on to reject Vermont’s arguments about the lack of economic loss by Liberty Mutual or its traditional power to regulate in the area of public health.

Finally, the Court held that ERISA’s pre-existing reporting, disclosure, and record-keeping provisions maintain their preemptive force regardless of whether the newer Affordable Care Act’s reporting obligations also preempt state law. In other words, mandated data collection laws like Vermont’s could be negated on several legislative fronts, but ERISA is the more comprehensive preemptive vehicle.

Next: Public policy questions

 

 

Public policy questions

As noted, policy-oriented analysts have focused on the issue of transparency, and so have criticized Gobeille as a barrier to the development of initiatives to disclose and track the economics and quality of healthcare services and practices throughout the United States, including trends with respect to healthcare spending and insurance reimbursement that might amplify public understanding about differences in patterns of pharmaceutical prescription, readmission rates, coding decisions regarding complexity, etc.

These policy-based data no doubt would be useful (although Vermont’s efforts by definition cannot be national in scope), but criticism of the Court tends to miss the point. Contrary to much one reads and hears in the public media, especially with a current Supreme Court vacancy, the Court is not a political branch of the government and even the liberal justices do not see themselves as empowered to fill what some perceive as legislative gaps.

Thus Gobeille was not a close case, and the array of justices contradicts any notion that there is a political aspect to the decision. The opinion was written by Justice Kennedy, a conservative centrist, joined by the Chief Justice and Justice Alito, two firm conservatives, and Justice Kagan, another liberal. Joining the majority but also filing a concurring opinion, were Justices Breyer and Thomas, a liberal and a conservative respectively. Two liberals, Justices Ginsburg and Sotomayor, dissented but, on the whole, Gobeille is a case where justices across the continuum of philosophical stripes rendered an opinion that, to them, had nothing to do with the desirability or efficacy of greater transparency as to healthcare expenditures and coverages.

Instead, the broad majority focus was on congressional intention in mandating the preemptive effects of ERISA, in other words, a question of statutory authority.

Were that authority to change by legislative enactment or, under ERISA as it is, if the Secretary of Labor were to undertake a national data reporting system, a different result in the Court would be likely.

It is probable that transparency advocates will seek such change.

Stuart M. Gerson is a Member of Epstein Becker Green’s Litigation and Health Care & Life Sciences practices, in the firm's Washington, D.C., and New York offices, and a former senior U.S. government official.