Amicus Curiae Brief — Gobeille v. Liberty Mut. Ins. Co., 135 S. Ct. 885 (2014) (No. 14-181)
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No. 14-181
In the Supreme Court of the United States
ALFRED GOBEILLE, in his official capacity as chair of
the Vermont Green Mountain Care Board,
Petitioner,
Vv.
LIBERTY MUTUAL INSURANCE COMPANY,
Respondent.
On Writ Of Certiorari To The United States
Court of Appeals for the Second Circuit
BRIEF OF THE AMERICAN BENEFITS
COUNCIL, AMERICA’S HEALTH INSURANCE
PLANS, THE ERISA INDUSTRY COMMITTEE,
THE HR POLICY ASSOCIATION, THE
NATIONAL BUSINESS GROUP ON HEALTH,
AND THE CHAMBER OF COMMERCE OF THE
UNITED STATES OF AMERICA AS AMICI
CURIAE IN SUPPORT OF RESPONDENT
BRIAN D. NETTER NANCY G. Ross
MATTHEW A. WARING Counsel of Record
Mayer Brown LLP Mayer Brown LLP
1999 K Street NW 71 S. Wacker Drive
Washington, DC 20006 _— Chicago, IL 60606
(202) 263-3000 (312) 782-0600
nross@mayerbrown.com
Counsel for Amici Curiae
(additional counsel listed in signature block)
ee
1
TABLE OF CONTENTS
A. SELF-FUNDED EMPLOYER PLANS
ARE MUTUALLY BENEFICIAL FOR
EMPLOYERS AND EMPLOYEEG................... 6
1. Self-Funded Employer Plans Provide
Benefits To Millions Of Americans............. 6
2. Self-Funded Employer Plans Provide
Many Advantages Over Fully
I cs cmeetieild 8
B. APCD STATUTES LIKE VERMONT’S
IMPOSE A SUBSTANTIAL AND
UNWARRANTED BURDEN ON SELF-
FUNDED EMPLOYER PLANG...................... 11
1. An Increasing Number Of States Are
Adopting Mandatory APCD Laws,
Many Of Which Have Conflicting
EE ee eS AE eee 11
2. Reporting Health Care Claims Data
To All The States That Require It Is
Burdensome For Self-Funded
il ccenitiiscaralintipkanenninnionnn 14
3. Congress Enacted ERISA To Prevent
Self-Funded Plans From Being
Subject To Patchwork State
hing Ee i a a 17
‘:
TABLE OF CONTENTS—continued
Page
4. The Decision To Use A Third-Party
Administrator Does Not Protect
Vermont’s APCD Law From
ERSTE ran ones aint- ORCS pee OR DRE 20
5. APCDs Can Obtain Information
From Other Sources—Such As
Providers—Without Needing To
Burden Self-Funded Plans........................ 23
C. THE EXCLUSIVE PURPOSE OF
ERISA BENEFIT PLANS IS TO
PROVIDE BENEFITS, NOT TO BE
LABORATORIES FOR STATE
es EE 24
1. Congress Enacted ERISA In Order
to Protect The Interests Of Plan
I ll 25
2. ERISA Mandates That Plans Be
Operated For The Exclusive Purpose
Of Providing Benefits To
Oars 26
3. State APCD Statutes Interfere With
Congress’s Purpose By
Commandeering ERISA Plans For A
Different Purpose: Data Collection........... 27
NN seicitnctenenncasininetncenesiieshunitiiesninennenitnn 29
TABLE OF AUTHORITIES
CASES
Boggs v. Boggs,
Ne cs ciscinsingninbssihinnniciunieiiin
Donovan v. Bierwirth,
680 F.2d 263 (2d Cir. 1982) ................eee
Egelhoff v. Egelhoff ex rel. Breiner,
ee Se: Se Ee atiinictsinicniccnensensncccnnsies
Firestone Tire Co. v. Bruch,
I Gi CE iscsi ciissitacsicsissnnsenecennscions
FMC Corp. v. Holliday,
re isvbiisssisssncnensnantscsecssonse
Fort Halifax Packing Co. v. Coyne,
Se Ee Oe Ci iceitcennectehisicitnsctinsnnnsccntineen
Ingersoll-Rand Co. v. McClendon,
Se Ne I I ierctinacinertinisentcnsscncseenes
Jackson v. Truck Drivers’ Union Local
42 Health & Welfare Fund,
933 F. Supp. 1124 (D. Mass. 1996)..........
Liberty Mut. Ins. Co. v. Kimbell,
No. 2:11-cv-204 (D. Vt. Aug. 17,
N.Y. State Conference of Blue Cross &
Blue Shield Plans v. Travelers Ins.
Co.,
ee Be Se Ge Patcccesccesrecesnosnscnccennnesens
Shaw v. Delta Air Lines, Inc.,
re ER i ncntsnnsericisnaniimseceensesssnons
Page(s)
iv
TABLE OF AUTHORITIES—continued
Page(s)
Varity Corp. v. Howe,
I 20, 27
STATUTES, RULES AND REGULATIONS
| EERE REE EEE ter Ree 2, 25, 26
Is i tl 26
Oe cel 16, 22, 26
I Tr iii alicia iniaiial 5, 17
A, i a cuseinisenelbiatl 10
78 Fed. Reg. 72,322 (Dec. 2, 2O1F)............cccccscecseseees 21
IRS, Notice 2015-52, Section 4980I—
Excise Tax on High Cost Employer-
Sponsored Health Coverage,
https://www.irs.gov/pub/irs-drop/n-
SPT hc siiiaiineailiakiiduedanatidiisbibalinibiiiseecbsdbensiicimaniein 22
Arkansas Ins. Dep’t Rule 100, § 7(B)........................ 16
RE BI, GD I, Be cccisessiccscniccennccnccssecscnescosiies 21
R.I. Dep’t of Health, Rules and
Regulations Pertaining to the Rhode
Island All-Payer Claims Database
§ 1.18, http://sos.ri.gov/documents/
archives/regdocs/released/
TT ictiericrincsiscsiciisiienabeininnineaninnninntdnti 12
Vt. Dep’t of Banking, Ins., Secs. &
Health Care Admin., Regulation H-
kN 9 21
Vv
TABLE OF AUTHORITIES—continued
Vt. Dep’t of Banking, Ins., Secs. &
Health Care Admin., Regulation H-
ee
18 Vt. Stat. Ann. § 9401 ..0......ccccccccsesecseseeees
MISCELLANEOUS
Al Prysunka, Milliman Healthcare
Analytics Blog, APCDs: Moving
Toward Standardization of Data
Collection (Nov. 30, 2012),
http://info.medinsight.milliman.com//
/moving-toward-standardization-of-
EE Re RS i en ee
The Alliance, When You’re Considering
Self-Funding (Aug. 2014),
http://www.the-alliance.org/
uploaded Files/Downloads/
When YoureConsideringSelfFunding.
APCD Council, Standardization of Data
Collection in All-Payer Claims
Databases (Jan. 2011), https://
www.apcdcouncil.org/file/83/
download?token=R4vbK7Xf....................
Center for Democracy & Technology,
Decentralizing the Analysis of Health
Data (Mar. 22, 2012),
https://cdt.org/files//Decentralizing-
Analysis-Health-Data.pdf.......................
Page(s)
sninhacceineaie 15
vi
TABLE OF AUTHORITIES—continued
Page(s)
Centers for Medicare and Medicaid
Services, Medicare Provider
Utilization and Payment Data:
Physician and Other Supplier (June
1, 2015),
https://www.cms.gov/Research-
Statistics-Data-and-
Systems/Statistics-Trends-and-
Reports/Medicare-Provider-Charge-
Data/Physician-and-Other-
ar as crmmamannnmnecitiiidies 24
Cigna White Paper, Advantages and
Myths of Self-Funding (Feb. 2014),
http://www.cigna.com/assets/docs/
business/small-
employers/841956_b_self funding
EE ES TRE AO 7,10
Colorado Center for Improving Value in
Health Care, Colorado All-Payer
Claims Database Data Submission
Guide,
http://www.civhc.org/getmedia/
29f43b37-b39d-4373-85f5-
1c1232f2d9c7/Data-Submission-
Guide-V7-June-2015.pdf.aspw/; .................002.0000:. 13
Employee Benefit Research Institute,
Health Plan Differences: Fully-
Insured vs. Self-Insured (Feb. 11,
2009), http://www.ebri.org/pdf/
FFE114.11Feb09. Final. pdf...........c..ccscessecsecsesseeeee 7
vill
TABLE OF AUTHORITIES—continued
H.R. Rep. No. 93-533 (1973), reprinted
in 1974 U.S.C.C.A.N. 46939 .....................
Henry J. Kaiser Family Foundation,
2015 Employer Health Benefits
Survey: Section Ten: Plan Funding
(Sept. 22, 2015), http://kff.org/report-
section/ehbs-2015-section-ten-plan-
NE
Henry J. Kaiser Family Foundation,
2015 Employer Health Benefits
Survey: Summary of Findings (Sept.
22, 2015), http://kff.org/report-
section/ehbs-2015-summary-of-
Minnesota Community Measurement,
Health Care Data Collection:
Exploring the Root Causes of
Provider Burden in Minnesota
(2015), http://mncm.org/wp-
content/uploads/2015/03/MNCM_Wh
0 ER rene oe
P. Rich & D. Landers-Nelson, National
Business Group on Health, Benefit
Manager Guide: Therapies for
Children with Autism Spectrum
Dieser Ger Cet. BOVG)...cccccccccccscccccsscccecsece
Page(s)
TABLE OF AUTHORITIES—continued
Page(s)
Patrick B. Miller, State Coverage
Initiatives, Robert Wood Johnson
Foundation, All-Payer Claims
Databases: An Overview for
Policymakers (May 2010),
https://www.apcdcouncil.org/publicat
ion/all-payer-claims-databases-
overview-policymakers .................0ccccscccseececeeeeeees 16
S. Rep. No. 93-127 (1973), reprinted in
Eg Eee 25
Utah Department of Health, Utah All-
Payer Claims Database Data
Submission Guide,
http://health. utah.gov/hda/apd/
UT%20APCD%20DSG%20v?2. 1 .pdf..................... 13
Washington Office of Financial Management,
WA-APCD Rules Background Paper #4:
Deadlines for Submission of Claim Files
(Sept. 2015), http:/Awww.ofm.wa.gov/
healthcare/pricetransparency/
oc ssnnentons 14
BRIEF OF THE AMERICAN BENEFITS
COUNCIL, AMERICA’S HEALTH INSURANCE
PLANS, THE ERISA INDUSTRY COMMITTEE,
THE HR POLICY ASSOCIATION, THE
NATIONAL BUSINESS GROUP ON HEALTH,
AND THE CHAMBER OF COMMERCE OF THE
UNITED STATES OF AMERICA AS AMICI
CURIAE IN SUPPORT OF RESPONDENT
INTEREST OF THE AMICI CURIAE!
The American Benefits Council (the Council) is a
national nonprofit organization dedicated to protect-
ing and fostering privately sponsored employee bene-
fit plans. The Council’s approximately 400 members
are primarily large multistate U.S. employers that
provide employee benefits to active and retired
workers and their families. The Council's member-
ship also includes organizations that provide em-
ployee benefit services to employers of all sizes. Col-
lectively, the Council’s members either directly spon-
sor or provide services to retirement and health
plans covering virtually all Americans who partici-
pate in employer-sponsored benefit programs.
America’s Health Insurance Plans (AHIP) is the
national association representing nearly 1,300 mem-
ber companies that collectively provide health insur-
ance coverage to more than 200 million Americans.
The vast majority of individuals insured by AHIP
! Pursuant to Rule 37.6, amici affirm that no counsel for a
party authored this brief in whole or in part and that no person
other than amici, their members, and their counsel made a
monetary contribution intended to fund its preparation or sub-
mission. Counsel of record for the petitioner and the respondent
have both filed blanket consents to the filing of amicus curiae
briefs with the Clerk of this Court.
2
members are participants in, or beneficiaries of, em-
ployee benefit plans under the Employee Retirement
Income Security Act of 1974 (ERISA), 29 U.S.C.
§§ 1001 et seq. The association’s goal is to provide a
unified voice for the health care financing industry,
to expand access to high quality, cost-effective health
care to all Americans, and to ensure Americans’ fi-
nancial security through robust insurance markets,
product flexibility and innovation, and an abundance
of consumer choice.
The ERISA Industry Committee (ERIC) is a
nonprofit organization representing America’s larg-
est employers that maintain ERISA-covered pension,
healthcare, disability, and other employee benefit
plans. These employers provide benefits to millions
of active workers, retired persons, and their families
nationwide. For this reason, ERIC frequently partic-
ipates as amicus curiae in cases that have the poten-
tial for far-reaching effects on employee benefit plan
design or administration.
The HR Policy Association represents the most
senior human resource executives in more than 370
of the largest corporations doing business in the
United States. Collectively, these companies employ
more than ten million employees in the United
States, nearly nine percent of the private sector
workforce. As America’s largest employers, HR Polli-
cy Association member companies provide health
benefits to employees, retirees, and their dependents
that are regulated under ERISA.
The National Business Group on Health (NBGH)
is a non-profit organization devoted to representing
large employers’ perspectives on national health pol-
icy issues. With 429 members, NBGH is the national
voice of large employers dedicated to finding innova-
3
tive and forward-thinking solutions to the nation’s
most important health care issues. NBGH facilitates
communications between large employers and na-
tional policymakers on key health care issues and
participates actively in national health policy de-
bates.
The Chamber of Commerce of the United States
of America (the Chamber) is the world’s largest busi-
ness federation, representing an underlying mem-
bership of over three million businesses and organi-
zations of every size, in every industry sector, and
from every geographic region of the country. An im-
portant function of the Chamber is to represent the
interests of its members by filing amicus briefs in
cases involving issues of vital concern to the nation’s
business community. Many Chamber members pro-
vide health benefits to employees and arrange for the
provision of health care services through employee
welfare benefit plans regulated under ERISA.
INTRODUCTION AND
SUMMARY OF ARGUMENT
When Congress enacted ERISA, it wanted to en-
courage employers to offer benefit programs for their
employees. In the case of healthcare benefits, com-
panies could choose either to purchase individual in-
surance policies, which would be subject to regula-
tion by the States, or to self-fund a nationwide plan,
which would be subject to a uniform, federal program
of regulation.
This case is about whether a company that has
elected to create a self-funded plan for the exclusive
purpose of providing healthcare benefits to its em-
ployees and their families—a plan that, under
ERISA, is subject to uniform federal regulation—
4
may nevertheless be forced by the States to function
as a clearinghouse for state data-collection efforts.
The Court’s answer to this question has important
implications not only for self-funded employer health
plans, but for all other employer benefit plans. The
more States are empowered to impose burdensome
regulatory requirements on employers, the more they
will do so. This slippery slope presents a serious
threat to the viability of welfare benefit plans, and
thus to the purposes of ERISA.
State programs such as Vermont's all-payer
claims database (APCD) undercut ERISA’s objectives
by subjecting self-funded plans to a morass of state
reporting requirements that Congress neither in-
tended nor allowed in enacting ERISA.
A.
Self-funded employer plans provide medical ben-
efits to some 93 million Americans. Employers large
and small rely on such plans because of the benefits
of self-funding, which include flexibility in fashioning
benefits to suit an employer’s workforce; the ability
to pay claims after they are incurred, instead of pre-
paying insurance premiums; and reductions in regu-
latory burdens and administrative costs.
The advantages of self-funding inure not only to
benefit employers, but to participants in those em-
ployers’ health insurance plans. To put it simply, an
employer that can reduce the costs of administering
benefit plans can provide more generous benefits to
its employees. Congress sought through ERISA to
encourage employers to establish self-funded plans,
so that more plans and plan participants would reap
the benefits of self-funding.
5
B.
Laws that require self-funded employer plans to
report data on medical claims to state APCDs impose
considerable compliance burdens on plans. Plan costs
necessarily increase, and Congress’s plan for uniform
regulation is compromised notwithstanding its es-
sential role in the passage of the Act. No two state
APCDs are the same; each requires that a plan (or
its agent) report somewhat different data, concerning
differently defined patient populations, at different
times, and in different file formats. A plan operating
in multiple states would need to devote substantial
time and resources to navigating this complex web of
regulations—resources that Congress. intended
should be spent on paying benefits to plan partici-
pants. APCD laws thus have an impermissible effect
on self-funded employer plans and are expressly
preempted by ERISA. See 29 U.S.C. § 1144(a). Peti-
tioner touts the fact that, under the peculiar circum-
stances of this case, it is technically the employer's
third-party administrator that must comply with
Vermont's APCD law. That is immaterial, however,
for it cannot be the case that Congress intended to
protect sponsors from piecemeal regulation but to
expose their plans to a different regime of burden-
some requirements if they choose to use a third-party
administrator.
C.
APCD laws also frustrate one of ERISA’s core
mandates: that plans must be operated solely for the
purpose of paying benefits to plan participants.
APCD laws contemplate that plans will serve an en-
tirely different purpose—namely, collecting partici-
pants’ medical data to support state programs and
initiatives. Commandeering ERISA plans for that
6
use, or the other infinite possibilities of state use
that await on the horizon, necessarily undermines
the objectives of ERISA and the goals that Congress
sought to achieve through the statute. Vermont’s
APCD law expands the purpose and function of bene-
fit plans contrary to ERISA’s dictates, and is there-
fore preempted.
ARGUMENT
Using self-funded welfare benefit plans as data
clearinghouses is incompatible with ERISA.
State APCDs impose real burdens on self-funded
plans. Those plans that operate across state lines
are subject to onerous requirements that require
plan sponsors or their agents to develop state-by-
state data-collection systems and reporting mecha-
nisms. APCD laws disrupt the uniform regulatory
scheme that Congress sought to create for employer
benefit plans and frustrate Congress’s desire that
ERISA plans’ resources be used efficiently to pay
benefits and plan expenses. ERISA preempts state
laws that so directly interfere with Congress’s de-
sign. Thus, this Court should affirm the judgment
below.
A. SELF-FUNDED EMPLOYER PLANS
ARE MUTUALLY BENEFICIAL FOR
EMPLOYERS AND EMPLOYEES
1. Self-Funded Employer Plans Provide
Benefits To Millions Of Americans
An employer can structure the health benefits it
provides to its employees in two different ways. The
first is for the employer to purchase an insurance
policy from an insurance company, paying a premi-
um to the insurance company for every employee
7
who is covered. This type of plan is referred to as a
“fully insured” plan, since the insurance company as-
sumes the full risk of covering employees’ medical
claims. See Employee Benefit Research Institute,
Health Plan Differences: Fully-Insured vs. Self-
Insured (Feb. 11, 2009), http://www.ebri.org/pdf/
FFE114.11Feb09.Final.pdf.
Alternatively, an employer can choose to estab-
lish a “self-funded” or “self-insured” plan. An em-
ployer with a self-funded plan pays for employees’
medical claims out of its own assets and thus bears
the entire risk associated with employees’ medical
claims, although it may purchase a “stop-loss” insur-
ance policy to cover its losses when its aggregate
costs grow unexpectedly high. Some employers with
self-funded plans—though not all—choose to contract
with third-party administrators (TPAs) rather than
control the day-to-day operations of their health
plans themselves. A typical TPA “administers the
health plan by processing the claims, issuing ID
cards, handling customer questions and performing
other tasks.” Cigna White Paper, Advantages and
Myths of Self-Funding 2 (Feb. 2014),
http://www.cigna.com/assets/docs/business/small-
employers/841956_b_self_ funding whitepaper_
v8.pdf.
Although the fully insured model was the tradi-
tional means by which employers provided health in-
surance benefits to employees, self-funded employer
plans are now overwhelmingly prevalent among
large and mid-size employers and have become more
popular with smaller employers in recent years. In-
deed, self-funded employer plans now cover more
employees than fully insured plans. A recent survey
found that 147 million Americans—“over half of the
8
non-elderly population”—receive employer-sponsored
health benefits. See Henry J. Kaiser Family Foun-
dation, 2015 Employer Health Benefits Survey:
Summary of Findings 1 (Sept. 22, 2015),
http://kff.org/report-section/ehbs-2015-summary-of-
findings/. Of those individuals, 63%—approximately
93 million—participate in self-funded employer
plans, including 94% of workers in firms with at
least 5,000 employees. Henry J. Kaiser Family
Foundation, 2015 Employer Health Benefits Survey:
Section Ten: Plan Funding (Sept. 22, 2015),
http://kff.org/report-section/ehbs-2015-section-ten-
plan-funding/. In 2000, by contrast, only 49% of
workers participated in self-funded employer plans.
Ibid.
2. Self-Funded Employer Plans Provide
Many Advantages Over Fully Insured
Plans
Employers have increasingly turned to self-
funded employer plans because, in comparison to ful-
ly insured health plans, self-funded employer plans
are often more flexible and less expensive. Self-
funded employer plans thus improve both employers’
bottom lines and the level of benefits that they can
provide to their employees.
Self-funded employer plans offer employers and
employees four principal advantages over fully in-
sured health plans:
First, self-funded employer plans give employ-
ers—particularly small employers—much more choice
as to which benefits their plans will provide. Em-
ployers who opt for a fully insured plan are limited to
the insurance policies approved for sale in the state
where the employer is located. By contrast, when
9
employers self-insure, they can customize their plans
by tailoring their benefit packages (above and beyond
any applicable statutory requirements) to match the
needs of their workforce. Cigna White Paper, supra,
at 3. The ability to customize benefits is especially
valuable to smaller businesses, which often have
specialized workforces whose needs differ from those
of most larger companies. Ibid.
Second, employers who self-fund save money be-
cause they do not need to prepay insurance companies
for health costs that may never be incurred. When an
employer opts to provide fully insured medical bene-
fits, it pays to an insurer the expected cost of benefits
plus a risk premium and also typically owes insur-
ance premium taxes to each State where it does
business. By contrast, so long as it can absorb or
spread the risks, an employer with a self-funded plan
can avoid the risk premium and the premium taxes,
and does not need to pay in advance. It can keep the
cash used to pay medical expenses in its own re-
serves, where the money can earn interest for the
plan. See The Alliance, When You're Considering
Self-Funding 3 (Aug. 2014), http://www.the-
alliance.org/uploadedFiles/Downloads/
WhenYoureConsideringSelfFunding.pdf.
Third, self-funded plans are typically less expen-
sive to operate than fully insured plans. Self-funded
plans generally have lower administrative costs than
fully insured plans. See The Alliance, supra, at 4
(‘Employers frequently find that administrative
costs for a self-funded program through a TPA are
lower than those charged by an insurance carrier.”).
The lower overhead of self-insurance allows more of
an employer’s resources to be spent on paying bene-
fits to employees and less on plan expenses.
10
Fourth, employers offering self-funded plans are
not subject to conflicting regulations in each of the
states in which they operate. Fully insured plans are
subject to state and local insurance laws and thus
must comply with differing mandates in each state
(and perhaps every different locality) in which they
operate. Self-funded plans, by contrast, are covered
by ERISA and subject only to ERISA’s regulatory
standards. See 29 U.S.C. § 1144(b)(2)(B) (exempting
employee benefit plans from state insurance and
banking regulations). Thus, self-funded plans are
able to streamline their operations by offering one
uniform set of benefits everywhere they operate. This
lowers plans’ administrative costs and ensures that
employees who move from place to place but stay
with the same employer can enjoy the same benefits
no matter where they reside. See The Alliance, su-
pra, at 3-4; Cigna White Paper, supra, at 3.2
Self-funded plans are a win-win proposition for
employers and their employees. Self-funding lowers
employers’ costs by allowing them to retain control
over the terms and features of their own benefit
plans and enabling them to manage how risks are
liquidated. And by lowering employers’ costs, self-
2 The flexibility of self-funded employer plans also enables
them to experiment more easily with innovative, evidence-
based benefit designs and then implement those designs on a
national scale. For example, recent research has shed consider-
able light on which treatments for children with autism work
better than others. Self-funded employer plans can easily adapt
their nationwide benefit packages to reflect these new findings.
See P. Rich & D. Landers-Nelson, National Business Group on
Health, Benefit Manager Guide: Therapies for Children with
Autism Spectrum Disorder (Oct. 2014) (excerpted summary for
public).
11
funding helps plan beneficiaries, who enjoy greater
benefits than they otherwise would. One of the prin-
cipal goals of ERISA is to ensure that sponsors and
beneficiaries can experience the benefits of uniform
federal regulation.
B. APCD STATUTES LIKE VERMONT'S
IMPOSE A SUBSTANTIAL AND UN-
WARRANTED BURDEN ON SELF-
FUNDED EMPLOYER PLANS
Vermont and many other states require self-
funded employer plans to report data on participants’
medical claims to state-run “all-payer claims data-
bases,” or APCDs. Each of these States requires that
different data be reported in a different format and
on a different schedule, meaning that an employer
that offers a health benefit plan in more than one
State is potentially subject to a complex web of regu-
lations. Complying with these varied data-reporting
requirements is a costly and burdensome undertak-
ing for self-funded employer plans. If forced to com-
ply with the dizzying array of APCD requirements,
self-funded employer plans would be required either
to dedicate personnel to the task of mastering and
satisfying the various requirements or to pay outside
parties to do the same. Either approach obviously
diverts resources away from the payment of benefits
to plan participants. Congress enacted ERISA pre-
cisely to protect plans from this sort of overwhelming
regulatory burden.
1. An Increasing Number Of States Are
Adopting Mandatory APCD Laws, Many
Of Which Have Conflicting Requirements
Though APCDs are a relatively new phenome-
non, they are proliferating rapidly across the coun-
12
try. Since 2003, when Maine established the first
APCD in the United States, twenty other states have
created their own APCDs. Eighteen of these twenty-
one state databases are “mandatory” APCDs that re-
quire all payers of medical claims—including self-
funded health benefit plans—to report data on their
customers or plan participants. See N.Y. Br. 4-5.
Thus, a large number of states already purport to
subject self-funded plans that operate nationally to
claims reporting requirements. And that number is
likely to increase in the near future: nineteen addi-
tional states are either considering legislation that
would create a mandatory APCD or are otherwise
exploring the idea. NY. Br. 5.
Although state APCDs share certain features in
common, each State’s database is distinctive. States
calibrate the features of their APCDs to match their
idiosyncratic policy goals, creating significant differ-
ences between each database’s requirements. To cite
only a few examples of these differences:
a. Different APCDs require different claims to be
reported. The coverage of each state APCD’s report-
ing requirement varies because states do not take
the same approach in determining which claims are
subject to reporting. Vermont, for example, requires
reporting of all medical care that is provided to Ver-
mont residents and all care provided within the
State of Vermont (even to nonresidents). Vt. Dep’t of
Banking, Ins., Secs. & Health Care Admin., Regula-
tion H-2008-01, § 4(D). Rhode Island, by contrast,
requires reporting only of care provided to Rhode Is-
land residents; care provided in the state to nonresi-
dents is not covered. See R.I. Dep’t of Health, Rules
and Regulations Pertaining to the Rhode Island All-
Payer Claims Database §§ 1.18, 1.20, 4.1(a),
13
http://sos.ri.gov/documents/archives/regdocs/released/
pdf/DOH/7305.pdf.
States also lack a uniform approach to determin-
ing who qualifies as a “resident” for APCD reporting
purposes. Colorado and Utah, for example, consider
students attending in-state colleges to be residents
subject to APCD reporting, no matter where they of-
ficially reside for other purposes. See Colorado Cen-
ter for Improving Value in Health Care, Colorado
All-Payer Claims Database Data Submission Guide
5, http://www.civhc.org/getmedia/29f43b37 -b39d-
4373-85f5-1¢c1232f2d9c7/Data-Submission-Guide-V7-
June-2015.pdf.aspx/; Utah Department of Health,
Utah All-Payer Claims Database Data Submission
Guide 3, http://health.utah.gov/hda/apd/UT%20
APCD%20DSG%20v2.1.pdf. Vermont, on the other
hand, appears not to treat students as residents. See
Vt. Regulation H-2008-01, § 4(D).
The States’ conflicting requirements as to which
claims must be reported and who qualifies as a “resi-
dent” mean that many claims may have to be report-
ed to multiple states at once. A claim involving care
provided in Vermont to a Rhode Island resident must
be reported to both states, for example. An employer
plan that operates in more than one state likely must
keep track of many such overlapping reporting re-
quirements.
b. Different APCDs have different schedules for
reporting data. State APCDs do not all require sub-
mission of data on the same timetable. On the con-
trary, at least four different reporting schedules are
in use by APCDs around the country. Maryland and
Oregon require that data be submitted quarterly.
But Colorado, Massachusetts, and Tennessee require
that data be submitted every month. Maine, New
14
Hampshire, and Vermont's APCDs take a third ap-
proach, requiring that different plans report data at
different intervals depending on the number of cov-
ered lives in the plan. And finally, Minnesota allows
reporters simply to choose between monthly and
quarterly data reporting. See Washington Office of
Financial Management, WA-APCD Rules Back-
ground Paper #4: Deadlines for Submission of Claim
Files 4-5 (Sept. 2015), http://www.ofm.wa.gov/
healthcare/pricetransparency/pdf/paper_4.pdf. Thus,
a plan that operates in multiple states would be un-
able to have one internal schedule for reporting all of
its claims data.
c. Different APCDs require that data be submit-
ted in different formats. State APCD laws prescribe
not only what data must be reported and when, but
also what format that data must be in. And here, too,
the requirements of each state’s APCD vary: differ-
ent states require that data be submitted in “consid-
erably different data file formats.” Al Prysunka,
Milliman Healthcare Analytics Blog, APCDs: Mov-
ing Toward Standardization of Data Collection (Nov.
30, 2012), http:/info.medinsight.milliman.com/2012/
11/apceds-moving-toward-standardization-of-data-
collection/. As a result, employers operating in more
than one state must develop different programs and
protocols for data submission in each state.
2. Reporting Health Care Claims Data To
All The States That Require It Is Burden-
some For Self-Funded Employer Plans
The task of reporting medical claims data to
state APCDs would be costly and difficult enough for
self-funded employer plans if every state’s require-
ments were exactly the same. Collecting health care
data for thousands of covered plan members, format-
15
ting it, and submitting it to an APCD is a time- and
labor-intensive undertaking—one that has only be-
come more difficult over time, as state regulators
have requested that more and more data points be
reported for each claim. Minnesota Community
Measurement, Health Care Data Collection: Explor-
ing the Root Causes of Provider Burden in Minnesota
1 (2015), http://mncm.org/wp-content/uploads/
2015/03/MNCM_WhitePaper_PrvdrBrdn_Final.pdf
(noting that due to the proliferation of health quality
measures among state regulators, “there is growing
concern in the [medical] community that the burden
of collecting and submitting data—represented pri-
marily by the cost of additional human resources—is
beginning to outweigh the benefits”).
Yet the multiplicity of conflicting and overlap-
ping reporting requirements in different states has
made the burden on plans even greater. For one
thing, self-funded plans that operate in multiple
states must deal with the sheer technical challenge
of reporting data to numerous states at different
times and in different formats. As one prominent
technology advocacy group has noted, it is simply
“burdensome and costly for plans to set up and se-
cure multiple large data submissions to different en-
tities in various locations, especially if those entities
require different data formats.” Center for Democra-
cy & Technology, Decentralizing the Analysis of
Health Data 9 (Mar. 22, 2012), https://cdt.org/files/
pdfs/Decentralizing-Analysis-Health-Data.pdf. _—In-
deed, even the strongest proponents of the creation of
APCDs acknowledge that the States’ varying re-
quirements for data reporting impose a significant
technical burden on plans. See, e.g., APCD Council,
Standardization of Data Collection in All-Payer
Claims Databases 1 (Jan. 2011), https://
16
www.apcdcouncil.org/file/83/download?
token=R4vbK7Xf (noting that “each state is collect-
ing different data by different methods and with dif-
ferent definitions,” which “rais[es] costs for payers
submitting data to the states (especially those payers
that are operating in multiple states)”); id. at 2 (“As
APCDs are required in more states, the cost to pay-
ers will become significant.”); see also Patrick B. Mil-
ler, State Coverage Initiatives, Robert Wood Johnson
Foundation, All-Payer Claims Databases: An Over-
view for Policymakers 8 (May 2010),
https://www.apcdcouncil.org/publication/all-payer-
claims-databases-overview-policymakers (noting that
payers who operate in numerous states must “bear
the compounded costs of responding to unique state
reporting requirements’).
In addition to the technical burden of reporting,
plans operating in multiple states must invest time
and resources in keeping track of each State’s re-
quirements, or assuring that a third-party adminis-
trator is doing so.? Most state APCDs’ requirements
are spelled out in regulations rather than in statuto-
ry law, allowing those requirements to change with-
out the need for legislative action. And in some
states, certain changes to APCD regulations can be
made without even needing to go through notice-and-
comment rulemaking. For example, the Arkansas
Insurance Department is authorized to change the
technical formatting requirements for data “at any
time,” without taking public comment. Arkansas Ins.
Dep’t Rule 100, § 7(B). After the new formatting re-
$A plan fiduciary has a duty to make sure the plan is adminis-
tered prudently, which includes compliance with applicable
laws. See 29 U.S.C. § 1104(a).
17
quirements are revised, payers can be required to
comply with the new requirements in as little as
four months. Jbid. The potential for rapid change in
state data reporting requirements means that self-
funded plans and other reporters must constantly
monitor state regulations and be prepared to revamp
their reporting procedures quickly.
In short, the burden of reporting claims data to
state APCDs is anything but minor. On the contrary,
reporting to APCDs is an onerous obligation that
self-funded employer plans must expend considera-
ble financial and human resources in order to meet.
And as more and more states create APCDs, that
burden is likely to worsen.
3. Congress Enacted ERISA To Prevent Self-
Funded Plans From Being Subject To
Patchwork State Regulation
The application of so many conflicting and over-
lapping state regulations to employer benefit plans
was precisely what Congress sought to prevent when
it enacted ERISA. Congress intended that employer
benefit plans would be administered in a single and
uniform way across the entire country. Central to
that uniform administrative process are the report-
ing obligations that plans must satisfy. Resp. Br. 17-
24. There can be no doubt that state APCD laws—
which require that a plan report its participants’
medical claims data differently in every state in
which the plan operates—“relate to” self-funded em-
ployer plans in an impermissible manner and are ex-
pressly preempted by ERISA. See 29 U.S.C.
§ 1144(a).
As amici explain infra (at pp. 24-29), Congress’s
primary concern when it enacted ERISA was to en-
18
sure that plans would be able to meet their obliga-
tions to participants and their beneficiaries. One of
the most important ways in which ERISA advances
this objective is by protecting plans from regulatory
requirements that vary from state to state—or even
from city to city. Congress believed that complying
with many differing state and local regulations
would burden plans with high compliance costs. See
Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98-99
(1983) (quoting a sponsor of ERISA who explained on
the House floor that the legislation would “elimi-
nate[e] the threat of conflicting and inconsistent
State and local regulation”). These higher costs, in
turn, would eventually fall on beneficiaries in the
form of reduced benefits. See, eg., Egelhoff v.
Egelhoff ex rel. Breiner, 532 U.S. 141, 149 (2001)
(“Requiring ERISA administrators to master the rel-
evant laws of 50 States *** would undermine
the congressional goal of ‘minimizing the administra-
tive and financial burdens’ on plan administrators—
burdens ultimately borne by the beneficiaries.”)
(quoting Ingersoll-Rand Co. v. McClendon, 498 U.S.
133, 142 (1990) (brackets omitted)); FMC Corp. v.
Holliday, 498 U.S. 52, 60 (1990) (“To require plan
providers to design their programs in an environ-
ment of differing state regulations would complicate
the administration of nationwide plans, producing
inefficiencies that employers might offset with de-
creased benefits.”); Fort Halifax Packing Co. v. Coyne,
482 U.S. 1, 11 (1987) (‘ERISA’s pre-emption provi-
sion was prompted by recognition that employers es-
tablishing and maintaining employee benefit plans
are faced with the task of coordinating complex ad-
ministrative activities. A patchwork scheme of regu-
lation would introduce considerable inefficiencies in
benefit program operation, which might lead those
19
employers with existing plans to reduce benefits, and
those without such plans to refrain from adopting
them.”). Subjecting employer benefit plans to only a
single set of national regulations would reduce plan
expenses and hence would foster greater healthcare
coverage for beneficiaries.
This Court thus has “not hesitated to apply
ERISA’s pre-emption clause to state laws that risk
subjecting plan administrators to conflicting state
regulations.” FMC Corp., 498 U.S. at 59. Indeed, this
Court has repeatedly struck down state laws that
have that undesirable effect. See, e.g., Egelhoff, 532
U.S. at 148-49 (holding that a state statute inter-
fered with “nationally uniform plan administration”
because it required plan administrators to “familiar-
ize themselves with [different] state statutes” and
created the possibility that plan payments would be
“subject to conflicting legal obligations”); FMC Corp.,
498 U.S. at 60 (holding that a state antisubrogation
law was preempted because “[a]pplication of differing
state subrogation laws to plans would * * * frustrate
plan administrators’ continuing obligation to calcu-
late uniform benefit levels nationwide”).
The Court should do the same in this case. The
multifarious regulations found in state APCD laws
burden self-funded employer plans—particularly na-
tional plans—with cumbersome and inefficient re-
porting requirements, the cost of which ultimately
falls on plan beneficiaries. And these reporting re-
quirements relate directly to the core function of self-
funded employer plans: their provision of benefits to
plan participants. This sort of onerous burden on a
core function of self-funded plans was exactly what
Congress sought to prevent.
20
Moreover, if the Court were to hold that APCD
laws were not preempted by ERISA, States and mu-
nicipalities would have no barrier holding back new
laws that similarly intrude on plan administration,
increasing the regulatory burden on self-funded em-
ployer plans even more. Perhaps States would re-
quire retirement and pension plans to report data on
their investments’ performance, for example.
Such a confusing patchwork of state regulations
would threaten to “create a system that is so complex
that administrative costs *** unduly discourage
employers from offering *** benefit plans in the
first place.” Varity Corp. v. Howe, 516 U.S. 489, 497
(1996). Congress enacted ERISA to prevent that un-
desirable result. See Fort Halifax, 482 U.S. at 11
(“ERISA’s pre-emption provision was prompted by
recognition that * * * [a] patchwork scheme of regu-
lation would introduce considerable inefficiencies in
benefit program operation, which might lead those
employers with existing plans to reduce benefits, and
those without such plans to refrain from adopting
them.”). This Court should abide by Congress’s in-
tent to encourage private welfare plans by holding
that Vermont's APCD reporting requirement imper-
missibly invades the province of ERISA and is ex-
pressly preempted.
4. The Decision To Use A Third-Party Ad-
ministrator Does Not Protect Vermont's
APCD Law From Preemption.
In his attempts to argue that state APCD laws
like Vermont’s do not impose a burden on self-funded
employer plans that triggers ERISA preemption, Pe-
titioner relies to a surprising extent on the fact that
it is Liberty Mutual's TPA—rather than Liberty Mu-
tual itself—that is subject to reporting requirements
21
under Vermont’s law. See Pet. Br. 1, 23, 31, 38 &
n.21, 53-55. Petitioner's position appears to be that
because Liberty Mutual’s TPA is the party that actu-
ally reports data to Vermont’s APCD, Liberty Mutual
itself cannot possibly be burdened by the reporting
requirement.
That position is incorrect, for two reasons. First,
as explained supra, although Liberty Mutual em-
ploys a TPA to operate its self-funded employer plan,
some employers do not.4 And under Vermont’s law
(and the APCD laws of other states), even companies
that do not retain TPAs are responsible for satisfying
burdensome reporting requirements. See, e.g., Vt.
Regulation H-2008-01, § 3(%); 957 Mass. Code Regs.
2.02. Thus, the burden of state APCD laws—
including Vermont’s—clearly falls on some self-
funded employer plans directly, which suffices to
make those laws preempted.
Second, from the standpoint of ERISA, there is
no legal distinction between legal obligations that
fall on a plan sponsor and those that fall on its dele-
gate, such as a TPA. Common sense and basic eco-
nomics both suggest that the burden of complying
with such obligations is ultimately borne by the plan
sponsor, irrespective of which party is subject to the
obligations in the first instance: if the TPA is respon-
sible for reporting, it will pass on the cost of report-
4 See Patient Protection and Affordable Care Act; HHS Notice
of Benefit and Payment Parameters for 2015, 78 Fed. Reg.
72,322, 72,340 (Dec. 2, 2013) (‘We recognize that some self-
insured group health plans self-administer the benefits and
services provided under the plan, and do not use the services of
a third party administrator.”).
22
ing to its client in the form of a higher price.5 And
even when a plan sponsor delegates a duty (such as
data reporting) to a TPA, it retains a fiduciary duty
to oversee and monitor the TPA’s performance of its
tasks. See 29 U.S.C. § 1104(a); see also, e.g., Jackson
v. Truck Drivers’ Union Local 42 Health & Welfare
Fund, 933 F. Supp. 1124, 1141 (D. Mass. 1996) (“[A]
delegating [ERISA] fiduciary retains an obligation to
oversee and monitor the activities of his delegate.”).
This monitoring takes both time and effort on the
plan sponsor’s part. Either factual scenario, there-
fore, subjects plan sponsors to the costs of state regu-
lation from which Congress sought to shield them in
enacting ERISA.
No principle in ERISA, moreover, suggests that
plans can be subjected to inconsistent jurisdiction-
by-jurisdiction obligations just because they have
sought outside assistance. On the contrary, this
Court has held that state laws may not “bind plan
administrators to [a] particular choice” about how to
structure their plan—such as the choice whether or
not to employ a TPA. See N.Y. State Conference of
Blue Cross & Blue Shield Plans v. Travelers Ins. Co.,
514 U.S. 645, 659 (1995). Thus, Petitioner’s interpre-
tation of ERISA preemption—which would essential-
5 The IRS acknowledged this “pass-through” dynamic in its
proposals for implementing the Patient Protection and Afforda-
ble Care Act’s excise tax on high-cost employer health plans. In
the notice laying out the proposals, the agency acknowledged
that if the excise tax on a self-insured employer plan is paid by
its TPA, the TPA is likely to “pass through all or part of the
amount of the excise tax to the employer.” IRS, Notice 2015-52,
Section 4980l1—Excise Tax on High Cost Employer-Sponsored
Health Coverage at 7, https://www.irs.gov/pub/irs-drop/n-15-
52.pdf.
23
ly coerce plans into forgoing TPAs by subjecting
them to APCD reporting only when they use TPAs—
is surely wrong. ERISA preemption should not and
does not depend on whether a plan opts to employ a
TPA.
5. APCDs Can Obtain Information From
Other Sources—Such As _ Providers—
Without Needing To Burden Self-Funded
Plans
Petitioner and his amici devote considerable
space in their briefs to arguments why APCDs are a
useful regulatory tool for states and explanations of
the potential benefits they offer to state policymak-
ers. See, e.g., Pet. Br. 12; Am. Hosp. Ass’n & Ass’n of
Am. Med. Colls. Br. 16-23. But none of this infor-
mation is relevant to the issue before this Court—
t.e., whether ERISA preempts state APCD laws. If
APCD laws impose the sort of burden on self-funded
employer plans that Congress sought to avert (and
they do), those laws are preempted no matter how
high-minded a purpose they serve.
Noticeably missing from Petitioner's brief is any
meaningful explanation as to why data from self-
insured plans is so critical to Vermont’s goals. In
fact, Petitioner contradicted that position when he
told the district court that self-insured plans account
for only a small percentage of the total data collected.
Def.’s Opp. to Mot. for Summ. J. 12, Liberty Mut. Ins.
Co. v. Kimbell, No. 2:11-cv-204 (D. Vt. Aug. 17,
2012), ECF No. 48 (“[A]t least two-thirds of Blue
Cross’ reporting in Vermont pertains to non-ERISA
plan members.”); see also Pet. App. 69a. It should be
noted, however, that if States truly think it im-
portant to obtain data on medical care provided to
participants in self-funded employer plans, they can
24
obtain those data from other sources—including,
most importantly, the providers who deliver that
care.6 The choice that Petitioner and his amici pre-
sent, between allowing States to maintain compre-
hensive APCDs on the one hand and respecting
ERISA’s goal of protecting plans from conflicting
state regulations on the other, is therefore a false
choice. States can obtain the data they need without
imposing regulatory costs on self-funded employer
plans—the entities that Congress singled out for spe-
cial protection in ERISA.
C. THE EXCLUSIVE PURPOSE OF ERISA
BENEFIT PLANS IS TO PROVIDE
BENEFITS, NOT TO BE LABORATO-
RIES FOR STATE EXPERIMENTATION
State APCD laws not only increase costs for self-
funded employer plans; they also conscript plans into
the service of the States, turning them into laborato-
ries in which States collect data for their own pur-
poses. This conscription of self-funded plans, wheth-
er well-intentioned or not, undermines the goals of
ERISA. Congress specified in ERISA that the sole,
exclusive purpose of employee benefit plans is to pro-
vide benefits to beneficiaries. By forcing plans to di-
vert resources to serve a different and unrelated
6 The Centers for Medicare and Medicaid Services (CMS), for
example, has made efforts in recent years to collect Medicare
claims data from providers and to make those data publicly
available for study. See Centers for Medicare and Medicaid
Services., Medicare Provider Utilization and Payment Data:
Physician and Other Supplier (June 1, 2015),
https://www.cms.gov/Research-Statistics- Data-and-
Systems/Statistics-Trends-and-Reports/Medicare-Provider-
Charge-Data/Physician-and-Other-Supplier. html. States could
compile similar datasets on non-Medicare claims.
25
purpose chosen by the state, APCD laws interfere
with the legislative scheme that Congress crafted in
ERISA.
1. Congress Enacted ERISA In Order to
Protect The Interests Of Plan Beneficiar-
les
In the early 1970s, Congress conducted “a com-
prehensive and exhaustive study of the private pen-
sion plan system in the United States” to investigate
concerns about the number of private-sector pension
and benefit plans that were becoming insolvent and
unable to pay their beneficiaries. This study revealed
that many retirement plans did not “meet the obliga-
tion[s] promised [to employees] * * * after many
years of service.” S. Rep. No. 93-127, at 11-12 (1973),
reprinted in 1974 U.S.C.C.A.N. 4838, 4847-48. Con-
gress found that “despite the enormous growth in
[employee benefit] plans[,] many employees with
long years of employment [were] losing anticipated
retirement benefits,” and that “owing to the inade-
quacy of current minimum standards, the soundness
and stability of plans with respect to adequate funds
to pay promised benefits [was] endangered.” 29
U.S.C. § 1001(a). In Congress’s view, the precarious
financial situation of employee benefit plans was a
threat to the “continued well-being and security of
millions of employees and their dependents” and,
thus, to the “national public interest.” bid.
ERISA was Congress’s response to these prob-
lems. As its text proclaimed, the statute’s animating
purpose was “to protect interstate commerce and the
interests of participants in employee benefit plans
and their beneficiaries.” 29 U.S.C. § 1001 (b); see al-
so, e.g., Shaw, 463 U.S. at 90 (“ERISA is a compre-
hensive statute designed to promote the interests of
26
employees and their beneficiaries in employee bene-
fit plans.”); H.R. Rep. No. 93-533, at 1 (1973), re-
printed in 1974 U.S.C.C.A.N. 4639, 4639 (“The pri-
mary purpose of the bill is the protection of individu-
al pension rights”). Each of ERISA’s safeguards—
from requiring plan administrators to disclose more
information, to holding fiduciaries to stricter stand-
ards of conduct, to requiring plan termination insur-
ance—was designed to further the purpose of pro-
tecting plan participants and their beneficiaries. See
29 U.S.C. § 1001(b)-(c). Vermont’s plan reporting ob-
ligations do not further that purpose.
2. ERISA Mandates That Plans Be Operat-
ed For The Exclusive Purpose Of Provid-
ing Benefits To Participants
The most important safeguard Congress included
in ERISA was the “exclusive purpose” rule of Section
404(a). This rule requires a plan fiduciary to “dis-
charge his duties with respect to a plan solely in the
interest of the participants and beneficiaries” and
“for the exclusive purpose * * * of providing benefits
to participants and their beneficiaries[,] and defray-
ing reasonable expenses of administering the plan.”
29 U.S.C. § 1104(a)(1) (emphases added). Section
403(c) of the statute provides a corollary to the “ex-
clusive purpose” rule, by providing that plan assets
are to be used “for the exclusive purposes of providing
benefits to participants in the plan and their benefi-
ciaries and defraying reasonable expenses of admin-
istering the plan.” Id. § 1103(c)(1).
The “exclusive purpose” rule is quite stringent: it
makes plan participants’ interests the sole relevant
consideration in plan decisionmaking and resource
allocation. See, e.g., Donovan v. Bierwirth, 680 F.2d
263, 271 (2d Cir. 1982) (noting that the exclusive
27
purpose rule requires that plan trustees’ decisions
“be made with an eye single to the interests of the
participants and beneficiaries.”). Indeed, Congress
intended that the exclusive-purpose rule would hold
plan fiduciaries to an even higher standard than or-
dinarily applies under state trust law, because Con-
gress “determin[ed] that the common law of trusts
did not offer completely satisfactory protection” to
beneficiaries. Varity Corp., 516 U.S. at 497. Federal
courts have accordingly developed a _ specialized
common law of fiduciary obligations under ERISA
“bearing in mind the special nature and purpose of
employee benefit plans.” Jbid. (citing Firestone Tire
Co. v. Bruch, 489 U.S. 101, 110-11 (1989)). In short,
the “exclusive purpose” rule is an exceedingly exact-
ing standard—one that reflects Congress’s special so-
licitude for the welfare of participants in employer
benefit plans.
3. State APCD Statutes Interfere With Con-
gress’s Purpose By Commandeering
ERISA Plans For A Different Purpose:
Data Collection
State APCD laws like Vermont’s are irreconcila-
ble with the “exclusive purpose” rule’s clear require-
ment that plan resources be expended solely for the
benefit of participants and beneficiaries, less any in-
cidental expenses of plan administration. APCD laws
require plans to expend resources on wholly different
priorities that the State has chosen: i.e., collecting,
formatting, and reporting data in compliance with
the requirements of each State’s database. This ex-
penditure of resources does not inure to the sole ben-
efit of plan participants, as ERISA requires; on the
contrary, it harms beneficiaries, since every dollar
spent on data reporting is a dollar that cannot be
28
spent to meet the plan’s obligations to its partici-
pants. And it layers on another regulatory scheme
requiring distraction from the plan’s exclusive pur-
pose of providing benefits.
Petitioner and his amici respond to this point by
suggesting that the costs imposed on self-funded em-
ployer plans by APCD laws are no different from
those imposed by any other generally applicable
state regulation. See Pet. Br. 27; N.Y. Br. 31, 34. Not
so. The expenses of reporting data to APCDs are not
akin to taxes or other costs that a plan might ordi-
narily be expected to incur under state law. On the
contrary, APCD reporting is an extraordinary obliga-
tion targeted at plans (and a very few other kinds of
healthcare enterprises) as a means of conscripting
them for the pursuit of specific state policy objec-
tives. See 18 Vt. Stat. Ann. § 9401 (listing policy
goals of Vermont's APCD statute). APCD reporting is
far from an ordinary cost of doing business in a par-
ticular state; it is a deadweight loss that Vermont
and other States require plans to absorb for the
States’ convenience.
This Court should therefore hold that state
APCD laws are preempted by ERISA because they
“operate[] to frustrate [ERISA’s] objects.” Boggs v.
Boggs, 520 U.S. 833, 841 (1997). Congress’s consid-
ered judgment in enacting ERISA was that main-
taining a strong and financially sound employee ben-
efit system is crucial to the well-being of millions of
American employees and their families and to the
strength of the national economy. And Congress con-
cluded that the best way to keep employee benefit
plans sound is to ensure that plans are administered
for the single and exclusive purpose of providing
benefits to participants and their beneficiaries.
29
When States attempt to use ERISA plans as tools for
pursuing their own agendas, ERISA preempts such
regulations, irrespective of how high-minded the
state’s purposes for commandeering the plan’s re-
sources or of whether the state’s regulatory scheme
would be “less useful,” Pet. Br. 33, if ERISA plans
were excluded from it.
The only acceptable use of an ERISA plan is to
provide benefits to participants. Vermont's law,
which uses ERISA health plans for an entirely dif-
ferent purpose chosen by the State, is therefore
preempted.
CONCLUSION
The judgment of the court of appeals should be
affirmed.
Respectfully submitted.
BRIAN D. NETTER
MATTHEW A. WARING
Mayer Brown LLP
1999 K Street NW
Washington, DC 20006
(202) 263-3000
NANCY G. Ross
Counsel of Record
Mayer Brown LLP
71 S. Wacker Drive
Chicago, IL 60606
(312) 782-0600
nross@mayerbrown.com
Counsel for Amici Curiae
KATHRYN WILBER
American Benefits
Council
1501 M Street NW
Suite 600
Washington, DC 20005
Counsel for American
Benefits Council
ANNETTE GUARISCO
FILDES
ERISA Industry
Committee
1400 L Street NW
Suite 350
Washington, DC 20005
Counsel for ERISA
Industry Committee
OCTOBER 2015
THOMAS WILDER
America’s Health
Insurance Plans
601 Pennsylvania Ave
NW
South Building, Ste. 500
Washington, DC 20004
Counsel for America’s
Health Insurance Pians
KATHRYN COMERFORD
TODD
WARREN POSTMAN
U.S. Chamber Litigation
Center
1615 H Street, N.W.
Washington, DC 20062
Counsel for the Chamber
of Commerce of the United
States of America
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