SCOTUS Agrees to Hear Liberty Mutual Preemption Case; President Signs HCTC Into Law

SCOTUS Redux: Apparently two blockbuster employee benefits cases weren’t enough for the U.S. Supreme Court, as they have now decided to enter back into the ERISA preemption scrum: on Monday they agreed to hear a case (next term) on the application of a Vermont reporting law to a self-funded group health plan.

The case, Gobeille v. Liberty Mutual Insurance Co., concerns a Vermont state law requiring reporting by all health plans, including insured and self-funded plans.  The state’s law requires health plans to file reports with the state that contain claims data and other “information relating to health care”.  Vermont’s law also specifies how the information must be recorded and transmitted.

Liberty Mutual sought a declaration in federal district court that the Vermont statute and regulation were preempted by ERISA, but the court granted summary judgment in favor of Vermont.

Liberty Mutual appealed to the Second Circuit Court, and this time the Court decided in favor of Liberty Mutual, reversing the decision of the district court.  The Circuit Court stated:

The ERISA preemption clause is not self-reading and ERISA preemption doctrine is not static. The early judicial consensus, based on the broad wording of the preemption clause (and legislative history), was to construe preemption broadly. More recent precedent has pulled back by setting a rebuttable presumption against preemption of state health care regulations. Two constants, however, remain: (1) recognition that ERISA’s preemption clause is intended to avoid a multiplicity of burdensome state requirements for ERISA plan administration; and (2) acknowledgment that “reporting” is a core ERISA administrative function. These two considerations lead us to conclude that the Vermont law, as applied to compel the reporting of Liberty Mutual plan data, is preempted. We therefore reverse and remand for entry of judgment in favor of Liberty Mutual.

ERIC action:  ERIC is now reviewing the possibility of filing an amicus brief to support Liberty Mutual in its claim of ERISA preemption.

Extension of the Health Coverage Tax Credit (HCTC):  Yesterday the president signed into law the “Trade Preferences Extension Act of 2015”, HR 1295, part of the controversial trade legislation package, to extend the HCTC through 2019; the credit had expired at the end of 2013.

The HCTC, which dates back to 2002, is available to certain workers displaced by trade as well as certain individuals who are at least age 55 and who receive pension payments from the PBGC.

The amount of the credit has evolved in a rather haphazard fashion:  it started at 65% in 2002, was increased to 80% under the ARRA stimulus package, then sank back to 65% on February 13, 2011.  The credit was next reinstated at the 72.5% level for coverage months beginning before 2014, and this is the level that now will be continued through 2019.

The credit applies to the payment of health premiums for eligible individuals and their qualifying family members, including COBRA premiums, and is available as an advance payment.

The subsidies cannot be used to offset premiums paid through the Exchanges, although it looks as though individuals will be able to retroactively choose the HCTC instead of an Exchange subsidy.  (This would be accomplished through an amendment to the affected individual’s federal income tax return so long as the returns are open for amendment.)

Notice 2015-43 on expat plans:  Treasury, with the consent of DOL and HHS, published a notice today providing interim guidance on expatriate health plans, expat health insurers, and employers as plan sponsors of expat health plans.  The new Notice 2015-43 basically concludes that we poor benighted souls haven’t had enough time to modify our current arrangements to accord with the Expatriate Health Coverage Clarification Act of 2014, so we will be permitted to rely on a good-faith interpretation of the Expat Act; for this purpose, reliance on certain specified FAQs will be considered a good-faith interpretation. (Question to Treasury:  can we extrapolate this reasoning to the ACA reporting requirements?)

Notice 2015-43 also addresses:

  • Application of the PCORI fee and the tax on health insurers under section 9010;
  • Compliance with the ACA reporting requirements of section 6055 and 6056 of the Internal Revenue Code; and
  • The definition of a qualified expatriate.

Notice 2015-43 applies to policies issued or renewed on or after July 1, 2015, and plan years that start on or after that date.

Article by Gretchen Young, ERIC Senior Vice President for Health Policy