You could be forgiven for not hearing about Liberty Mutual v. Gobeille, a case on the Supreme Court’s docket this term. There are, indeed, other important cases that will be decided: Fisher v. University of Texas at Austin for instance, challenges a circuit court’s support of U of Texas’s race-based affirmative action policies; Friedrichs v. California Teachers Association seeks to expand on a previous case, by invalidating “public sector union shops.” Gobeille has nothing to do with some of the more exciting issues of the day. But what the court decides in Gobeille could spell the end of state efforts to inject long-overdue price transparency in health care pricing, potentially affecting millions of Americans.
The legal question in Gobeille is simple: does the Employment Retirement Income Security Act (ERISA) pre-empt state efforts on health care transparency.
So, first – what is ERISA?
ERISA sets universal minimum standards for pensions and health plans, and generally applies to group health plans offered by employers. This offers some standardization for companies, minimizing their regulatory burden and allows employees similar certainty.
The facts on the ground are pretty simple. Vermont has established a so-called all-payer claims database (APCD) – which is a fancy way of saying that Vermont, as over a dozen other states have done, is collecting payment information from every single payer in the state. This covers the gamut of commercial insurers, pharmacy benefit managers (like Express Scripts), hospitals and health systems, along with the state’s Medicaid program. The idea behind APCDs is to begin to shed some light on the often unknown costs of health care services. Colorado’s APCD, for instance, shows that the total cost of care for a hip replacement in the Denver area can cost between $21,000 and $36,000 depending on the facility you use.
It’s easy to see what the conflict might be for ERISA-covered plans, then. Typically, when federal law conflicts with state law, federal law is generally assumed to trump whatever the state is doing. There is an important exception when it comes to ERISA. Fully-insured plans (those that purchase insurance through another company) have a pre-emption carve out that allows states to regulate them — but this doesn’t apply to self-insured plans that pay they own claims.
Enter Liberty Mutual, a company that pays for its own health care claims. In 2011, Vermont subpoenaed Blue Cross Blue Shield, the company responsible for administering Liberty Mutual’s claims, demanding that they provide claims data under threat of fines. Liberty Mutual, as one might guess, decided to fight these demands, claiming ERISA pre-emption. Without getting too far into the details, a district court ruled against Liberty Mutual, an appeals court ruled in favor of them, and Vermont appealed to the Supreme Court.
Liberty Mutual is contending that not only is the claims collection function pre-empted by ERISA, but that if multiple states have different reporting requirements, data collection would then become unnecessarily burdensome.
The legal questions at hand are important. But they’ve already been thoroughly addressed.
Instead, it’s worth considering what the worst case scenario – the Supreme Court siding with Liberty Mutual – might look like. In short, the loss to patients would be enormous.
Transparency is one of the most important ingredient now missing from the American health care system. Consider that even after the ACA’s coverage expansions, commentators routinely question whether patients can access plan formularies, whether physician networks are accurately portrayed, and perhaps most relevantly, whether patients can shop around (meaning, know how much different services cost) with their new high-deductible plans.
Sure, some of this information might be already available if you have insurance. Most insurers now have cost estimator tools for their members. But what about for people who are shopping for insurance? The fact that Medicare Part D enrollees can know ahead of time what their total drug costs will be based on the medication they’re taking, and people shopping around on the ACA exchanges can’t should be appalling. Even people with employer-sponsored coverage who have access to cost estimators may not be getting the most accurate estimates. And insurers typically don’t know what other insurers are paying – so the bigger insurers may get better deals that smaller insurers will never know about.
For discrete procedures – a CT scan, x-ray, or a physician office visit – this is already bad. But for diagnoses that require multiple procedures – the hip replacement example from Colorado – this can be truly terrifying. To actually be relevant for patients, cost-of-care estimates have to be total cost of care. It doesn’t matter to the patient what the cost of any one procedure is. What the final bill will be – including anesthetics and antibiotics, physician fees, and facility fees is what’s relevant. And for the most part, this isn’t available.
Far from being a panacea, this is what APCDs would help begin to solve. The incredible lack of patient-relevant information, even as we ask patients to shoulder an ever-growing share of health care costs, should be a first-order concern for anyone remotely interested in continued reforms to our health care system. Actual prices paid to providers are locked up better the gold in Fort Knox – breaking down these walls is the first step in tearing down the health care “fortress.”
So naturally, should the APCDs fall to the wayside, the setback would be significant.
There’s little that states can do at this point. But fortunately, we need not wait for the Supreme Court’s decision on the case. One work-around, actually suggested by Justice Breyer in oral arguments, is for the Department of Labor (DOL) to proactively “authorize” the various APCDs around the country to collect data on their behalf. This would seem to get around ERISA pre-emption while avoiding disruption of states’ already established APCDs.
But it’s unlikely that the DOL would issue guidance while a Supreme Court case is pending. And the actual majority view, as Ronald Mann at SCOTUSblog writes, is largely unclear. So for the time being, health care transparency advocates must place their hopes in the Justices on the court. The Supreme Court has rescued the ACA twice, now – here’s hoping they do the same for price transparency.
This piece originally appeared in Forbes
This piece originally appeared in Forbes