FEHBP Plans Not Subject to State Laws
Coventry Health Care of Missouri, Inc. v. Nevils
April 18, 2017
- S. Sup. Ct.
- 16–149
The U.S. Supreme Court ruled yesterday that Contractual subrogation and reimbursement rights of federal employees’ private health insurance carriers override state laws barring subrogation and reimbursement (Ginsburg, J.) In a unanimous decision, the Court reviewed the Federal statute creating the Federal Employees Health Benefit Program (FEHBP) and held that
- Because contractual subrogation and reimbursement prescriptions plainly “relate to . . . payments with respect to benefits,” §8902(m)(1), they override state laws barring subrogation and reimbursement. Pp. 6–9.
5 U. S. C. §8902(a), (d). FEHBA contains an express-preemption provision, §8902(m)(1), which states that the “terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law . . . which relates to health insurance or plans.”
In this case Nevils is a former federal employee who enrolled in and was insured under a FEHBA plan offered by petitioner Coventry Health Care of Missouri.1 Nevils v. Group Health Plan, Inc., 418 S. W. 3d 451, 453 (Mo. 2014) (Nevils I ). When Nevils was injured in an automobile accident, Coventry paid the medical expenses. Nevils sued the driver who caused his injuries and recovered a settlement award. Coventry asserted a lien for $6,592.24 against part of the settlement proceeds to cover medical bills it had paid. Nevils I, 418 S. W. 3d, at 453. Nevils repaid that amount, thereby satisfying the lien. Nevils then filed this class action against Coventry in Missouri state court, alleging that Coventry had unlawfully obtained reimbursement. Nevils premised a claim on Missouri law, which does not permit subrogation or reimbursement in this context, Coventry asserted a lien for $6,592.24 against part of the settlement proceeds to cover medical bills it had paid. Nevils I, 418 S. W. 3d, at 453. Nevils repaid that amount, thereby satisfying the lien. Nevils then filed this class action against Coventry in Missouri state court, alleging that Coventry had unlawfully obtained reimbursement. Coventry countered that §8902(m)(1) makes subrogation and reimbursement clauses in FEHBA contracts enforceable notwithstanding state law. The trial court granted summary judgment in Coventry’s favor, The Missouri Supreme Court reversed. Nevils I, 418 S. W. 3d, at 457. The Court granted certiorari, vacated the Missouri Supreme Court’s judgment, and remanded for further consideration in light of OPM’s recently adopted rule. Coventry Health Care of Mo., Inc. v. Nevils, 576 U. S. ___ (2015). On remand, the Missouri Supreme Court adhered to its earlier decision. Nevils v. Group Health Plan, Inc., 492 S. W. 3d 918, 920, 925 (2016) The Court granted certiorari to resolve conflicting interpretations of §8902(m)(1). 580 U. S. ___ (2016). Compare 492 S. W. 2d, at 925 (majority opinion), with Bell v. Blue Cross & Blue Shield of Okla., 823 F. 3d 1198, 1199 (CA8 2016)
Nevils contended that, if §8902(m)(1) covers subrogation and reimbursement clauses in OPM contracts, then the statute itself would violate the Supremacy Clause by assigning preemptive effect to the terms of a contract, not to the laws of the United States. The Court concluded, however, that the statute, not a contract, strips state law of its force. Without §8902(m)(1), there would be no preemption of state insurance law. FEHBA contract terms have preemptive force only as they “relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits),” §8902(m)(1)—i.e., when the contract terms fall within the statute’s preemptive scope. It is therefore the statute that “ensures that [FEHBA contract] terms will be uniformly enforceable nationwide, notwithstanding any state law relating to health insurance or plans.”
In its analysis the Court referred to the broad preemptive powers of ERISA as an analogy, the substantive difference being that ERISA does preempt State law, but not State insurance laws. Here the Court clearly stated that State Insurance laws in as far as they relate to FEHBP plans are Preempted by Sec. 8902(m)(1).
See the full case at:
https://www.supremecourt.gov/opinions/16pdf/16-149_6jfm.pdf