By: David L. Place, J.D., Synergy Settlement Services Vice President, Director of Lien Resolution Services
The Federal Employees Health Benefits Act (FEHBA) of 1959 (5 U.S.C. 8901 et seq.) is the largest employer-sponsored group health insurance program in the world, covering more than 8 million federal employees, retirees, former employees, and family members. FEHBA Plans are contracts between the insurance carrier and the United States Office of Personnel Management (OPM). FEHBA contains a preemption provision which provides that certain contract terms in health insurance plans “shall” preempt state or local law. The language of a FEHBA Plan preempts state law, whether consistent or inconsistent with federal plan provisions, on matters of “coverage or benefits” (5 U.S.C. 8902(m)(1)). The Missouri Supreme Court handed down its opinion in Nevils v. Group Health Plan on Feb. 4, 2014, holding that that FEHBA does not preempt Missouri law, which prohibits subrogation on personal injury claims.
This well-reasoned ruling by the Missouri Supreme Court is significant in that it counters a letter issued by the OPM on June 18, 2012. This OPM letter expressly stated its official position that FEHBA preempts state laws on issues of subrogation and reimbursement, and instructed carriers such as Blue Cross Blue Shield to “utilize this correspondence as needed in your recovery efforts.”
The catalysts for the OPM letter were the United States Supreme Court’s decision limiting preemption under FEHBA in the case of Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 126 S. Ct. 2121 (2006), and its progeny. In that case, the Supreme Court declined to exercise subject matter jurisdiction holding that Section 8902(m)(1) does not raise a federal question to support federal jurisdiction. The Court noted it was undisputed that FEHBA did not expressly create a federal right of action, and the carrier’s right to reimbursement arose by contract, not federal law. In the wake of McVeigh, other federal circuit courts issued opinions rejecting preemption of various state law provisions governing tort recoveries. In Blue Cross Blue Shield of Ill v. Cruz, 495 F.3d 510 (7th Cir. 2007), the court rejected preemption of the state’s “common fund” rule and in Van Horn v. Arkansas Blue Cross, 629 F. Supp 2d 905 (D. Ark. 2007), the court rejected preemption of the “made whole” doctrine. (See also, Morris v. Humana Health Plan, Inc., 829 F.Supp2d.848 (W.D. Missouri, 2011); Calingo v. Meridian Res. Co. LLC, 2011 U.S. Dist. Lexis 83496 (S. D. N.Y. 2011); Cedars-Sinai Med. Ctr. V. Natl League of Postmasters of the U.S., 497 F.3d 972 (9th Cir. 2007).
Despite all of the legal authority cited in the OPM letter by John O’Brien, the Director of Healthcare and Insurance for the OPM, one federal district court was persuaded.
In Calingo v. Meridian Res. Co., LLC, 2013 WL 1250448 (S.D.N.Y. 2013) (Calingo II), relying upon Chevron USA, Inc., v. Natural Resources Defense Counsel, Inc., 467 U.S. 837 (1984) the Court gave deference to the OPM letter noting that reimbursement and subrogation play an integral role in the overall administration of the Federal Employees Health Benefits Program and thus “relate to” the coverage and benefits of those insured under the program.
The Missouri Supreme Court found:
“Chevron deference” is typically applied “where an agency rule sets forth important rights and duties, where the agency focuses fully and directly on the issue, where the agency uses notice and comment procedures to promulgate a rule, [and] where the resulting rule falls within the statutory grant of authority.” Long Island Care at Home, Ltd. v. Cole, 551 U.S. 158, 173 (2007).
The OPM carrier letter is recent, informal and was drafted in response to litigation challenging the subrogation provision in its contract. While informal agency interpretations of statutes are relevant, there is no indication that Congress delegated to the OPM the authority to make binding interpretations of the scope of the FEHBA preemption clause. The OPM letter is not entitled to the deference described in Chevron and does not establish that FEHBA preempts state anti-subrogation law. See Kobold, 309 P.3d at 929.” Nevils v. Group Health Plan, page 12, footnote 2.
As most personal injury attorneys who have clients covered by a FEHBA plan have discovered, the recovery vendors for these plans send a copy of the OPM letter and Calingo II along with their demands for full repayment. Now armed with this new Missouri case, and the wealth of cases following McVeigh, the personal injury attorney should be able to effectively counter the unreasonable repayment demands from these FEHBA plans and their recovery agents.