By Dave L. Place, J.D.
On April 18, 2017 in Coventry Health Care Of Mo., Inc. V. Nevils the United States Supreme Court held that the subrogation/reimbursement plan language contained in the health insurance contracts of Federal Employee Health Benefit plans (FEHBA) preempted state law. This decision by the Supreme Court puts to rest over a decade of uncertainty in the area of FEHBA subrogation. Unfortunately, that certainty deals a serious blow to injury victims who are covered by FEHBA plans.
The FEHBA Act 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.” The question for the courts since McVeigh in 2006 was do subrogation/reimbursement provisions “relate to” “coverage and benefits”.
Justice Ginsburg, writing the majority opinion for the Court found that:
“Contractual provisions for subrogation and reimbursement ‘relate to . . . payments with respect to benefits’ because subrogation and reimbursement rights yield just such payments. When a carrier exercises its right to either reimbursement or subrogation, it receives from either the beneficiary or a third party “payment” respecting the benefits the carrier had previously paid.”
Continuing with the theme that all reason bends to financial gain the court made clear the monetary benefit to government was just too large to ignore.
“The Federal Government, more-over, has a significant financial stake. OPM estimates that, in 2014 alone, FEHBA ‘carriers were reimbursed by approximately $126 million in subrogation recoveries.’ 80 Fed. Reg. 29203. Such ‘recoveries translate to premium cost savings for the federal government and [FEHBA] enrollees.]’”
In explaining that it is the FEHBA statute, and not the individual FEHBA contracts, that provides for the preemption of state law the Supreme Court raises the trial bar’s other subrogation nemesis, ERISA.
“We conclude, however, that the statute, not a contract, strips state law of its force. … FEHBA contract terms have preemptive force … 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.’ Brief for United States as Amicus Curiae 28 (internal quotation marks omitted).
Many other federal statutes preempt state law in this way, leaving the context-specific scope of preemption to contractual terms. The Employee Retirement Income Security Act of 1974 (ERISA), 29 U. S. C. §1001 et seq., for example, preempts “any and all State laws insofar as they . . . relate to any employee benefit plan.” §1144(a).
Placing FEHBA subrogation rights in the same context as ERISA plans should be a clear and sobering indication to the plaintiff’s bar of how the courts will now view FEHBA subrogation/reimbursement demands. Fortunately, most FEHBA plans are not drafted with the same draconian language as ERISA plans, often allowing for reasonable compromises to be reached. In resolving your client’s FEHBA subrogation/reimbursement issues the first step should be to obtain a copy of the specific FEHBA plan in which you client is enrolled. You can find all FEHBA plans on this link. https://www.opm.gov/healthcare-insurance/healthcare/plan-information/plans/.
As always, Synergy is here to help negotiate and resolve all lien types. While FEHBA recovery has been strengthened by Nevils, we believe there are still avenues to travel down based on plan language to get a reduction. We remain committed to getting the best possible outcome for an injury victim with all types of subrogation claims.