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Coventry Health Care of Missouri, Inc. v. Nevils

United States Supreme Court

April 18, 2017

COVENTRY HEALTH CARE OF MISSOURI, INC., FKA GROUP HEALTH PLAN, INC.
v.
NEVILS

         ON WRIT OF CERTIORARI TO THE SUPREME COURT OF MISSOURI

          Argued March 1, 2017

         The Federal Employees Health Benefits Act of 1959 (FEHBA) authorizes the Office of Personnel Management (OPM) to contract with private carriers for federal employees' health insurance. 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."

         OPM's contracts have long required private carriers to seek subrogation and reimbursement. Accordingly, OPM's regulations make a carrier's "right to pursue and receive subrogation and reimbursement recoveries ... a condition of and a limitation on the nature of benefits or benefit payments and on the provision of benefits under the plan's coverage." 5 CFR §890.106(b)(1). In 2015, OPM published a new rule confirming that a carrier's subrogation and reimbursement rights and responsibilities "relate to the nature, provision, and extent of coverage or benefits (including payments with respect to benefits) within the meaning of" §8902(m)(1), and "are . . . effective notwithstanding any state or local law, or any regulation issued thereunder, which relates to health insurance or plans." §890.106(h).

         Respondent Jodie Nevils was insured under a FEHBA plan offered by petitioner Coventry Health Care of Missouri. When Nevils was injured in an automobile accident, Coventry paid his medical expenses. Coventry subsequently asserted a lien against part of the settlement Nevils recovered from the driver who caused his injuries. Nevils satisfied the lien, then filed a class action in Missouri state court, alleging that, under Missouri law, which does not permit subrogation or reimbursement in this context, Coventry had unlawfully obtained reimbursement. Coventry countered that §8902(m)(1) preempted the state law. The trial court granted summary judgment in Coventry's favor, and the Missouri Court of Appeals affirmed. The Missouri Supreme Court reversed. Finding §8902(m)(1) susceptible to diverse plausible readings, the court invoked a "presumption against preemption" to conclude that the federal statute's preemptive scope excluded subrogation and reimbursement. On remand from this Court for further consideration in light of OPM's 2015 rule, the Missouri Supreme Court adhered to its earlier decision. A majority of the Missouri Supreme Court also held that §8902(m)(1) violates the Supremacy Clause.

         Held:

1. 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.
(a) This reading best comports with §8902(m)(1)'s text, context, and purpose. 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. The carrier's very provision of benefits triggers the right to payment. Congress' use of the expansive phrase "relate to, " which "express[es] a broad pre-emptive purpose, " Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383, weighs against Nevils' effort to narrow the term "payments" to exclude payments that occur "long after" a carrier's provision of benefits. Nevils' argument that Congress intended to preempt only state coverage requirements, e.g., inclusion of acupuncture and chiropractic services, also miscarries.
The statutory context and purpose reinforce this conclusion. FEHBA concerns "benefits from a federal health insurance plan for federal employees that arise from a federal law." Bell v. Blue Cross & Blue Shield of Okla., 823 F.3d 1198, 1202. Strong and "distinctly federal interests are involved, " Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 696, in uniform administration of the program, free from state interference, particularly in regard to coverage, benefits, and payments. The Federal Government also has a significant financial stake in subrogation and reimbursement. Pp. 6-8.
(b) McVeigh's suggestion that §8902(m)(1) has two "plausible" interpretations, 547 U.S., at 698, Nevils asserts, supports application of the presumption against preemption here. But the Court never chose between the two readings set out in McVeigh, because doing so was not pertinent to the discrete question whether federal courts have subject-matter jurisdiction over FEHBA reimbursement actions. Having decided in McVeigh that §8902(m)(1) is a "choice-of-law prescription, " not a "jurisdiction-conferring provision, " id., at 697, the Court had no cause to consider §8902(m)(1)'s text, context, and purpose, as it does here. Pp. 8-9.
2. The regime Congress enacted is compatible with the Supremacy Clause. The statute itself, not a contract, strips state law of its force. FEHBA contract terms have preemptive force only if they fall within §8902(m)(1)'s preemptive scope. Many other federal statutes found to preempt state law, including the Employee Retirement Income Security Act of 1974 and the Federal Arbitration Act, leave the context-specific scope of preemption to contractual terms. While §8902(m)(1)'s phrasing may differ from those other statutes', FEHBAs express-preemption provision manifests the same intent to preempt state law. Pp. 9-11.

492 S.W.3d 918, reversed and remanded.

          GINSBURG, J., delivered the opinion of the Court, in which all other Members joined, except GORSUCH, J., who took no part in the consideration or decision of the case. THOMAS, J., filed a concurring opinion.

          GINSBURG JUSTICE

         In the Federal Employees Health Benefits Act of 1959 (FEHBA), 5 U.S.C. §8901 et seq., Congress authorized the Office of Personnel Management (OPM) to contract with private carriers for federal employees' health insurance. §8902(a), (d). FEHBA contains a provision expressly preempting state law. §8902(m)(1). That provision reads:

"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, or any regulation issued thereunder, which relates to health insurance or plans."

         Contracts OPM negotiates with private carriers provide for reimbursement and subrogation. Reimbursement requires an insured employee who receives payment from another source (e.g., the proceeds yielded by a tort claim) to return healthcare costs earlier paid out by the carrier. Subrogation involves transfer of the right to a third-party payment from the insured employee to the carrier, who can then pursue the claim against the third party. Several States, however, Missouri among them, bar enforcement of contractual subrogation and reimbursement provisions.

         The questions here presented: Does FEHBA's express-preemption prescription, §8902(m)(1), override state law prohibiting subrogation and reimbursement; and if §8902(m)(1) has that effect, is the statutory prescription consistent with the Supremacy Clause, U.S. Const., Art. VI, cl. 2? We hold, contrary to the decision of the Missouri Supreme Court, that contractual subrogation and reimbursement prescriptions plainly "relate to . . . payments with respect to benefits, " §8902(m)(1); therefore, by statutory instruction, they override state law barring subrogation and reimbursement. We further hold, again contrary to the Missouri Supreme Court, that the regime Congress enacted is compatible with the Supremacy Clause. Section 8902(m)(1) itself, not the contracts OPM negotiates, triggers the federal preemption. As Congress directed, where FEHBA contract terms "relate to the ...


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