Opinion
handed down May 3, 2016
In Nevils v. Group Health Plan, Inc., the
Supreme Court of Missouri held for the second time in two years that § 8902(m)(1)
of the Federal Employee Health Benefits Act (“FEHBA”) does “not preempt
Missouri law prohibiting subrogation of personal injury claims.”[1] After the court found no preemption in 2014,
the Office of Personnel Management (“OPM”) promulgated a regulation providing
that FEHBA does preempt state
subrogation law, and the Supreme Court of the United States vacated Nevils and remanded the case to the
Supreme Court of Missouri for reconsideration in light of the new regulation.[2] On remand, the court gave minimal deference
to the OPM’s guidance, holding that the new regulation did not alter its
original conclusion that FEHBA does not preempt Missouri law prohibiting
subrogation of personal injury claims.[3]
I. Facts and Holding
John
Nevils was a federal employee whose health insurance plan was governed by
FEHBA.[4] After being injured in an automobile accident,
his insurance carrier paid his medical bills.[5] Nevils also received a personal injury
settlement from the person responsible for the accident, and the insurance
carrier asserted a lien against the settlement, claiming it was entitled to
reimbursement of its payment of Nevils’s medical bills.[6] Nevils satisfied the lien then filed a class
action lawsuit against the insurance carrier, arguing that the lien violated
Missouri law prohibiting the subrogation of personal injury laws.[7] In response, the insurance carrier argued
that FEHBA – which permits subrogation – preempts state anti-subrogation law.[8]
Relying
on clear precedent from the Missouri Court of Appeals for the Eastern District,
the trial court determined that FEHBA preempts Missouri’s anti-subrogation and
entered judgment for the insurance carrier, but the Supreme Court of Missouri
reversed on appeal.[9] The court’s decision was influenced by
several factors: (1) a concern that allowing the subrogation of personal injury
claims is bad public policy; (2) a presumption against the preemption of the
state’s police powers; (3) and a determination that FEHBA’s preemption clause
is susceptible to multiple interpretations and does not express a clear intent
to preempt state anti-subrogation laws.[10]
However,
after the court’s decision in Nevils,
the OPM issued a regulation providing that:
A carrier’s rights and responsibilities
pertaining to subrogation and reimbursement under any FEHB contract relate to
the nature, provision, and extent of coverage or benefits (including payments
with respect to benefits) within the meaning of 5 U.S.C. 8902(m)(1). These
rights and responsibilities are therefore effective notwithstanding any state
or local law, or any regulation issued thereunder, which relates to health
insurance or plans.[11]
In light of the new OPM regulation,
the Supreme Court of the United States granted certiorari and vacated Nevils, remanding the case to the
Supreme Court of Missouri “to determine whether the foregoing rule
establishe[d] that FEHBA preempts Missouri’s anti-subrogation law.”[12]
On remand, the Supreme Court of Missouri determined that it
need not defer to an agency’s interpretation of a preemption clause, and therefore
the “OPM rule does not alter the fact that FEHBA preemption clause does not
express Congress’ clear and manifest intent to preempt Missouri’s
anti-subrogation law.”[13]
II. Legal Background
The
Supremacy Clause provides that state laws are preempted when in conflict with
federal laws, but the preemption analysis “starts with the basic assumption
that Congress did not intend to displace state law.”[14] Thus, a court will only
find that a federal law preempts state law where Congress clearly expressed an
intent that the law have that effect.[15]
FEHBA
contains an express preemption clause, providing that state laws which “relate
to the nature, provision, or extent of coverage or benefits” are preempted by FEHBA.[16] While the Missouri Court of Appeals for the Eastern
District had determined almost twenty years earlier that subrogation “relates
to” insurance coverage and benefits, and that Missouri’s anti-subrogation law
is therefore within the scope of FEHBA’s preemption clause,[17] the Supreme Court of the
United States subsequently recognized that the clause “may be read to refer to
contract terms relating to the beneficiary’s
entitlement (or lack thereof) to [the insurance plan’s] payment for certain
health-care services [the beneficiary] has received, and not to terms relating
to the carrier’s postpayments right to reimbursement.”[18] As a result, the Supreme Court believed that the
preemption issue should be revisited.[19]
Because the OPM’s interpretation of FEHBA’s preemption
clause is in direct conflict with the interpretation adopted by the Supreme
Court of Missouri in Nevils, a key
issue on remand was whether the court should apply the deference-friendly
standard famously described in Chevron
U.S.A., Inc. v. Natural Resources Defense Council, Inc.[20] In Chevron,
the Supreme Court of the United States held that courts attempting to resolve
statutory ambiguities should defer to an agency’s interpretation of the
statute, at least where the rule resulted from formal procedures and was within
the agency’s statutory grant of authority.[21] However, the issue in Chevron was whether to defer to the Environmental Protections
Agency’s interpretation of the term “stationary source” as it appeared in the
Clean Air Act, and therefore the case did not address what deference should be
given to an agency ruling where deference would result in the preemption of
state law.[22]
III. Instant Decision
The issue before the Supreme Court of Missouri on remand
was whether to defer to the OPM’s regulation providing that FEHBA preempts
state anti-subrogation law.[23] While the insurance carrier argued that the
OPM regulation controlled the court’s preemption analysis pursuant to Chevron, the Supreme Court of Missouri
rejected that position because it determined that Chevron deference applies only to agency interpretations of the
substantive meaning of statutes and not to interpretations of express
preemption clauses.[24]
The court
began its analysis by noting that while congressional intent is the
“touchstone” of preemption analysis, the analysis must begin with a presumption
against preemption.[25] As a result, when two plausible readings of a
statute are possible, “[the court] would nevertheless have a duty to accept the
reading that disfavors pre-emption.”[26] With respect to FEHBA, the Supreme Court of
the United States had previously recognized that the statute’s preemption
clause is subject to plausible alternate interpretations.[27]
Next,
the court addressed two federal cases that discussed the presumption against
preemption as it applies to express preemption clauses. First, in Cipollone,
the Supreme Court applied a “strong presumption” against preemption when
analyzing an express preemption clause in the Federal Cigarette Labeling and
Advertising Act, but it did not address whether an agency’s interpretation of
such a clause is entitled to deference.[28]
Second,
in Smiley v. Citibank (S. Dakota), N.A.,
the Supreme Court of the United States distinguished between a regulation
interpreting the substantive meaning
of a statute, and a regulation interpreting the statute’s preemptive reach.[29] The plaintiff in that case filed a lawsuit,
claiming that certain fees charged by a South Dakota bank were illegal under
state law.[30] The bank, however, argued that the suit was
preempted by a federal banking act’s definition of interest, which the
administering agency had interpreted to include late fees.[31] The Supreme Court agreed, specifically
rejecting the plaintiff’s argument that the presumption against preemption
should be applied:
This argument confuses
the question of the substantive (as opposed to pre-emptive) meaning of a
statute with the question of whether a statute is pre-emptive. We may assume
(without deciding) that the latter question must always be decided de novo by
the courts. That is not the question at issue here; there is no doubt that § 85
pre-empts state law.[32]
According to the Supreme Court
of Missouri, the emphasis in Smiley
on the distinction between the substantive meaning of statutes and their
preemptive reach “indicates that Chevron
deference does not apply to provisions, like the provision in Cipollone, that deal expressly with
preemption, while it does apply to substantive provisions, even if application
of the substantive provision will have some preemptive effect.”[33] Thus, having found no “binding precedent
requiring courts to afford dispositive deference to an agency rule defining the
scope of an express preemption clause,” the court “decline[d] to hold that the
OPM rule conclusively resolve[d] the ambiguity in the FEHBA preemption clause.”[34]
IV. Comment
While Nevils did not discuss the policy
implications of deferring to agency interpretations that have the effect of
preempting state law, several commentators have suggested that such deference
is inappropriate because agencies are not politically accountable to the
states.[35] According to this view, agencies do not have
strong incentives – relative to Congress – to consider state interests, and
deference to agencies in the realm of preemption would therefore jeopardize the
delicate balance of state and federal authority.[36] Others have questioned the premise that
agencies and Congress differ significantly with respect to political
accountability and have suggested that other considerations – e.g., that
agencies’ superior expertise relative to Congress does not extend to issues of
federalism – warrant equivalent cautiousness regarding deference to agencies in
the realm of preemption.[37]
It is
possible that the Supreme Court of Missouri was influenced by these policy
concerns, but the question remains whether the holding will have lasting impact. For one thing, Cipollone demonstrates that a court must defer to an agency’s
interpretation of the substance of a statute, even where such deference results
in preemption, suggesting that agencies will always retain some authority to
affect preemption. Agencies seeking to
avoid the result obtained in Nevils
will forgo interpreting their statute’s preemption clause and seek instead to affect
preemption by defining the substantive provision in a way that conflicts with
state law. Second, at least one state
supreme court has determined that the OPM’s ruling is dispositive of Congress’s
intent to preempt state anti-subrogation laws.[38] Given the importance of the federalism issues
involved, the Supreme Court may vacate Nevils
for a second time so that it can resolve the disagreement.
-
Bill
Kistner
[1] Nevils v. Group Health
Plan, Inc., No. SC 93134, 2016 WL 3919334, at *1 (Mo. May 3, 2016) (en banc).
[2] Id. at *2.
[3] Id. at *5.
[4] Nevils v. Group Health Plan, Inc., 418 S.W.3d 451, 453 (Mo.
2014) (en banc), vacated sub nom.
Coventry Health Care of Mo., Inc. v. Nevils, 135 S. Ct. 2886 (2015) (mem.).
[6] Id.
[7] Id.
[8] Id.
[9] Id. at 453, 457.
[10] Id. at 453-57.
[12] Nevils v. Group Health
Plan, Inc., No. SC 93134, 2016 WL 3919334, at *2 (Mo. May 3, 2016) (en banc).
[13] Id. at *5.
[16] 5 U.S.C. § 8902(m)(1) (2012).
[19] Nevils v. Group Health
Plan, Inc., No. SC 93134, 2016 WL 3919334, at *2 (Mo. May 3, 2016) (en banc).
[20] 467 U.S. 837
(1984).
[21] Id. at 843-44.
[23] Nevils, 2016 WL 3919334, at *2.
[24] Id.
[25] Id. at *6 (citing Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516
(1992)).
[26] Id. at *3 (quoting Bates v. Dow Agrosciences LLC, 544 U.S. 431, 449
(2005)).
[29] Smiley v. Citibank (S.
Dakota), N.A., 517 U.S. 735, 743 (1996).
[30] Id. at 738.
[31] Id.
[32] Id. at 744.
[33] Nevils v. Group Health
Plan, Inc., No. SC 93134, 2016 WL 3919334, at *4 (Mo. May 3, 2016) (en banc).
[34] Id.
[35] See, e.g., Jack W. Campbell IV, Regulatory Preemption in the Garcia/Chevron Era, 59 U. Pitt. L. Rev. 805, 832 (1998); Damien Marshall, Note, The Application
of Chevron Deference in Regulatory Preemption Cases, 87 Geo. L.J. 263, 278 (1998); Cass R. Sunstein, Nondelegation
Canons, 67 U. Chi. L. Rev. 315,
331 (2000); Howard P. Walthall, Jr., Chevron
v. Federalism: A
Reassessment of Deference to Administrative Preemption, 28 Cumb. L. Rev. 715, 754-58 (1997-98).
[36] Id. at 756.
[38] Kobold v. Aetna Life
Ins. Co., 370 P.3d 128, 130 (Ariz. Ct. App. 2016).
