Opinion handed down February 4,
2014
Jodie Nevils, a federal government
employee, was injured in an automobile accident. Group Health Plan (“GHP”),
under contract with the federal Office of Personnel Management (“OPM”), was
Nevils’ insurer. After Nevils recovered a personal injury settlement from the
individual responsible for the accident, GHP asserted a lien against the
recovery because its contract with OPM directed it to do so. Section 5 of the
Federal Employee Health Benefits Act (“FEHBA” or ‘the Act”) provides that the
terms of any insurance contract made under the act supersede or preempt
contrary state or local law. The Supreme Court of Missouri held that the term
in GHP’s contract with Nevils providing GHP with a right to subrogation did not
overcome Missouri law prohibiting such subrogation.
I. Facts and Holding
After Jodie Nevils, a federal
government employee, was injured in an automobile accident, GHP, Nevils’ insurer, paid his resulting
medical bills.[ii]
GHP was under contract with the federal OPM to provide health insurance to some
federal employees.[iii]
When Nevils later recovered a personal injury settlement from the individual
responsible for the accident, GHP asserted a subrogation lien against the
recovery to the extent that Nevils’ medical bills were paid by the insurer.[iv] While Missouri law prohibits
subrogation of tort claims, GHP successfully argued at the trial court level
that Section 5 of the FEHBA preempts state law and allows GHP to enforce the subrogation
lien pursuant to the terms of the insurance contract.[v] The lower court granted
summary judgment in favor of GHP.[vi] The Supreme Court of
Missouri disagreed and held that FEHBA does not preempt Missouri law
prohibiting subrogation of personal injury claims.
The court began its analysis with
the text of the Act itself, which provides in relevant part: “The terms of any
contract under this chapter which relate to the nature, provision, or extent of
coverage or benefits (including with respect to benefits) shall supersede any
State or local law, or any regulation issued thereunder, which relates to
health insurance or plans.”[vii] Therefore, the court
reasoned, it was necessary to determine if GHP’s claimed right of subrogation
“relate[d] to the nature, provision, or extent of coverage or benefits.”[viii] The Supreme Court of
Missouri concluded that it did not.
Because the relevant section of
FEHBA purports to preempt state law, the court began its statutory analysis by
noting two presumptions about preemption.[ix] First, Congress must
clearly intend to preempt state law in areas that are traditionally within the
powers of the states.[x] Second, a plausible
reading of the statute that disfavors preemption should be adopted if the
statute is ambiguous.[xi] The Supreme Court of
Missouri next turned to Empire Healthchoice
Assurance Co. v. McVeigh,[xii] where the Supreme Court
of the United States considered FEHBA’s preemption provision.[xiii] Empire noted that the statute at issue “was open to more than one
construction” and “warrants [a] cautious interpretation.”[xiv] Thus, the Supreme Court
of Missouri concluded that the presumption against preemption was implicated.[xv]
Turning squarely to the task of
statutory interpretation, with the presumption against preemption in mind, the
Supreme Court of Missouri had to
determine whether GHP’s claimed right to subrogation “relate[d] to” Nevils’
“coverage” or “benefits.”[xvi] The court held that,
given Empire’s warning that FEHBA
should be interpreted cautiously with regard to preemption and the presumption,
the phrase “relate to” in the statute “must be construed as requiring a direct
and immediate relationship to the insurance coverage and benefits at issue.”[xvii] The Supreme Court of
Missouri next concluded that “coverage” “consists of the various risks GHP
agreed to insure.”[xviii] Therefore, subrogation
– which occurs after benefits have already been paid out – has nothing to do
with coverage.[xix]
Finally, the Supreme Court of Missouri concluded that an insurer’s right to
subrogation is distinct from an insured’s benefits, noting that the Supreme Court
of the United States recognized this distinction in Empire.[xx] The Supreme Court of
Missouri held that “benefits” are payments by the insurer on the insured’s
behalf. Subrogation does not relate to an insured’s benefits because the
payments by the insurer on the insured’s behalf would have been made whether
the insured filed suit to recover damages or not.[xxi]
Because GHP’s claimed right to
subrogation did not “relate to the nature, provision, or extent of coverage or
benefits,” the preemption provision of FEHBA did not apply. Therefore, nothing
in the federal law of the insurance contract preempted Missouri law. Because
Missouri law prohibits subrogation of personal injury claims, GHP was not
entitled to summary judgment.
In a concurring opinion, Judge Wilson
agrees that GHP was not entitled to summary judgment, but does so on the ground
that the preemption provision of FEHBA is not a valid application of the
Supremacy Clause and therefore cannot supersede Missouri law.[xxii] Specifically, Judge
Wilson points out that Congress attempted to make the terms of private
contracts supersede state laws. Judge Wilson argued that “[t]he idea that
Congress claims the power to authorize the executive branch and private
insurance companies to negotiate contract terms that Congress decrees – sight
unseen – shall “preempt and supersede” state law is such an unprecedented and
unjustified intrusion on state sovereignty that it almost defies analysis.”[xxiii]
II. Legal Background
This case arose from the fact that
subrogation of personal injury claims is prohibited in Missouri. This common
law rule was adopted by Missouri courts as early as 1909,[xxiv] and has been rigorously
enforced.[xxv]
However, in Buatte v. Gencare Health
Sys., Inc.,[xxvi]
the Missouri Court of Appeals for the Eastern District held that FEHBA
preempted state law prohibiting subrogation by considering decisions applying
FEHBA in other states with subrogation prohibitions similar to Missouri’s.[xxvii]
However, the Nevils court found that a subsequent Supreme Court of the United
States case, Empire HealthChoice
Assurance Co. v. McVeigh,[xxviii] called the continued
validity of Buatte into question.[xxix] In Empire, the Court briefly considered FEHBA’s preemption provision
and concluded that it was open to multiple constructions without deciding the
extent of any possible preemptive effect.[xxx] Furthermore, the Empire Court drew a distinction between an
insurer providing insurance coverage or benefits on the one hand and an
insurer’s claimed right to subrogation on the other.[xxxi] This distinction proved
to be critical for the decision in Nevils.
III. Comment
While the Supremacy Clause[xxxii] was surely implicated
in Nevils – as the constitutional
basis for FEHBA’s preemption clause – the Supreme Court of Missouri managed to
avoid engaging in a protracted discussion touching on issues of federalism and
state powers by deciding the case on purely statutory grounds. However, this
may leave deeper issues undecided. On the other hand, Judge Wilson’s approach faces
the Supremacy Cause issue directly, but this raises the question of whether it
is better to decide a constitutional question when it can be avoided. It is
difficult, however, to disagree with Judge Wilson’s admonition that FEHBA’s
preemption clause is a starling federal misappropriation of state power. It
also seems that the court’s statutory analysis, leading to the conclusion that
subrogation does not relate to the provision of insurance coverage or benefits,
may provide an escape route for states with common law subrogation prohibitions
like Missouri’s when faced with a FEHBA issue.
- Keith Holland
[i]
No. SC93134 (Mo. 2014) (en banc), available
at http://www.courts.mo.gov/file.jsp?id=69837.
[ii]
Id. at 2.
[iii]
Id.
[iv]
Id.
[v]
Id. at 1.
[vi]
Id.
[vii]
Id. at 4 (quoting 5 U.S.C. §
8902(m)(1)).
[viii]
Id.
[ix]
Id. at 4-5.
[x]
Id. at 5.
[xi]
Id. (citing Bates v. Dow AgroScience, LLC, 544 U.S. 431, 449 (2005)).
[xii]
547 U.S. 677 (2006).
[xiii]
Nevils at 5.
[xiv]
Id. at 6 (quoting Empire Healthchoice
v. McVeigh, 547 U.S. 677, 968 (2006)).
[xv]
Id.
[xvi]
Id. at 8.
[xvii]
Id. at 9.
[xviii]
Id.
[xix]
Id.
[xx]
Id. at 10.
[xxi]
Id.
[xxii]
Id. at 2 (Wilson, J., concurring).
[xxiii]
Id. at 11 (Wilson, J., concurring).
[xxiv]
See Remmers v. Remmers, 117 S.W. 1117
(Mo. 1909).
[xxv]
See, e.g., Freeman v. Berberich, 60
S.W.2d 393 (Mo. 1933).
[xxvi]
939 S.W.2d 440 (Mo.App. E.D. 1996).
[xxvii]
Id. at 442.
[xxviii]
547 U.S. 677 (2006).
[xxix]
Nevils at 5-6.
[xxx]
Empire at 697.
[xxxi]
Id. at 683.
