This article has been published in “The Advocate”, a publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, May – June 2013 issues, @2013 by Steven J. Bruzonsky, Esq.
Litigation Update: FEHBA Lien Claims
Empire Healthchoice Assurance, Inc. v. McVeigh,547 U.S. 677 (2006), remains the gold standard regarding Federal Employees Health Benefits Act of 1959 (FEHBA) (5 U.S.C. §§ 8901-8914) lien claims, in that the U.S. Supreme Court held that there was no federal court jurisdiction and no federal preemption over FEHBA lien claims.
Following are federal court cases dealing with FEHBA liens post-McViegh:
Insurance Corp. of N.Y. v. Monroe Bus Corp., 491 F.Supp.2d 430, 436 (S.D.N.Y. 2007). The District Court for the Southern District of New York stated that it involved an insurance plan “authorized by federal law [FEHBA] but none of the rights in question were created by federal law.”
Hawaii Disability Rights Ctr. v. Cheung, 513 F.Supp.2d 1185, 1199 (D.C. Haw. 2007). The District Court in Hawaii, seeking to distinguish the McVeigh case from the facts in this case, stated “[t]he Supreme Court found...FEHBA’s preemption clause only displaced state law on issues relating to ‘coverage or benefits’ not subrogation or reimbursement rights...”
Villegas v. El Paso Ind. School Dist., 2008 WL5683481 (W.D. Tex.). The Western District of Texas, in 2008, held that no federal cause of action exists for FEHBA healthplan reimbursement or subrogation actions, and that FEHBA’s preemption clause was not applicable.
Pollitt v. Health Care Serv. Corp., 558 F.3d 615 (7th Circ. 2009). State law bad faith claims against a health insurer administering a federal plan are not completely preempted by FEHBA.
Blue Cross Blue Shield of Illinois v. Cruz,495 F.3d 510 (7th Cir. 2007). FEHBA does not give rise to complete preemption of a dispute over whether the state common fund doctrine applies to a health insurance policy governed by FEHBA.
Blue Cross Blue Shield Health Care Plan of Georgia, Inc. v. Gunter, 541 F.3d 1320 (11th Cir., 2008). The FEHBA healthplan filedsuit in U.S. District Court seeking subrogation and reimbursement against Gunter’s third party settlement. The Eleventh Circuit affirmed the lower court’s dismissal under the general rule of McVeigh.
Blue Cross Blue Shield v. William Joseph Cox, U.S. District Court, N.D. Georgia, Atlanta Div., No. 1:07-CV-533-CAP, 9-23-2009. Blue Cross Blue Shield Association (BSBCA) , the national plan, wanted suit in federal court, so BCBSA filed suit in U.S. District Court seeking subrogation against a medical malpractice settlement of $3,050,000.00 for a $894,139.36 FEHBA healthplan lien, and the local provider (BCBS of Georgia) wasn’t listed as plaintiff. The Court granted Cox’s Motion for Summary Judgment on the basis that per the contract, Cox is only contractually obligated to BCBS of Georgia, which would be the only proper party to file a lawsuit against Cox.
Farnsworth v. Harston et al, U. S. District Court, D. Utah, Central Div., No. 2:10-cv-238 CW, 1-27-2011. Farnsworth sued Dr. Harston and Altius, her FEHBA healthplan provider, for medical malpractice in Utah state court, alleging that Altius, with the decision made by Dr. Harston, decided to stop paying for her IVIG therapy on the basis that this was experimental, that eventually the responsible federal agency reversed that decision, and Farnsworth was injured as a result. Dr. Harston and Altius filed a notice of removal asserting federal jurisdiction under 28 U.S.C. § 1331, arguing that the Federal Employees Health Benefits Act (FEHBA), 5 U.S.C. §§ 8901-8914 completely preempts Farnsworth’s medical malpractice claims which are denial of coverage claims in disguise. The U.S. District Court concluded that in Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 698 (2996), the U.S. Supreme Court ruled that FEHBA does not create complete preemption with respect to “any and all state laws that in some way bear on federal employee-benefit plans”; and that under McVeigh and its progeny, citing Pollitt v. Health Care Serv. Corp., 558 F.3d 615 (7th Cir. 2009) and Blue Cross Blue Shield of Illinois v. Cruz,495 F.3d 510 (7th Cir. 2007), that even though Farnsworth’s claims are arguably denial of coverage claims governed by FEHBA, they are not completely preempted and belong in state court. Defendants point to various cases decided before McVeigh but do not explain why they believe that the reasoning of those cases would still apply after McVeigh. Farnsworth v. Harston et al, U.S. District Court, D. Utah, No. No. 2:10-cv-238 CW, 2-28-2011). Harston and Altius ordered to pay Farnsworth’s $14,331.25 costs she incurred as a result of the removal of this action.
Stokes v. Bertolini, 2011 WL 4738490, U.S. District Court, Maryland, 10-5-2011. Dr. Stokes filed suit in Maryland state court against Aetna Health and its president seeking $700 for diagnostic testing of a patient. Defendants removed case to U.S. District Court asserting complete preemption under the FEHBA. The U.S. District Court noted that several cases relied upon by defendants are no longer good law after the 2006 U.S. Supreme Court McVeigh decision.
Morris v. Humana Health Plan, 2011 WL 5282598 (W.D.Mo. 11-2-2011). This case involves a class action lawsuit brought against Humana alleging that it it “routinely engaged in a widespread pattern and practice of unlawfully asserting reimbursement rights on healthcare benefits paid” to FEHBA insureds. The U.S. District Court, Western District, for Missouri remanded the case to state court to proceed on the basis of no federal question presented, no federal jurisdiction and no preemption of state law in this regard.
Matthew Kobold v. Ryland Group Inc., The(Maricopa County Superior Court, 11-4-2011) (CV2008-023699), in which the Honorable John A. Buttrick granted summary judgment holding that a FEHBA healthplan subrogation and reimbursement provision is unenforceable based upon the U. S. Supreme Court’s decision in McVeigh and Arizona anti-subrogation case law, also awarding attorney’s fees against the health plan.
Calingo v Meridian and Empire Healthchoice Assoc.(Case 11 CV 628-VB, SDNY 2-20-2013), in which the U.S. District Court, Southern District of New York, in a Memorandum Decision, held that the FEHBA preempts the New York anti-subrogation statute. The court discusses that it previously held (in a FEHBA lien class action case that was dismissed from federal court, Calingo v Meridian and Empire Healthchoice Assoc. (Case 11 CV 628-VB, SDNY 8-16-2011),that the FEHBA doesn’t preempt the New York anti-subrogation statute, then finding persuasive “the second of two alternative interpretations of FEHBA’s preemption provision articulated by the Supreme Court in McVeigh; namely, that reimbursement is not related to ‘coverage or benefits’ because ‘a claim for reimbursement ordinarily arises long after ‘coverage’ and ‘benefits’ questions have been resolved.” Then, the court discusses an FEHB Program Carrier Letter No. 2012-18, dated 6-18-2012, issued by the U.S. Office of Personnel Management, Federal Employee Insurance Operations, and finds this letter to be “persuasive”. “An agency interpretation - - - is still entitled to ‘respect according to its persuasiveness.’ “ Estate of Landers v. Leavin, 545 F.3d at 107 (quoting United States v. Mead. Corp., 533 U.S. 218, 221 (2001). The court discusses the substance of the FEH Program Carrier Letter issued 6 -18-2012 and that the funds recovered by subrogation and reimbursement are “returned to a pool of money used to lower the costs of all FEHBP enrollees”. “Based on the OMP Letter, the Court is persuaded that subrogation and reimbursement provisions in FEHBP benefit plans ‘relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits)”. The court held that the New York anti-subrogation statute is preempted by the FEHBA and that defendants are entitled to judgment on the pleadings.