FEHBA Liens Now Mimic ERISA Liens
On April 18, 2017, the United States Supreme Court ruled in Coventry Healthcare of Mo., Inc. v. Nevils that reimbursement or subrogation plan language in Federal Employee Health Benefit Plans (FEHBA) preempts any State law. This holding means that FEHBA liens now feel a lot like ERISA liens.
Since the McVeigh ruling in 2006, there has been uncertainty in state jurisdictions as to which law governs a FEHBA subrogation or reimbursement right. With this ruling, the United Supreme Court has put an end to ambiguity, which unfortunately disadvantages any plaintiffs who are covered by FEHBA plans.
The FEHBA Act contains a provision that promulgates this preemption, see §8902(m)(1).
Justice Ginsburg, as part of the majority opinion, concluded 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.”
Ginsberg goes on to affirm that the FEHBA act itself is a statute and not a contract. It logically follows that the statute, and not a contract, inherently strips the state law of its force. In other words, the FEHBA act has preemptive force over state law when the contract term falls within the scope of FEHBA’s preemptive scope.
Another Federal Statute, the Employee Retirement Income Security Act (ERISA) essentially operates the same way. It preempts any and all state insurance laws insofar as they relate to any employee benefit plan.
This FEHBA ruling causes a major shift. Many injury victims that are covered by FEHBA plans will be affected by this ruling. Now, all federal employee beneficiaries under FEHBA, similar to private employees in ERISA, will be under similar scrutiny with respect to reimbursement rights and obligations. While it is safe to say that FEHBA can be categorized in the same context as ERISA plans, FEHBA reimbursement and subrogation rights have appeared to be more negotiable and perhaps more reasonable compromises can be reached in comparison to ERISA language.
It is important to understand how this ruling affects your current and prospective clients. In addition, it is equally important to update your current best practices and protocols to ensure you are representing your clients efficiently and competently.
We recommend you take some time to review this ruling. Discuss it among members of your firm and establish procedures to ensure your client’s medical coverage and financial interests are protected.
We at Massive deal with these and similar issues daily. If you are looking for an expert to review your case, please feel free to contact us at 844.633.5436 today!