The Obama administration’s chief lawyer has permission to weigh in on a U.S. Supreme Court case involving health benefits problems at the U.S. Department of Labor.

The Supreme Court has given Elena Kagan, the solicitor general for the administration, permission to participate in oral argument as a friend of the court and for divided argument in connection with Health Care Service Corp. vs. Juli A. Pollitt et al., a case involving the “federal preemption” provision of the Federal Employees Health Benefits Act.

The case involves a question about whether the U.S. Department of Labor mishandled an employee’s health benefits arrangements or if a health carrier erred.

FEHBA normally blocks efforts by states to oversee federal employees’ health benefits, but a 3-judge panel at the 7th U.S. Circuit Court of Appeals ruled in 2009 that, as a result of earlier Supreme Court rulings, “federal law does not completely occupy the field of health-insurance coverage for federal workers.”

The Labor Department may have paid Health Care Service Corp., Chicago, only for family coverage for Juli Pollitt, a federal employee, even though she had asked for family coverage, according to court pleadings.

In July 2007, when Health Care Service, the parent of Blue Cross and Blue Shield of Illinois, found that Pollitt seemed to have only individual coverage, it stopped paying for care for her son and tried to get back all payments made to Pollitt’s providers since 2003.

The company started paying claims again in October 2007, but Pollitt says it did not tell providers of the change.

Pollitt filed a bad-faith complaint against Health Care Service in state court.

Health Care Service succeeded at shifting the case to U.S. District Court. The federal court dismissed the case, saying it was preempted by FEHBA.

The 7th Circuit dismissed the lower-court ruling, saying the conflict between Health Care Service’s account of what went wrong and the Labor Department’s account of what went wrong is an issue for the Illinois courts to resolve.