The U.S. Supreme Court knocked down an effort by Missouri to keep health plans from seeking reimbursement from the lawsuit awards of enrollees with federal employee health benefits.
Members of the court ruled 8-0 Tuesday, in favor of a company that is now part of Aetna Inc., that Missouri has no authority to regulate the subrogation and reimbursement provisions in the contracts of Federal Employees Health Benefits Program carriers.
The preemption provision in Section 8902(m)(1) of the Federal Employees Health Benefits Act of 1959 overrides state health insurance laws using different language than the Employee Retirement Income Security Act of 1974 uses, but Section 8902(m)(1) overrides state subrogation laws just as well as the ERISA preemption provision does, the court held.
Subrogation is a legal mechanism a health plan uses when it pays for an injured patient’s care, then stands in place of the patient in actions to recover damages from the party, or parties, that caused the injuries.
Advocates for the injured patients argue that subrogation may reduce the amount of cash victims of negligence, or intentional wrongdoing, have to get by. Health plan sponsors, including the federal government, say that the health plan itself suffers a financial loss due to an enrollee’s covered injury, and that exercising subrogation rights is an important way for the plan to protect its limited resources and hold down coverage costs.
Jodie Nevils, the patient in the case, Coventry Health Care of Missouri Inc., fka Group Health Plan Inc. v. Nevils (Case Number 16-149), had coverage from a Coventry Health Care FEHBA plan in Missouri in 2006.
He was hurt in an automobile accident. Coventry Health Care paid his bills. Nevils sued the driver who hurt him and recovered a settlement.
Coventry Health Care used a subrogation provision in its contract with OPM to put a lien on $6,592.24 of the settlement proceeds.
Missouri normally bans that kind of subrogation provision.
Two lower courts ruled against Nevils, arguing that the Missouri law did not apply to FEHBA plans.