On April 18, 2017, the Supreme Court of the United States decided Coventry Health Care of Missouri, Inc. v. Nevils, No. 16-149, holding that: 1) under the FEHBA (specifically, 5 U.S.C. § 8902(m)(1)), the provisions of a private insurance carrier’s contract with the Office of Personnel Management (OPM) that require the insurer to pursue subrogation and reimbursement to recover payments to an insured preempt any state law prohibiting subrogation and reimbursement; and 2) this preemption of state law does not violate the Supremacy Clause.
Jodie Nevils is a former federal employee who was insured under an FEHBA plan. Nevils was injured in an automobile accident. His insurer, Coventry Health Care of Missouri, paid his medical expenses. Nevils sued the other driver and recovered a settlement. Coventry’s contract with the OPM required Coventry to pursue subrogation and reimbursement from the settlement proceeds, and Coventry did so.
Nevils filed a class action against Coventry, alleging that Missouri law did not permit subrogation or reimbursement in this context. Coventry responded that the FEHBA preempts state law that prohibits subrogation and reimbursement. The Missouri Supreme Court invoked a presumption against federal preemption, and concluded that the FEHBA’s preemptive scope excluded subrogation and reimbursement, so Missouri law applied and barred Coventry’s recovery. After the U.S. Supreme Court remanded for further consideration after a change to the OPM’s rule governing subrogation and reimbursement, the Missouri Supreme Court adhered to its original decision, and added that Congress’ “attempt to give presumptive effect to the provisions of a contract between the federal government and a private party” violated the Supremacy Clause of the Constitution.
The U.S. Supreme Court reversed. The Court first held that the subrogation and reimbursement requirements in OPM’s contract with Coventry “relate to the nature, provision, or extent of coverage or benefits,” including “payments with respect to benefits,” and thus fell within the preemption provision of the FEHBA. The term “relate to” is very broad, and the Court concluded that the insurer’s right to payment from the settlement proceeds arose directly from the insurer’s provision of benefits to the insured, and therefore “relate[d] to … payments with respect to benefits.” The presumption against preemption did not overcome the language of the preemption provision.
The Court then held that the FEHBA did not violate the Supremacy Clause by assigning preemptive effect to a contract with a private party, rather than the laws of the United States. The Court concluded that the preemptive effect of the FEHBA flowed from the statute itself, not from the contract, as without the statutory provision there would be no preemption of state law.
Justice Ginsburg delivered the opinion of the Court, in which all other Justices joined, except for Justice Gorsuch, who took no part in the consideration or decision of the case. Justice Thomas filed a concurring opinion.