FEHBA Preemption Gives Blue Cross Eighth Circuit Win

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

May 26 — A Department of Veterans Affairs worker must reimburse her government health plan for the benefits it paid after her car accident, because federal law preempts an Arkansas statute that would've allowed her to avoid reimbursement, an appellate court concluded ( Bell v. Blue Cross & Blue Shield of Okla. , 2016 BL 167570, 8th Cir., No. 14-3731, 5/26/16 ).

In ruling for two Blue Cross and Blue Shield entities, the U.S. Court of Appeals for the Eight Circuit held May 26 that the Federal Employees Health Benefits Act preempts an Arkansas law that places limits on insurers that try to recoup benefits paid to injured participants who receive compensation from third parties for their injuries.

The ruling is also a win for the federal government and the Association of Federal Health Organizations, which each filed a brief arguing in favor of this result.

The Eighth Circuit's decision follows a similar ruling by the U.S. Court of Appeals for the Tenth Circuit, which held last year that the FEHBA preempts a Kansas administrative regulation prohibiting subrogation and reimbursement clauses in health insurance contracts of federal government employees (211 PBD 211, 11/2/15).

No Defense to Reimbursement

The Arkansas law in question addresses who is responsible for paying health benefits when a worker with employer-provided health insurance gets injured by a third party. Under the Arkansas law, the worker doesn't have to reimburse her health plan for any benefits paid in connection with her injury, unless she was fully compensated by the third party responsible for her injuries.

When this situation arose for Veterans Affairs worker Teresa Bell, she argued that the Arkansas law saved her from having to reimburse the Blue Cross entities that paid for her medical care under a health plan for federal employees.

However, both a district judge and the Eighth Circuit found that the FEHBA preempted the Arkansas law relied on by Bell.

In particular, the Eighth Circuit said that the FEHBA specifically provides that the terms of any government employee health plan will supersede and preempt any state law relating to health insurance plans. Because the Blue Cross plan in question required Bell to reimburse the plan from her third-party settlement, the Arkansas law to the contrary was preempted, the Eighth Circuit said.

Blue Cross urged the Eighth Circuit to defer to the federal Office of Personnel Management's interpretation of the FEHBA, but the Eighth Circuit said that it agreed with Blue Cross even without giving any deference to the federal agency.

The court also rejected Bell's argument that portions of the FEHBA were unconstitutional, noting that other courts have been “skeptical” that these provisions of the law pose any constitutional problems.

Judge Steven M. Colloton wrote the court's opinion, which was joined by Judges Roger L. Wollman and Jane Kelly.

Taylor King & Associates, Public Justice and Gupta & Wessler represented Bell. Dover & Dixon and Miller & Chevalier represented Blue Cross.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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