Missouri high court finds federal law preempts state’s antisubrogation law

By Sam Knef | Jul 21, 2017

JEFFERSON CITY — In a federal worker's proposed class action, the Missouri Supreme Court has sided with a group health plan holding that a clause in the Federal Employee Health Benefits Act (FEHBA) preempts the state's antisubrogation law. 

In a decision handed down July 11, the court indicated it was the third time it had addressed whether the state's antisubrogation law is preempted by federal law involving contracts for health benefits negotiated between the government and an insurance carrier.

After plaintiff Jodie Nevils was involved in a car accident, Coventry paid her medical expenses and then through a subrogation lien, went after settlement funds she received from the party responsible for the accident, according to the ruling.

"Because the United States Supreme Court recently held § 8902(m)(1) validly preempts state anti-subrogation laws, this Court affirms the trial court’s judgment," the en banc opinion states.

Justice Mary R. Russell wrote the opinion, and Presiding Justice Zel Fischer and Justices George Draper, Paul Wilson, Patricia Breckenridge and Laura Denvir Stith concurred. Judge W. Brent Powell did not participate.

The opinion states that after Nevils satisfied Coventry's subrogation lien, she filed a class action claiming that Missouri law does not allow subrogation or reimbursement of personal injury claims. 

Coventry and ACS Recovery Services followed with a move for summary judgment, arguing that this clause in the FEHBA preempts Missouri's antisubrogation law: "The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans."

The St. Louis County Circuit Court granted summary judgment to the defendants, but the Missouri Supreme Court reversed it and held that the FEHBA preemption clause does not preempt because an insurer's subrogation rights do not relate to the "nature, provision, or extent of coverage or benefits," the ruling states.

"In reaching this conclusion, this Court noted the presumption that a state’s police powers are not preempted by federal statute unless such is the 'clear and manifest purpose of Congress,'" according to the ruling.

After "Nevils I" was decided, the federal Office of Personnel Management created a new rule providing that an "insurer’s rights to subrogation and reimbursement under federal employee health benefits contracts 'relate to the nature, provision, and extent of coverage or benefits' within the meaning of FEHBA’s preemption clause," the ruling states.

The U.S. Supreme Court, having granted certiorari, then vacated the Missouri Supreme Court decision in Nevils I and remanded on the question of whether FEHBA preempts Missouri's antisubrogation law in light of the new rule.

In Nevils II, the Missouri Supreme Court again reversed finding that the FEHBA preemption clause "does not express Congress’ clear and manifest intent to preempt Missouri’s anti-subrogation law.” 

Once again, the U.S. Supreme Court granted certiorari and held that an insurer's subrogation and reimbursement rights “relate to ... payments with respect to benefits” because it is the insurance carrier’s provision of benefits that triggers its right to payment from either the beneficiary or a third party after a judgment against a tortfeasor is entered or settlement is reached.

The high court also held that a section of the federal law "strips state law of its force," and not language contained in a worker's health benefits contract. It ultimately vacated Nevils II and remanded for further proceedings.

In its analysis, the Missouri Supreme Court found that in applying the U.S. Supreme Court's "clear directives," the trial court was right to grant summary judgment to the defendants because the FEHBA preempts the state's antisubrogation law with respect to federal employee health benefits contract at issue.

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