Court rules state law pre-empted by federal act
By Scott Lauck
BridgeTower Media Newswires
ST. LOUIS, MO — Despite two wins before the Missouri Supreme Court, a class action lawsuit in St. Louis County likely is over following a ruling by the U.S. Supreme Court on Tuesday.
The Federal Employee Health Benefits Act, or FEHBA, allows insurers for federal employees to claim portions of their beneficiaries’ personal injury settlements. A Missouri law forbids this practice, known as subrogation.
The U.S. Supreme Court ruled that Missouri’s law is pre-empted by the federal act. Tuesday’s ruling reverses the Missouri Supreme Court, which has twice ruled to the contrary.
The case stems from a class action lawsuit brought by Jodie Nevils, a former federal employee who was injured in a car accident. After settling with the at-fault driver, Nevils had to repay about $6,600 in medical bills that his insurer, Coventry Healthcare of Missouri, had paid on his behalf.
FEHBA says that federal insurance contract language pre-empts state laws that “relate to the nature, provision, or extent of coverage or benefits” of insurance for federal employees. In 2014, the Missouri Supreme Court ruled that language didn’t trump Missouri’s subrogation law.
The U.S. Supreme Court ordered its Missouri counterpart to re-examine the case after a federal regulation was passed specifying that FEHBA does overcome state anti-subrogation laws. But last year, the Missouri Supreme Court stuck to its 2014 ruling. Six judges wrote separately to say that a contract between the federal government and an insurer was not a valid application of the Supremacy Clause.
Writing for the high court on Tuesday, Justice Ruth Bader Ginsburg said the federal law does override state anti-subrogation laws, ensuring that the terms of federal insurance contracts “will be uniformly enforceable nationwide, free from state interference.”
The court also denied the argument in the Missouri Supreme Court’s concurring opinion, saying “the statute, not a contract, strips state law of its force.”
“Without [FEHBA], there would be no preemption of state insurance law,” Ginsburg wrote.
In a short concurring opinion, Justice Clarence Thomas wrote that allowing executive agencies to enter into contracts that pre-empt state law “might unlawfully delegate legislative power to the President insofar as the statute fails sufficiently to constrain the President’s contracting discretion.” But, he added, that argument wasn’t made in this case.
Other than Thomas’ concurrence, the opinion was unanimous. Justice Neil Gorsuch, who joined the court this month, didn’t take part in the vote.
Tuesday’s ruling harmonizes Missouri caselaw with that of the 8th U.S. Circuit Court of Appeals. A 2015 case, Bell v. Blue Cross & Blue Shield of Oklahoma, had reaffirmed circuit precedent that FEHBA pre-empted a state law in Arkansas.
Mitch Burgess, an attorney in Kansas City representing Nevils, said the ruling likely means the class action is over, though he and other class lawyers are still digesting the opinion and deciding what to do next. He noted that the ruling at least clarifies the law.
“There’s some benefit to just getting a final decision, no matter what it is,” he said.
The case is Coventry Health Care of Missouri v. Nevils, 16-149.