Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-14-03731/USCOURTS-ca8-14-03731-0/pdf.json

Parties Involved:
Association of Federal Health Organizations
Amicus on Behalf of Appellee(s)
Teresa Bell
Appellant
Blue Cross and Blue Shield of Oklahoma
Appellee
Blue Cross and Blue Shield of Texas
Appellee
United States
Amicus on Behalf of Appellee(s)

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 14-3731

___________________________

Teresa Bell,

lllllllllllllllllllll Plaintiff - Appellant,

v.

Blue Cross and Blue Shield of Oklahoma, a Division of Health Care Service

Corporation, a Mutual Legal Reserve Company agent of Health Care Service

Corporation; Blue Cross and Blue Shield of Texas, a Division of Health Care

Service Corporation, a Mutual Legal Reserve Company agent of Health Care

Service Corporation,

lllllllllllllllllllll Defendants - Appellees,

------------------------------

Association of Federal Health Organizations; United States,

lllllllllllllllllllllAmici on Behalf of Appellees.

____________

Appeal from United States District Court 

for the Western District of Arkansas - Fayetteville.

____________

 Submitted: September 23, 2015

 Filed: May 26, 2016

____________

Before WOLLMAN, COLLOTON, and KELLY, Circuit Judges.

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COLLOTON, Circuit Judge.

This appeal concerns a dispute between Teresa Bell and two Blue Cross and

Blue Shield insurance carriers that administer Bell’s government-sponsored benefit

plan (“the Plan”). Bell was injured in a motor vehicle accident in Arkansas, and the

Plan paid medical benefits on Bell’s behalf. Bell then received a payment from a

different carrier that insured the party who was allegedly responsible for Bell’s injury.

The Blue Cross carriers contend that under the terms of Bell’s benefit plan, she

must use any monies obtained from the alleged tortfeasor’s insurer to reimburse the

Plan for medical benefits paid by Blue Cross. Bell responds that under Arkansas law,

she is not required to reimburse the Plan unless she has been wholly compensated for

her injuries, and thatshe was not “made whole” by the paymentsfromBlue Cross and

the alleged tortfeasor’s insurer. Blue Cross’s position is that a provision of the

Federal Employees Health Benefits Act, 5 U.S.C. § 8902(m)(1), expressly preempts

Bell’s state-law defense, and that the Plan governs the question of reimbursement. 

We conclude that federal law preempts the Arkansas state-law defense, and that Bell

must reimburse the Plan. We therefore affirm the decision of the district court.*

I.

The Federal Employees Health Benefits Act of 1959 (“FEHBA”), 5 U.S.C.

§§ 8901-14, creates a “comprehensive program of health insurance for federal

employees.” Empire HealthChoice Assur., Inc. v. McVeigh, 547 U.S. 677, 682

(2006). Under the Act, the Office of Personnel Management, commonly known as

OPM, contracts with private carriers to offer federal employees a variety of healthcare plans. 5 U.S.C. § 8902(a). One of these plans is the Blue Cross and Blue Shield

The Honorable Timothy L. Brooks, United States District Judge for the

*

Western District of Arkansas.

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Service Benefit Plan, a government-wide plan that is established between OPM and

the Blue Cross and Blue Shield Association. See 5 U.S.C. § 8903(1); McVeigh, 547

U.S. at 682. Blue Cross and Blue Shield companies in their respective localities

administer this plan. 

Each contract between OPM and a carrier like Blue Cross must include “a

detailed statement of benefits offered.” 5 U.S.C. § 8902(d). OPM issues official

descriptions of plan terms through a “statement of benefits” or “brochure.” See id.

§§ 8902(a), (d), 8907. The Statement of Benefits for the contract at issue here

includes a section discussing the rights of the parties when others are responsible for

injuriesto an employee. It provides, among other things, that if another person causes

an employee to suffer an injury, and the Plan pays benefits for that injury, the

employee must agree that the Plan is entitled to be reimbursed for its benefit

payments even if the employee is not “made whole” for all of her damages in the

recoveries that she receives.

Teresa Bell, an employee of the Department of Veterans Affairs, received

health-care benefits through a government-sponsored plan that was administered by

Blue Cross and Blue Shield of Oklahoma and Blue Cross and Blue Shield of Texas

(collectively, “Blue Cross”). In October 2010, she sustained personal injuries and

medical expenses from a motor vehicle accident that occurred in Arkansas. Bell’s

benefit plan paid $33,014.01 in medical benefits on her behalf. Bell also pursued a

third party who allegedly caused her injury, and she received an undisclosed payment

from Progressive Insurance Company, the alleged tortfeasor’s insurer, pursuant to a

settlement.

Bell and Blue Cross disputed whether Bell was required to use the funds

received from Progressive Insurance to reimburse the Plan. Bell contends that under

Arkansas law, the Plan cannot require reimbursement unless Bell has been wholly

compensated for her injuries. See Shelter Mut. Ins. Co. v. Kennedy, 60 S.W.3d 458,

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461 (Ark. 2001). She represents that the payments from Blue Cross and Progressive

did not wholly compensate her. Bell brought suit against Blue Cross in Arkansas

state court, seeking a declaration that she is not required to reimburse the Plan. 

Blue Cross removed the action to federal court on the theory that Blue Cross

was a “person acting under” a federal officer. See 28 U.S.C § 1442(a)(1). The

district court, relying on Jacks v. Meridian Res. Co., 701 F.3d 1224 (8th Cir. 2012),

denied Bell’s motion to remand the case to state court.

Blue Cross moved for judgment on the pleadings. According to Blue Cross,

the Plan terms described above require Bell to use monies that she obtained from

Progressive Insurance to reimburse the Plan for benefit payments made, even if Bell

has not been “made whole.” Blue Cross asserts that federal law, 5 U.S.C.

§ 8902(m)(1), provides that the terms of the Plan preempt Arkansas law on the

question of the carriers’ right to reimbursement, and that Bell must reimburse the

Plan.

The district court granted Blue Cross’s motion, concluding that § 8902(m)(1)

expressly preempts Arkansas law. Bell appeals, and we review the district court’s

decision de novo.

II.

Section 8902(m)(1) provides that “[t]he 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 . . . which relates to health insurance or plans.” 5 U.S.C. § 8902(m)(1)

(emphases added). The Supreme Court has observed that § 8902(m)(1) “is a puzzling

measure, open to more than one construction.” McVeigh, 547 U.S. at 697. On one

view, the subrogation and reimbursement clauses in the contract between OPM and

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Blue Cross function “as a condition or limitation on ‘benefits’ received by a federal

employee.” Id. Under that approach, the contractual terms “relate to . . . benefits”

within the meaning of § 8902(m)(1), and thus preempt state law. Id. An alternative

reading, however, posits that § 8902(m)(1) refers to “contract terms relating to the

beneficiary’s entitlement (or lack thereof) to Plan payment for certain health-care

services he orshe has received, and not to terms relating to the carrier’s postpayments

right to reimbursement.” Id. Under that interpretation, the contractual clauses would

not conflict with or preempt Arkansas law.

Because the Supreme Court in McVeigh deemed both constructions of the

statute “plausible,” id. at 698, the parties invoke rules of construction that favor their

desired outcome. Bell cites a presumption against preemption that applies when a

federal preemption clause is ambiguous. Blue Cross counters with OPM’s rule,

promulgated in 2015, stating that § 8902(m)(1) has preemptive effect. The carriers

argue that the court should defer to the agency’s reasonable construction of an

ambiguous statute under the doctrine of Chevron, U.S.A., Inc. v. Natural Resources

Defense Council, Inc., 467 U.S. 837 (1984).

Bell cites the Supreme Court’s guidance that “when the text of a pre-emption

clause issusceptible of more than one plausible reading, courts ordinarily ‘accept the

reading that disfavors pre-emption.’” Altria Grp., Inc. v. Good, 555 U.S. 70, 77

(2008) (quoting Bates v. Dow Agrosciences LLC, 544 U.S. 431, 449 (2005)). “That

assumption applies with particular force when Congress has legislated in a field

traditionally occupied by the States.” Id. at 77. The vitality of this presumption

against preemption, however, has been a subject of debate within the Supreme Court. 

A dissenting opinion in Altria Group suggested that application of the presumption

has been sporadic, id. at 99 (Thomas, J., dissenting), and the most recent decision in

this area was splintered. See CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2189 (2014)

(plurality opinion) (applying presumption); id. at 2189 (Scalia, J., concurring in part

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and concurring in the judgment) (rejecting presumption and applying ordinary

principles of statutory construction). 

Whatever the force of the presumption against preemption as an interpretive

tool, the Court has recognized that the presumption should not apply where

“considerable federal interests” are at stake. United States v. Locke, 529 U.S. 89, 94,

108 (2000). In Locke, a case involving regulationsthat affected maritime commerce,

the Court opined that despite “the historic role of the Statesto regulate local ports and

waters under appropriate circumstances,” the “‘assumption’ of nonpre-emption is not

triggered when the State regulates in an area where there has been a history of

significant federal presence.” Id. at 108-09. Similarly, in Buckman Co. v. Plaintiffs’

Legal Committee, 531 U.S. 341 (2001), the Court rejected a presumption against

preemption ofstate-law fraud-on-the-FDA claims, because “the relationship between

a federal agency and the entity it regulates is inherently federal in character because

the relationship originates from, is governed by, and terminates according to federal

law.” Id. at 347.

This case involves federal interests comparable to those involved in Buckman

and Locke. Although health care in general is an area of traditional state regulation,

e.g., Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 387 (2002), this dispute

concerns benefits froma federal health insurance plan for federal employees that arise

from a federal law. There is obviously a long history of federal involvement in

federal employment and benefits. “[D]istinctly federal interests are involved.”

McVeigh, 547 U.S. at 696. The scope of a federal employee’s reimbursement

obligations has a significant impact on the federal treasury and on premiums or

benefits for other employees. See 5 U.S.C. § 8909(b); 5 C.F.R. § 890.503(c)(2). The

employee’s benefit plan “could be described as ‘federal in nature’ because it is

negotiated by a federal agency and concerns federal employees.” McVeigh, 547 U.S.

at 696. “The United States no doubt has an overwhelming interest in attracting able

workers to the federal workforce and in the health and welfare of the federal workers

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upon whom it relies to carry out its functions.” Id. at 701 (internal quotation marks

omitted). Under these circumstances, we see no warrant to place a thumb on the

scales against preemptive effect of the federal statute. Ordinary principles of

statutory construction should guide the decision. Accord Helfrich v. Blue Cross &

Blue Shield Ass’n, 804 F.3d 1090, 1104-06 (10th Cir. 2015).

Blue Cross argues that if the preemption statute is ambiguous, we should

accord Chevron deference to the recent interpretation of OPM that subrogation and

reimbursement clauses “relate to” the provision of benefits within the meaning of

§ 8902(m)(1), and that such clauses are “effective notwithstanding any state or local

law.” 5 C.F.R. § 890.106(h). OPM concluded that its interpretation of the statute

“comports with longstanding Federal policy, lowers the cost of benefits, and creates

greater uniformity in benefits and benefits administration.” Federal Employees

Health Benefits Program; Subrogation and Reimbursement Recovery, 80 Fed. Reg.

931, 932 (Jan. 7, 2015). The agency believed that subrogation and reimbursement

clauses “relate to the nature, provision, and extent of coverage or benefits (and the

payment of benefits) by making those payments conditional upon a right to

subrogation or reimbursement of equivalent amounts, either from a third-party, or

from the enrollee, in the event a third party is obligated to pay for the same injury or

illness.” Id. OPM said that its interpretation “furthers Congress’s goals of reducing

health care costs and enabling uniform, nationwide application of [Federal Employee

HealthBenefits] contracts.” Id.(citing H.R. Rep. No. 105-374, at 9 (1997); H.R. Rep.

No. 86-957, (1959)).

The law concerning application ofChevron to an agency’s view on preemption

is unsettled. The Supreme Court once assumed without deciding that Chevron is not

applicable to the question whether a federalstatute is pre-emptive, Smiley v. Citibank

(S. Dakota), N.A., 517 U.S. 735, 744 (1996), then said its interpretation of a

preemption statute was “substantially informed” by agency regulations, Medtronic,

Inc. v. Lohr, 518 U.S. 470, 495 (1996), then later invoked Chevron in a preemption

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case but ruled that an agency’s interpretation wasimpermissible, so deference was not

actually accorded. Cuomo v. Clearing House Ass’n, 557 U.S. 519, 535-36 (2009). 

The Court in City of Arlington v. FCC, 133 S. Ct. 1863, 1874 (2013) (Scalia, J.),

deferred to an agency’s interpretation concerning the scope of its own jurisdiction,

but City of Arlington did not address a preemption question, and the opinion’s author

previously joined an opinion concluding that “when an agency purportsto decide the

scope of federal pre-emption, a healthy respect for state sovereignty calls for

something less than Chevron deference.” Watters v. Wachovia Bank, N.A., 550 U.S.

1, 22, 41 (2007) (Stevens, J., dissenting). Justice O’Connor wrote in 1996 that “[i]t

is not certain that an agency regulation determining the pre-emptive effect of any

federal statute is entitled to deference,” Lohr, 518 U.S. at 512 (O’Connor, J.,

concurring in part and dissenting in part) (emphasis omitted), and it is not clear that

the law has evolved materially since then.

One state court has deemed Chevron applicable to OPM’s interpretation of

§ 8902(m)(1), Kobold v. Aetna Life Ins. Co., No. 1 CA-CV 12-0315, 2016 WL

1273024, at *1 (Ariz. Ct. App. Mar. 31, 2016), and another concluded that Chevron

does not apply. Nevils v. Group Health Plan, Inc. (Nevils II), No. SC93134, slip op.

9-12 (Mo. May 3, 2016). Like the Tenth Circuit in Helfrich, 804 F.3d at 1109, we

think it is unnecessary to decide. Even without deference to the agency under

Chevron, the better reading of the statute is that Arkansas law is preempted.

This court already ruled in 1994 that § 8902(m)(1) preempts state law that is

inconsistent with a contract under the Federal Employees Health Benefits Act. In

MedCenters Health Care v. Ochs, 26 F.3d 865, 867 (8th Cir. 1994), the court

affirmed a district court’s ruling that a subrogation and reimbursement clause in a

contract under the Act preempted and superseded Minnesota common law that

established a “full recovery rule” as a predicate to reimbursement. See MedCenters

Health Care, Inc. v. Ochs, 854 F. Supp. 589, 592-93 (D. Minn. 1993). Although

Ochs was abrogated in part by the Supreme Court’s decision in McVeigh, because this

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court also thought § 8902(m)(1) conferred federal jurisdiction, see 26 F.3d at 867;

854 F. Supp. at 593 n.3, the analysis of Ochs concerning ordinary preemption was

unaffected by McVeigh. Indeed, the Second Circuit opinion that was affirmed on the

jurisdictional question in McVeigh likewise implied that § 8902(m)(1) would preempt

a state-law defense to a subrogation claim. Empire HealthChoice Assur., Inc. v.

McVeigh, 396 F.3d 136, 145 n.9 (2d Cir. 2005) (Sotomayor, J.), aff’d, 547 U.S. 677

(2006).

The better reading of the statute’s text supports the conclusion in Ochs. The

Act gives preemptive effect to contractual terms that “relate to . . . benefits (including

payments with respect to benefits).” The reimbursement and subrogation provisions

are limitations on the payment of benefits. Each contract must “contain a detailed

statement of benefits offered and shall include such maximums, limitations,

exclusions, and other definitions of benefits as the Office considers necessary or

desirable.” 5 U.S.C. § 8902(d). Blue Cross’s statement of benefits informs the

insured that “[i]f another person . . . causes you to suffer an injury or illness, and if

we pay benefits for that injury or illness, you must agree to the provisions listed

below.” Those provisions advise the insured of Blue Cross’s “right of recovery to be

reimbursed for our benefit payments even if you are not ‘made whole,’” and its right

“to initiate recovery on your behalf (including the right to bring suit in your name).” 

Blue Cross also informs the insured that it “may delay processing of your claims

until” it receives “the signed reimbursement agreement and/or assignment.” Because

these provisions restrict the payment of benefits, they relate to “benefits (including

payments with respect to benefits).”

The reimbursement provision also requires an insured to make repayment of

prior benefit payments if the insured recovers from a third party. Blue Cross “may

seek a first priority lien on the proceeds of your claim in order to reimburse ourselves

to the full amount of benefits we have paid or will pay.” That provision relates to

“payments with respect to benefits” because, after an insured recovers from a third

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party, the contract results in repayment of funds that were previously received as

benefits. The contractual provisions also allow Blue Cross to enforce its “right of

recovery by offsetting future benefits.” An offset of future benefits affects the

payment of future benefits and therefore relates to payments with respect to benefits.

The structure of the Act likewise favors giving preemptive effect to the

contractual terms concerning reimbursement and subrogation. The Treasury credits

all reimbursement and subrogation to the Federal Employees Health Benefits Fund

under the Act. McVeigh, 547 U.S. at 685. As Justice Breyer observed, “[a]fter

benefits are paid, any surplus in the fund can be used at the agency’s discretion to

reduce premiums, to increase plan benefits, or to make a refund to the Government

and enrollees.” Id. at 703 (Breyer, J., dissenting); see 5 U.S.C. § 8909(b); 5 C.F.R.

§ 890.503(c)(2). Hence, the contractual provisions relate to benefits, including

payments with respect to benefits, because they may trigger an increase in plan

benefits through the workings of the statutory scheme.

Bell relies on Nevils v. Group Health Plan, Inc. (Nevils I), 418 S.W.3d 451

(Mo. 2014), vacated sub nom., Coventry Health Care of Missouri, Inc. v. Nevils, 135

S. Ct. 2886 (2015), and Kobold v. Aetna Life Insurance Co., 309 P.3d 924 (Ariz. Ct.

App. 2013), vacated, 135 S. Ct. 2886 (2015), in asserting that § 8901(m)(1) requires

a more “immediate relationship” between the payment of benefits and the contractual

provision in question. Nevils I, 418 S.W.3d at 457; Kobold, 309 P.3d at 928. But the

Arizona court has reversed course, see Kobold, 2016 WL 1273024, at *1, and the

Missouri court’s conclusion, to which it recently adhered, was influenced by a

presumption against preemption with which we respectfully disagree. See Nevils I,

418 S.W.3d at 456. The text of § 8902(m)(1) includes no “immediacy” requirement,

and the phrase “relate to” benefits is properly given a broad meaning in ordinary

usage. See Morales v. Trans World Airlines, 504 U.S. 374, 384 (1992). Nothing

about the context here, involving a statute that serves to promote uniformity in the

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administration of federal employee benefits and stewardship of the public fisc,

suggests a narrower meaning.

Bell asserts that § 8901(m)(1) violates the Supremacy Clause of the

Constitution because it provides that contractual terms, rather than federal law, will

supersede and preempt state laws. Bell did not raise this constitutional argument in

response to the motion for judgment on the pleadings in the district court, and the

point istherefore forfeited. See Helfrich, 804 F.3d at 1110. There is no obvious error

that warrants correction on appeal. Others have been skeptical that § 8901(m)(1)

presents a constitutional problem, see id. (citing Boyle v. United Techs. Corp., 487

U.S. 500, 512-13 (1988)), but in any event, the statute can reasonably be construed

to mean that federal law (either the Act itself or federal common law), not the

contractual terms, has the preemptive force. See McVeigh, 396 F.3d at 144-45

(Sotomayor, J.); id. at 155-56 (Raggi, J., dissenting). SeveralJustices of the Missouri

court have concluded that there is no basis to construe § 8901(m)(1) in a manner that

is constitutional, because Congress plainly did not intend the creation of federal

common law, and the Supreme Court in McVeigh rejected it. See Nevils II, slip op.

at 14 (Wilson, J., concurring in the result); Nevils I, 418 S.W.3d at 464-65 (Wilson,

J., concurring). Then-Judge Sotomayor, however, relied on “Congress’s stated intent

to maintain ‘uniformity’ in FEHBA benefits and to ‘displace State or local law

relating to health insurance or plans.’” 396 F.3d at 145 (quoting H.R. Rep. No. 105-

374, at 9, 16 (1997)). We are not convinced that a saving construction would be

antithetical to any congressional goal that must be discerned from the statute’s text. 

As we understand McVeigh, the Supreme Court held only that federal common law

did not displace the entire area of state law involving “FEHBA-authorized contracts

at large.” 547 U.S. at 691-93. The Court left open the possibility that state law could

be displaced more narrowly, when there is a “significant conflict . . . between an

identifiable federal policy or interest and the operation of state law,” id. at 693

(quoting 396 F.3d at 150 (Sack, J., concurring)), and the Court’s reasoning does not

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preclude construing § 8901(m)(1) to mean that federal common law or the Act

displaces state law in the case of such a conflict.

* * *

For the foregoing reasons, the judgment of the district court is affirmed.

______________________________

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