Opinion ID: 661453
Heading Depth: 2
Heading Rank: 3

Heading: FEHBA Preemption

Text: 24 Adopted as part of the Omnibus Budget Reconciliation Act of 1990 (OBRA), Pub.L. No. 101-508, Sec. 7002(c), 104 Stat. 1388, 1388-330 (1990) (codified without title of Sec. 7002(c) at 5 U.S.C. Sec. 8909(f) (Supp. IV 1992) (amending 5 U.S.C. Sec. 8909 (1988)), FEHBA's preemption provision is contained in Sec. 8909(f)(1): 25 No tax, fee, or other monetary payment may be imposed, directly or indirectly, on a carrier or an underwriting or plan administration subcontractor of an approved health benefits plan by any State, the District of Columbia, or the Commonwealth of Puerto Rico, or by any political subdivision or other governmental authority thereof, with respect to any payment made from the Fund. 26 The district court found this provision ambiguous. Finding the statute's legislative history equally unenlightening, it invoked the teachings of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984) (absent clear congressional intent, district courts should defer to implementing agency's interpretation of a federal statute, as long as that interpretation is reasonable). Thus, the court turned to OPM for guidance. It concluded that OPM's determination that the surcharges are preempted under Sec. 8909(f)(1) was a reasonable construction of the statute and deferred to that interpretation by holding FEHBA preempted the 13% and 11% surcharges. 27 On appeal, defendants renew the argument that the language of the statute as well as its legislative history are unambiguous, and reflect Congress' clear intent that FEHBA preemption apply only to state premium taxes. 813 F.Supp. at 1010; see 48 C.F.R. Sec. 1652.216-71 (1992) (defining premium taxes as those imposed on FEHB premiums by any State, the District of Columbia, or the Commonwealth of Puerto Rico). They point to the statute's legislative history and the title of Sec. 7002(c)--EXEMPTION FROM STATE PREMIUM TAXES--and conclude that Sec. 8909(f)(1) is targeted only at premium taxes, and not the surcharges here. We are not persuaded. 28 We start by looking at the plain language of a statute to interpret its ordinary common meaning. See Connecticut Nat'l Bank v. Germain, --- U.S. ----, ----, 112 S.Ct. 1146, 1149, 117 L.Ed.2d 391 (1992) (courts must presume that a legislature says in a statute what it means and means in a statute what it says). If the words of a statute are unambiguous, judicial inquiry should end, and the law interpreted according to the plain meaning of its words. Aslanidis v. United States Lines, Inc., 7 F.3d 1067, 1073 (2d Cir.1993). In our view, the language of Sec. 8909(f)(1) is sufficiently clear to reveal congressional intent. See Ardestani v. INS, --- U.S. ----, ----, 112 S.Ct. 515, 520, 116 L.Ed.2d 496 (1991) (strong presumption that plain language of statute expresses legislative intent). 29 By its terms, 5 U.S.C. Sec. 8909(f)(1) prohibits every state or local tax, fee, or other monetary payment imposed, directly or indirectly, on a carrier or an underwriting or plan administration subcontractor of an approved [FEHBA] health benefits plan, with respect to any payment made from the Fund. Defendants do not dispute that the 13% and 11% surcharges satisfy the first two requirements for preemption: the surcharges are a state-imposed tax, fee, or other monetary payment, and they are imposed directly or indirectly on carriers offering FEHBA plans. The controversy, therefore, is over the third one--the requirement that the tax is imposed with respect to any payment made from the Fund. 30 Under FEHBA, the federal government and individual enrollees make contributions which are then deposited into the Employees Health Benefits Fund (the Fund) in the United States Treasury. 5 U.S.C. Secs. 8906, 8909 (1988 & Supp. IV 1992). The Fund is administered by OPM. Id. 31 OPM contracts with various insurance carriers, and through various health benefit plans the carriers provide, pay for, or reimburse the cost of health services for enrollees. 5 U.S.C. Secs. 8901(6), 8901(7), and 8902(a) (1988). In turn, OPM creates a letter of credit (LOC) account for each experience-rated plan, 2 and the LOC is maintained in the Treasury as part of the Fund. Each carrier draws against its LOC account on a checks-presented basis for amounts paid by the carrier as FEHBA claims or expenses. 5 U.S.C. Sec. 8909(a) (Supp. IV 1992); 48 C.F.R. Sec. 1632.170(b)(2) (1992). This requires carriers to pay for covered hospital treatment from their own resources, and then get reimbursed by drawing against their LOC. Cf. 48 C.F.R. Sec. 1632.170(b)(2) ([D]rawdown on the LOC is delayed until the checks issued for FEHB Program disbursements are presented to the carrier's bank for payment.). 32 Given this scheme of payment and reimbursement, and mindful of how the two reserves required for each experience-rated plan work, see 5 U.S.C. Sec. 8909(b)(2) (Supp. IV 1992); 5 C.F.R. Secs. 890.503(c)(1)-(2) (1993) (contingency reserve); 5 C.F.R. Sec. 890.503(c)(3) (1993) (carrier reserve), the preemption issue is not a difficult one. The 13% and 11% surcharges are, indeed, imposed with respect to any payment made from the Fund because the amount drawn by experience-rated carriers from their LOC accounts, which are part of the Fund, is based in part on the amount of the surcharge. As already noted, carriers first pay hospital bills from their own funds, then draw from their LOC accounts to replenish their depleted funds. Because payments from the Fund are directly affected by what the hospitals charge for their services, and because the surcharges increase the amounts carriers draw from the Fund, the surcharges are clearly imposed with respect to ... payment[s] made from the Fund. Accordingly, they are preempted. 33 Despite this straightforward construction of Sec. 8909(f)(1), defendants urge us to reject it because our interpretation is repugnant to the general aims of FEHBA. They believe that there is a clearly expressed legislative intention that is contrary to the language of the statute. Cf. United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989) (The plain meaning of legislation should be conclusive, except in the 'rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.'  (citation omitted)). 34 In plumbing the legislative history of Sec. 8909(f)(1), defendants selectively ignore legislative policies that run counter to their interpretation of the statute. Section 8909(f)(1) was enacted as part of OBRA, the central purpose of which was to reduce government expenditures. See H.Rep. No. 101-881, 101st Cong., 2d Sess. 169 (1990), reprinted in 1990 U.S.C.C.A.N. 2017, 2177. For its part, Sec. 8909(f)(1) was designed to reduce expenditures from the Fund by preventing states from charging taxes on health care reimbursements drawn by carriers from the Fund. Id. at 173, reprinted in 1990 U.S.C.C.A.N. at 2181. To adopt defendants' crabbed view of preemption would undermine this revenue-saving purpose. 35 Defendants cite numerous excerpts from congressional committee reports where Sec. 8909(f)(1) is characterized as a restriction on premium taxes. This exercise is singularly unenlightening, however, because it remains obscure what the various members of Congress meant when they referred to premium taxes in discussing Sec. 8909(f)(1). We also note that defendants' reliance on the title to Sec. 7002(c) of OBRA containing Sec. 8909(f) as an amendment to FEHBA is misplaced. Defendants simply ignore that the focal point of this controversy is FEHBA Sec. 8909(f)(1), and not OBRA Sec. 7002(c). 36 Finally, defendants are piqued that the district court deferred to OPM's current interpretation of the preemption issue. (This interpretation is set forth in the government's amicus brief and affidavits, and was first solicited by the State from OPM (in opinion letters) before this action even began.) Defendants argue that the district court ignored an earlier OPM regulation limiting the scope of Sec. 8909(f) to premium taxes, 48 C.F.R. Sec. 1631.205-41 (1992), and instead improperly deferred to OPM's current interpretation which defendants characterize as  'agency litigating positions that are wholly unsupported by regulations, rulings, or administrative practice.'  State's Brief at 44 (quoting Bowen v. Georgetown University Hospital, 488 U.S. 204, 212, 109 S.Ct. 468, 473, 102 L.Ed.2d 493 (1988)). 37 Even if we agreed that the language of Sec. 8909(f)(1) is ambiguous and its legislative history unilluminating, we would still affirm the district court's judgment, with its reliance on OPM's amicus position. As a preliminary matter, the district court did not defer to an agency litigating position; rather, it deferred to OPM's administrative interpretation of Sec. 8909(f)(1), made before the government entered this litigation and offered in response to a request from New York itself. 38 OPM in its amicus brief to this Court asserts that 48 C.F.R. Sec. 1631.205-41 uses premium taxes as a shorthand description of the taxes covered by 5 U.S.C. Sec. 8909(f)(1), not in the narrow sense urged by defendants. The regulation stresses, in OPM's view, the broad sweep of Sec. 8909(f), interpreting it to apply to all payments directed by States or municipalities, regardless of how they may be titled, to whom they must be paid, or the purpose for which they are collected, including all forms of direct and indirect measurement of FEHBP premiums, however modified.... 48 C.F.R. Sec. 1631.205-41 (emphasis added). Like the district court, we too will defer to OPM's interpretation of its own regulation unless it is ... plainly erroneous or inconsistent with the language of the regulation. Federal Labor Relations Auth. v. United States Dept. of Veterans Affairs, 958 F.2d 503, 514 (2d Cir.1992) (citing Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 359, 109 S.Ct. 1835, 1850, 104 L.Ed.2d 351 (1989)). We cannot say it is unreasonable to interpret Sec. 1631.205-41 as OPM does. 39 Accordingly, the New York statutes imposing the 13% and 11% surcharges are preempted by FEHBA.