Blue Cross & Blue Shield of Fla. v. Dept. of Banking and Finance

• Decision Date: 05 July 1985
• Docket Number: No. 83-242 Civ-J-14.,83-242 Civ-J-14.
• Citation: 613 F. Supp. 188
• Parties: BLUE CROSS AND BLUE SHIELD OF FLORIDA, INC., Plaintiff, v. DEPARTMENT OF BANKING AND FINANCE, an agency of the State of Florida; Gerald A. Lewis, Comptroller of the State of Florida; United States of America; Office of Personnel Management, an agency of the U.S. Government; Donald J. Devine, Director of the Office of Personnel Management, Defendants.
• Court: U.S. District Court — Middle District of Florida

613 F. Supp. 188

BLUE CROSS AND BLUE SHIELD OF FLORIDA, INC., Plaintiff, v. DEPARTMENT OF BANKING AND FINANCE, an agency of the State of Florida; Gerald A. Lewis, Comptroller of the State of Florida; United States of America; Office of Personnel Management, an agency of the U.S. Government; Donald J. Devine, Director of the Office of Personnel Management, Defendants.

No. 83-242 Civ-J-14.

United States District Court, M.D. Florida, Jacksonville Division.

July 5, 1985.

J. Stephen O'Hara, Jr. and Betsy C. Cox, Mathews, Osborne, McNatt, Gobelman, & Cobb, Jacksonville, Fla., for plaintiff.

Charles L. Stutts, Asst. Gen. Counsel and Mike Underwood, Dept. of Banking and Finance, Tallahassee, Fla., Dorothea Beane, Asst. U.S. Atty., Jacksonville, Fla., Stephen P. Smith, Washington, D.C., for defendants.

OPINION

SUSAN H. BLACK, District Judge.

This case came on to be heard on plaintiff's Motion for Summary Declaratory Decree as to Count II, filed herein on September 5, 1984. Defendant United States of America, Office of Personnel Management (hereinafter "OPM") and plaintiff filed a Pretrial Stipulation on September 27, 1984. Defendant Department of Banking and Finance (hereinafter "Florida") filed its Concurrence Of State Of Florida In Pre-Trial Stipulation As To Count II on September 28, 1984. A hearing was held before the Court on December 12, 1984. At the close of the hearing, the Court directed counsel to file further briefs. In accordance with the Court's direction, plaintiff filed its Supplemental Memorandum, Filed Pursuant To Request Of Court on January 21, 1985. Defendant OPM, filed its Memorandum Of Points And Authorities On Behalf Of The Claim Of The United States on January 21, 1985. Florida filed its response on January 22, 1985. Furthermore, Blue Cross and Blue Shield Association (hereinafter "Blue Cross Association") filed a brief amicus curiae on February 12, 1985.

This case of first impression is before the Court for a declaration of the rights and relations of plaintiff and defendants under the Federal Employees Health Benefits Act, 5 U.S.C. §§ 8901-8913 (hereinafter "the Act") and the Florida Disposition of Unclaimed Property Act, Fla.Stat. § 717 (hereinafter "Unclaimed Property Act") in regard to provision VIII(m) of Contract Number CS 1039 (hereinafter "Contract") between OPM and the Blue Cross Association. At issue is the disposition of amounts represented by Federal Employee Program (hereinafter "FEP") benefit checks issued by plaintiff to federal employee benefit recipients which remain uncashed for two years or more.

Plaintiff contends that the defendants have made conflicting and adverse claims to the amounts represented by the benefit checks and seeks a declaration as to how it should dispose of these amounts. Defendant OPM avers that the amounts represented by the benefit checks should be credited to the Special Reserve fund maintained by the Blue Cross Association pursuant to the Act. Defendant Florida contends that the plaintiff should hold the amounts in question until they remain unclaimed for seven (7) years and then deliver them to Florida for administration and disposition pursuant to the Unclaimed Property Act.¹

FINDINGS OF FACT

In the Pretrial Stipulation As To Count II, filed on September 27, 1984, the parties stipulated to the following facts.

1. Under the terms of the agreement entered into between plaintiff, Blue Cross and Blue Shield of Florida, Inc. and the Blue Cross Association,² plaintiff authorized the Blue Cross Association to contract with OPM to furnish health benefits through plaintiff to federal employees and annuitants as provided by the Government-wide Service Benefit Program.

2. OPM is authorized by the Act to contract with qualified insurance carriers to provide health benefit plans such as the Government-wide Service Benefit Plan in the case sub judice. Based on this authorization, OPM and the Blue Cross Association entered into the Contract.

3. Plaintiff administers health care benefits for enrolled federal employees in Florida pursuant to the terms of the Contract and the aforementioned agreements between plaintiff and the Blue Cross Association. As one of its duties, plaintiff issues FEP checks to federal employee benefit recipients. Occasionally, these checks are not cashed.

4. Congress amended the Act effective September 17, 1978, to add the following language:

(m)(1) The provisions of any contract under this chapter which relate to the nature 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 to the extent that such law or regulation is inconsistent with such contractual provisions.

5. Subsequently, OPM amended the Contract, effective September 28, 1979, to add the following paragraph at the end of Article VIII:

(m) Payment of benefit checks issued pursuant to this contract shall be voided if the checks have been outstanding for two (2) years. The amounts represented by these checks shall be credited to the Special Reserve. The term "check" shall include any written instrument issued to pay or reimburse the payment of benefits under this contract, including by way of illustration but not limitation, drafts, money orders, and checks. This provision is adopted pursuant to P.L. 95-368, enacted September 17, 1978, to preempt State disposition of unclaimed property acts and acts of similar import.

6. The Special Reserve Fund referenced in that amendment is maintained by the Blue Cross Association pursuant to the Contract terms.

7. Plaintiff is keeping a record of all uncashed FEP benefit checks. Count II of this action is directed to the amounts represented by checks issued by the plaintiff that remained uncashed for more than two (2) years but less than seven (7) years.³

8. OPM requests that, under the terms of the Contract, plaintiff credit to the Special Reserve fund the amounts represented by FEP benefit checks issued by plaintiff and uncashed for two years or more.

9. Florida disputes OPM's claim. In its role as administrator of the Unclaimed Property Act, Florida claims that the amounts represented by the unclaimed benefit checks are to be delivered to Florida for administration and disposition pursuant to Section 717 or, alternatively, Section 716, Fla.Stat.

10. The plaintiff makes no claim to the funds in question. It asks only to have a determination as to whether these amounts should be deposited in the Special Reserve Fund maintained by the Blue Cross Association for OPM or be delivered to Florida.

CONCLUSIONS OF LAW

The Court has jurisdiction of this Count II action for declaratory decree pursuant to 5 U.S.C. § 8912; 28 U.S.C. § 1331 (together with 5 U.S.C. §§ 702 and 703); and 28 U.S.C. § 1346(a) in that this is a civil action against the United States founded on 5 U.S.C. § 8901, et seq. In order to determine the disposition of the funds, the Court will examine the history of The Act. Then, the Court will apply a two-part test to determine which defendant should be awarded the funds held by the plaintiff, Florida Blue Cross. The first part of the test will determine whether OPM's claim preempts Florida's. The basic precepts of federal preemption will be analyzed and then applied to the legislative intent of Congress when it passed Section 8902(m)(1). Recent court decisions that interpret The Act will be examined in light of federal preemption. Second, having made a finding regarding federal preemption, the Court will determine whether OPM had the authority to amend the Contract.

History of the Act

In 1959 Congress established the FEP to provide health benefits for federal employees and annuitants, retired employees. This was codified as The Act, 5 U.S.C. §§ 8901-8913. Under this program, the government contributes part of the premium cost and the employee pays the remainder. Id. at § 8906. Employee contributions are then paid into the Federal Employees Health Benefits Fund which is held in the United States Treasury exclusively for the payment of health benefits for the FEP subscribers. Id. at § 8909.

The FEP is administered by the OPM.⁴ In 1960, OPM contracted with the Blue Cross Association to establish the Government-Wide Service Benefit Plan authorized by The Act. Until Congress amended The Act in September of 1978, the Blue Cross Association remitted uncashed checks to each state where there was an applicable unclaimed property law.⁵ In states where there was no such law, the checks were returned to the FEP. (Audit Policies and Procedures Bulletin No. 4, FEP, October 29, 1976).

After congressional amendment of The Act, OPM and the Blue Cross Association amended their contract to provide for the federal preemption of state disposition of unclaimed property acts. The effect of this contract amendment was to ensure that all uncashed checks were returned to the special reserve of the Blue Cross Association.⁶ Employees' rights to these checks are not extinguished by the amendment. Any employee who presents a claim for an uncashed benefit check may receive a reissued check.⁷ The Blue Cross Association immediately implemented this contract change. See Audit Policies and Procedures Bulletin No. 4, October 3, 1979. All state Blue Cross plans have acquiesced and have remitted uncashed checks to the special reserve except the Florida plan.⁸

Federal Preemption of State Law

The Supremacy Clause of the Constitution, Article VI, Clause 2, provides that federal law preempts the operation or exercise of incompatible or conflicting state legislation. The United States Supreme Court has stated, "(t)he law of the State, though enacted in the exercise of powers not controverted, must yield when incompatible with federal legislation." Sperry v. State of Florida, 373 U.S. 379, 384, 83 S.Ct. 1322, 1325, 10 L.Ed.2d 428 (1963) (citation omitted). In defining federal preemption, ...