Aybar v. New Jersey Transit Bus Operations, Inc.

• Decision Date: 14 October 1997
• Citation: 701 A.2d 932,305 N.J.Super. 32
• Parties: Grace AYBAR, Plaintiff, v. NEW JERSEY TRANSIT BUS OPERATIONS, INC., Jimmie O. James, Defendants-Appellants, and Government Employees Hospital Association, Inc., Defendant-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 32

305 N.J.Super. 32

701 A.2d 932

Grace AYBAR, Plaintiff, v. NEW JERSEY TRANSIT BUS OPERATIONS, INC., Jimmie O. James Defendants-Appellants and Government Employees Hospital Association, Inc., Defendant-Respondent.

Superior Court of New Jersey Appellate Division.

Argued Sept. 23, 1997.

Decided Oct. 14, 1997.

[701 A.2d 933] Patricia A. Schiripo, Deputy Attorney General, for defendants-appellants (Peter Verniero, Attorney General, attorney;

Andrea M. Silkowitz, Assistant Attorney General, of counsel; Ms. Schiripo, on the brief)

Scott R. Jamison, Washington, DC, for defendant-respondent Government Employees Hospital Association, Inc. (Melito & Adolfsen, Jersey City, and Gordon & Barnett, Washington, DC, attorneys; Mr. Jamison and Michael J. Schwab, on the brief).

Before Judges PRESSLER, CONLEY and WALLACE.

The opinion of the court was delivered by

CONLEY, J.A.D.

As posed to us, the State in this appeal urges us to determine that "the anti-subrogation provision of the New Jersey Tort Claims Act ..., N.J.S.A. 59:9-2e ¹, does not 'relate to' health insurance or plans ... within the meaning of [the Federal Employees Health Benefit Act] 5 U.S.C. § 8902(m)(1), and, thus, is not preempted thereby." The issue, potentially, is much broader and that is whether the Legislature's "collateral source" rule, applicable not only to tort claims against the State and State employees, N.J.S.A. 59:9-2(e), but all other litigation as well, N.J.S.A. 2A:15-97, is preempted by the Federal Employees Health Benefits Act (FEHBA). Moreover, preemption under FEHBA would, we think, mean preemption under FEHBA's counterpart in the private sector, the Employee Retirement Income

                and Social Security Act (ERISA). 2  In a well-reasoned oral [701 A.2d 934] decision, the trial judge concluded that  N.J.S.A. 59:9-2e's "anti-subrogation" clause was preempted.  While we affirm that decision, we caution that our opinion is narrow in scope and limited solely to what the parties have presented
                

I

On November 15, 1990, plaintiff, a federal employee, was a passenger on a bus owned by appellant New Jersey Transit Bus Operations, Inc. (NJTBO). While exiting it, she tripped and fell, sustaining injuries for which she obtained treatment and incurred lost wages. Plaintiff sued NJTBO and the driver of the bus whose negligence, she claimed, was the direct and proximate cause of her injuries. At the time of the accident, plaintiff was insured under the health benefits plan of respondent Government Employees Hospital Association, Inc. (GEHA). That plan paid benefits in the amount of $39,818 for medical expenses.

Plaintiff settled with NJTBO for $150,000. The settlement agreement expressly stated that the $150,000 was for reimbursement GEHA's plan is established pursuant to and governed by FEHBA and the regulations promulgated by the U.S. Office of Personnel Management (OPM). See 5 C.F.R. Pt. 890 (1997); 48 C.F.R. Ch. 16. The plan, in accordance with the FEHBA, provides health benefits coverage to eligible individuals pursuant to a federal government procurement contract entered into between OPM and GEHA. The FEHBA authorizes OPM to determine eligibility coverage, 5 U.S.C. §§ 8902(f), 8905, and 8908, and set standards for the termination of coverage, 5 U.S.C. § 8902(g), (h). It establishes qualifications for carriers, 5 U.S.C. § 8902(e). It establishes benefit levels and prescribes the method for setting plan rates, 5 U.S.C. §§ 8902(d), (i) and 8904. It provides for government contribution toward the cost of coverage, 5 U.S.C. § 8906, for the establishment of a dedicated fund in the United States Treasury for handling all FEHB Program funds, and OPM control of plan contingency reserves and program administrative expenses, 5 U.S.C. § 8909.

                of lost wages, compensation for pain and suffering and did not include medical costs.  The State's release mandated that plaintiff commence a declaratory judgment action to determine whether GEHA is entitled to a "lien against the proceeds of the settlement."   The agreement also provided that if it is judicially determined that GEHA is entitled to a "lien" NJTBO will indemnify plaintiff for the full amount of the "lien."
                

Thus, FEHBA vests in OPM sole authority and responsibility to enter into contracts with qualified carriers to provide health benefits coverage, 5 U.S.C. § 8902(a), sole discretion to determine which benefits are appropriate for inclusion in FEHB plans, and it requires OPM to include in each such contract an annual "detailed statement of benefits offered" for distribution to plan members which "include[s] such maximums, limitations, exclusions, and other definitions of benefits as [OPM] considers necessary or desirable." 5 U.S.C. § 8902(d). Accordingly, that "detailed statement of benefits," or brochure, is expressly incorporated into and At least as presented to us, that brochure contains the following provision addressing GEHA's right to be reimbursed to the extent of health benefits paid from third-party recoveries obtained by its beneficiaries.

thus forms a part of the federal government procurement contract establishing the GEHA benefit plan.

SUBROGATION

Subrogation means the Plan's right to recover any of its payments (1) made because of any injury to you or your dependent caused by a third party and (2) which you or your dependent later recover from the third party or the third party's insurer.

[Government Employee Hospital Association Benefit Plan Brochure, (1990) (emphasis added).]

To our knowledge, therefore, the particular plan here does not contain a reimbursement provision (similar to a statutory lien) upon any third-party recovery, either by jury, settlement or otherwise. Contrast NALC Health Benefit Plan v. Lunsford, 879 F.Supp. 760, 763 n. 5 (E.D.Mich.1995) (" 'If you or your covered dependent suffers an injury or illness through the act or omission of another, the Plan requires that it be reimbursed for benefits paid by the Plan ... or that it be subrogated to ... to the extent the benefits paid.... All recoveries from a third party ... must be used to reimburse the Plan for benefits paid. The Plan's share of the recovery will not be reduced because you or your dependent do not receive the full amount of damages claimed, unless the Plan agrees in writing to a reduction.' " (emphasis added)). As provided to us, GEHA's plan provides for subrogation only to the extent of third-party recoveries by the beneficiary for plan payments.

II

The critical FEHBA preemption provision, 5 U.S.C. § 8902(m)(1), provides:

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. [Emphasis added.]

Preliminarily, while the State's appeal focuses upon the language "which relates to health insurance or plans," 5 U.S.C. § 8902(m)(1) also requires inquiries as to whether the circumstances are such that the state law or regulation is inconsistent with a particular plan's contractual provisions. As to any inconsistency, all that we have been presented is the plan's subrogation provisions, which we have set forth above. A right of subrogation, of course, "is an equitable device intended to effectuate an obligation's ultimate discharge by the one who ought to pay it and thus to promote 'essential justice' between the parties." Hayes v. Pittsgrove Township Bd. of Educ., 269 N.J.Super. 449, 454-55, 635 A.2d 998 (App.Div.1994). But, "a subrogee's rights can rise no higher than those of the subrogor." Id. (citation omitted). In Hayes, therefore, we held that the employee's medical plan could not "through subrogation, effect a recovery" from a State entity which the plan's beneficiaries could not obtain in light of N.J.S.A. 59:9-2(e)'s anti-subrogation clause. Id. at 455, 635 A.2d 998. ³ It might be suggested, therefore, that what we are asked to do here is render an advisory opinion since GEHA may, under the precise language of its plan, have no subrogation rights to plaintiff's lump sum, nonmedical settlement. See generally Waller v. Hormel Foods Corp., 120 F.3d 138, 140 (8th Cir.1997); Wahl v. Northern Telecom, Inc., 726 F.Supp. 235, 242 (E.D.Wis.1989). Compare Medcenters Health Care, Inc. v. Ochs, 854 F.Supp. 589, 592-93 (D.Minn.1993), aff'd, 26 F.3d 865 (8th Cir.1994).

The State, however, has not contended that GEHA has no exercisable subrogation rights and does not, therefore, argue that the "anti-subrogation" provision of N.J.S.A. 59:9-2(e) is not inconsistent with the particular plan provisions. Rather, its focus on appeal is the broadly stated proposition that an anti-subrogation provision does not "relate to" a FEBA plan within the meaning of 5 U.S.C. § 8902(m)(1). That is the sole issue we, therefore, decide.

As to that, we are convinced that FMC Corp. v. Holliday, 498 U.S. 52, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990); NALC Health Benefit Plan v. Lunsford, supra, 879 F.Supp. 760; and Medcenters Health Care, Inc. v. Ochs, supra, 854 F.Supp. 589 are dispositive. We need not, therefore, engage in extensive generalized discussion of ERISA and FEHBA preemption upon which the case law is virtually unlimited. All three of these cases concern state "anti-subrogation" provisions under either ERISA's or FEHBA's "relate to" preemption clause and all three conclude a state anti-subrogation statute or rule does "relate to" protected plans.

In FMC Corp. v. Holliday, supra, the United States Supreme Court considered whether a Pennsylvania motor vehicle financial responsibility statute which contained an anti-subrogation provision prohibiting benefit plans from enforcing subrogation rights against third parties from whom their insureds collected ⁴, did have a "reference to" and a ...