Burkey v. Government Employees Hosp. Ass'n, 91-3653

Citation983 F.2d 656
Decision Date17 February 1993
Docket NumberNo. 91-3653,91-3653
Parties, 16 Employee Benefits Cas. 1682 Linda W. BURKEY and Carey David Burkey, Plaintiffs-Appellees, Cross-Appellants, and Department of Health & Human Resources, et al., Intervenors-Plaintiffs-Appellees, v. GOVERNMENT EMPLOYEES HOSPITAL ASSOCIATION, Defendant-Appellant, Cross-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Lisa Miley Geary, Campbell, McCranie, Sistrunk, Anzelmo & Hardy, Metairie, LA, Michael J. Kator, Kator, Scott & Heller, Washington, DC, for appellant.

William Kanter, John P. Schnitker, U.S. Dept. of Justice, Washington, DC, for amicus curiae U.S. Office of Personnel Management.

Gayle Anne Reynolds, LeBrun, Mackles & Reynolds, New Orleans, LA, for Burkeys.

Miles Trapolin, New Orleans, LA, for DHHR.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before DAVIS and JONES, Circuit Judges, and Parker 1, District Judge.

EDITH H. JONES, Circuit Judge:

Linda W. Burkey Mahaffey, a federal employee, and Carey David Burkey filed suit in 1986 contending that the Government Employees Hospital Association ("GEHA") breached its contractual agreement to pay Carey David Burkey's medical bills. They were awarded recovery under Louisiana law, which authorizes damages and attorneys' fees for unreasonable delay in paying health and accident insurance claims. La.Rev.Stat.Ann. 22:657 (West Supp.1992). We hold, contrary to this award, that Louisiana's penalty provision is inconsistent with and therefore preempted by the federal law regulating federal employee

                health benefits.  5 U.S.C. § 8902(m)(1).   We also hold that although Mahaffey did not file a standard claim form with GEHA, she informed the carrier timely and repeatedly of her quest for benefits, both orally and in writing, in substantial compliance with GEHA's contractual provisions concerning the filing of claims.   Consequently, the judgment for recovery of medical expenses, though not for statutory penalties and attorneys fees, is affirmed

The facts are recited as found by the district court. On December 17, 1981 plaintiff, Linda Burkey, an employee of the Naval Station in New Orleans, had family coverage for herself and her son, Carey, under a group health policy issued by GEHA as an authorized carrier under the Federal Employees Health Benefits Act ("FEHBA"), 5 U.S.C. § 8901 et seq. Carey became 22 on November 19, 1981. On December 17, 1981 Carey was rendered a quadriplegic when he was a passenger in an automobile involved in a collision. Carey was immediately hospitalized at Charity Hospital in New Orleans, just three days before the 31st day after his 22nd birthday. Charity Hospital treated him continuously during his inpatient hospitalization from December 18, 1981 to June 1983.

Regulations of the federal Office of Personnel Management, which superintends FEHBA, 5 C.F.R. Part 890, and the GEHA policy provide that Carey was covered until age 22 and that he was entitled to a 31-day extension thereafter. In addition, if he were hospitalized on the 31st day of that extension, he was entitled to 60 days coverage for continuous hospitalization. 5 CFR 890.401. February 18, 1982 was the 63rd day of Carey's continuous hospitalization after his injuries; from December 17 until February 18, Carey's medical expenses at Charity were $44,693.00.

Immediately upon learning of her son's serious condition, Mrs. Burkey contacted her employer seeking confirmation that Carey was covered by GEHA so he could be transferred to a private hospital specializing in treatment of spinal cord injuries. Despite her own contact with GEHA verbally and through her employer and her repeated written pleas for help, Burkey never received that confirmation. Her son continued on public assistance at Charity. On June 1, 1982, Linda Burkey prepared for her lawyer to submit to GEHA its claim form E-1 seeking confirmation that Carey's medical needs as a result of his 1981 injury were covered. The E-1 was received by GEHA before June 25, 1982. In response to her E-1, plaintiff received a GEHA form F-012 stating only, "children are covered until age 22," without further explanation. 2 When, in late 1982, Mrs. Burkey received a copy of GEHA's "open season" announcement that referenced the 31-day extension following a person's 22nd birthday, she wrote to GEHA's claim office and inquired whether Carey was entitled to the 31-day extension of coverage. Her letter advised GEHA of all pertinent facts needed to determine whether or not Carey was entitled to medical services: (a) Carey severed his spinal cord in a December 1981 accident; (b) GEHA refused coverage and Carey had been in Charity Hospital continuously since that time; (c) she had sent an E-1 to GEHA in June 1982; (d) she had received form F-012 from GEHA apparently denying Carey's entitlement to coverage because he was over age 22. GEHA did not respond to plaintiff's letter.

On December 23, 1982, Mrs. Burkey again wrote to GEHA's claim office addressing her letter to its President, Mr. Rowland. She enclosed copies of her E-1 and GEHA's F-012 denying coverage. On December 23, Mrs. Burkey also wrote to Congresswoman Lindy Boggs and outlined the difficulties with GEHA. Because Carey's insurance benefits were never confirmed by GEHA, Carey was never transferred to a private specialty hospital.

GEHA's trial representative testified that if she had received the E-1 and Mrs. Burkey's letters referred to above, she Having found out about the Burkeys' lawsuit against GEHA, Louisiana's Department of Health and Human Resources ("DHHR") intervened to assert its interest in the claim for medical expenses incurred by Charity Hospital. The case was tried to the court without a jury on March 21, 1991. At the conclusion of the trial, the court gave oral reasons for judgment in favor of plaintiffs under the Louisiana statutory penalty provision, and it remanded to a magistrate judge for an evidentiary hearing to determine reasonable attorneys' fees and the amount of medical bills. The magistrate judge recommended that $40,000 in attorneys' fees were reasonable and that $44,693 be recognized as the actual amount of medical expenses due. The court initially entered judgment in favor of the Burkeys for twice the amount of medical expenses plus attorneys' fees of $40,000. After revising the judgment to recognize the intervenors' interest, the final damage award against GEHA remained $129,386, but $44,693 of that amount was ordered to be paid to DHHR and twenty-five percent of the $40,000 attorneys fees was ordered payable to the plaintiffs' former attorneys, who had also intervened.

                would have investigated the claim.   She testified that it is not always a prerequisite to confirming coverage that a bill for medical services be received because in certain circumstances a bill may not be available to a plan participant until quite some time later.   While admitting that Carey had hospitalization coverage from December '81 through February '82, she also agreed that once GEHA received Burkey's E-1, it had all the authority it needed to request bills directly from Charity

The Burkeys and GEHA have appealed, but neither DHHR nor the attorney intervenors have done so. GEHA asserts that the district court incorrectly interpreted the scope of FEHBA preemption and therefore improperly applied Louisiana law in assessing coverage and awarding damages and attorneys fees. Further, GEHA claims that the substantive finding of coverage was incorrect under the GEHA plan. We agree with GEHA's preemption argument but disagree with its contention that plaintiffs' expenses were not covered by the plan because no complete claim form was filed. The Burkeys are thus entitled to recover only the stipulated expenses of $44,693 incurred at Charity Hospital, together with pre- and post-judgment interest, subject to the intervention judgment awarded DHHR by the district court. 3


While one federal circuit court has held otherwise concerning the scope of FEHBA preemption of state law, "The weight of authority and most persuasive analysis supports the position that state law claims are preempted". 4 Federal Plaza Medical Associates v. Palermino, 1991 WL 29201 (S.D.N.Y.). Federal preemption of state law is fundamentally "a question of Congressional intent ..." English v. General Elec. Co., 496 U.S. 72, 78, 110 S.Ct. 2270, 2275, 110 L.Ed.2d 65 (1990) (citation omitted). Congress expressed itself with unusual clarity in 5 U.S.C. § 8902(m)(1), which states 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 regulation issued thereunder, to the extent that such law or regulation is inconsistent with such contractual provisions.

The policy underlying § 8902(m)(1) is to ensure nationwide uniformity of the administration of FEHBA benefits. Hayes v. Prudential Insurance Company of America, 819 F.2d 921, 925 (9th Cir.1987) (citing H.R.Rep. No. 282, 95th Cong., 1st Sess. 1, 4 (1977)), cert. denied, 484 U.S. 1060, 108 S.Ct. 1014, 98 L.Ed.2d 980 (1988); Blue Cross & Blue Shield of Florida v. Department of Banking, 613 F.Supp. 188, 192-193 (D.C.Fla.1985) (discussion of legislative history of the preemption provision of FEHBA) aff'd 791 F.2d 1501 (11th Cir.1986), reh. denied, 797 F.2d 982 (11th Cir.1986); Hartenstine v. Superior Court, 196 Cal.App.3d 206, 220, 241 Cal.Rptr. 756, 765 (1987) (discussion OPM's belief that state law claims should be preempted because the imposition of varying state law requirements would undermine the purpose and objectives of the FEHBA), cert. denied, 488 U.S. 899, 109 S.Ct. 245, 102 L.Ed.2d 234 (1988).

The Burkeys argue that their state law claim for penalties is not preempted under § 8902(m)(1) because their claim relates to remedies and not to the "nature or...

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