Helfrich v. Blue Cross & Blue Shield Ass'n, No. 14–3179.

CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)
Writing for the CourtHARTZ, Circuit Judge.
Citation804 F.3d 1090
PartiesLee Ann HELFRICH, Plaintiff Counter Defendant–Appellant, v. BLUE CROSS AND BLUE SHIELD ASSOCIATION, Defendant Counterclaimant–Appellee, and Blue Cross and Blue Shield of Kansas City, Defendant–Appellee. United States of America; Association of Federal Health Organizations, Amici Curiae.
Docket NumberNo. 14–3179.
Decision Date29 October 2015

804 F.3d 1090

Lee Ann HELFRICH, Plaintiff Counter Defendant–Appellant
v.
BLUE CROSS AND BLUE SHIELD ASSOCIATION, Defendant Counterclaimant–Appellee
and
Blue Cross and Blue Shield of Kansas City, Defendant–Appellee.


United States of America; Association of Federal Health Organizations, Amici Curiae.

No. 14–3179.

United States Court of Appeals, Tenth Circuit.

Oct. 29, 2015.


804 F.3d 1091

Matthew W.H. Wessler, Public Justice, P.C., Washington, D.C. (Sarah E. Belton, Public Justice, P.C., Oakland, California, and David A. Hoffman, Donald W. Vasos, Vasos Law Offices, Fairway, Kansas, with him on the briefs), for Plaintiff Counter Defendant–Appellant.

Anthony F. Shelley (Adam P. Feinberg, with him on the brief), of Miller & Chevalier Chartered, Washington, D.C., for Defendant Counterclaimant–Appellee Blue Cross and Blue Shield Association, and Defendant–Appellee, Blue Cross and Blue Shield of Kansas City.

Henry C. Whitaker, Assistant United States Attorney, Appellate Staff (Joyce R. Branda, Acting Assistant Attorney General, Barry R. Grissom, United States Attorney, and Alisa B. Klein, Assistant United States Attorney, Appellate Staff, and Susan G. Whitman, Deputy Assistant General Counsel, U.S. Office of Personnel Management,

804 F.3d 1092

Washington, D.C., with him on the brief) U.S. Department of Justice, Washington, D.C., for Amicus Curiae, United States of America.

David M. Ermer, Jason C. Suter, Ermer Law Group, Washington, D.C., for Amicus Curiae, Association of Federal Health Organizations.

Before LUCERO, HARTZ, and HOLMES, Circuit Judges.

Opinion

HARTZ, Circuit Judge.

Lee Ann Helfrich received benefits through her federal-employee health-insurance plan, the Blue Cross and Blue Shield Service Benefit Plan (the Plan), for the treatment of injuries she sustained in a car accident. After Ms. Helfrich reached a settlement with the other driver's insurance company, Blue Cross and Blue Shield Association (BCBSA) and Blue Cross and Blue Shield of Kansas City (BCBSKC) sought reimbursement for the benefits paid, as provided in the terms of the Plan. Ms. Helfrich appeals from the judgment of the United States District Court for the District of Kansas requiring her to reimburse BCBSA and BCBSKC (together Blue Cross) because the Federal Employees Health Benefits Act of 1959 (FEHBA) preempts a Kansas insurance regulation prohibiting subrogation and reimbursement clauses in insurance contracts. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm. Ms. Helfrich must reimburse Blue Cross because federal common law displaces the Kansas antisubrogation regulation, which, if applied to the Plan, would conflict with uniquely federal interests. Alternatively, giving weight to the views of the Office of Personnel Management (OPM) regarding the meaning of FEHBA's preemption provision, 5 U.S.C. § 8902(m)(1), we hold that the reimbursement provision in the Plan “relate[s] to the nature, provision, or extent of coverage or benefits,” id., and therefore supersedes state law.

I. BACKGROUND

A. The Plan

FEHBA establishes a program to provide health insurance for federal employees and annuitants.See 5 U.S.C. §§ 8901 –8914 (2012 ed. and Supp. I). Its purpose is to provide affordable quality healthcare to government employees. See Doe v. Devine, 703 F.2d 1319, 1329 n. 41 (D.C.Cir.1983) (“FEHBA's goal is to ensure maximum health benefits for employees ‘at the lowest possible cost to themselves and to the Government.’ ”) (quoting H.R.Rep. No. 86–957, at 4 (1959), 1959 U.S.C.C.A.N. 2913, 2916).

FEHBA authorizes OPM to enter into contracts with insurance carriers and promulgate regulations to carry out the program. See 5 U.S.C. § 8902(a) ; id. § 8913(a). OPM has contracted with BCBSA for the Plan, which is administered by local Blue Cross and Blue Shield companies. See id. § 8903(1). Under FEHBA the federal government pays approximately 70% of an enrollee's premium, and the enrollee pays the remainder. See id. § 8906(b); 80 Fed.Reg. 29,203. Premiums from the government and enrollees are deposited into the Employees Health Benefits Fund within the United States Treasury. See 5 U.S.C. § 8909(a). BCBSA, like other experience-rated carriers, draws from the Fund as necessary to pay for benefit claims and administrative expenses, see 48 C.F.R. § 1632.170(b) ; id. § 1652.216–71(b), and the government pays a negotiated fee for its services, see id. § 1615.404–4. In other words, any premiums that are not used to pay benefits or administrative expenses remain the property of the government, and BCBSA earns its profit from the service fee. Community-rated

804 F.3d 1093

carriers, in contrast, set premiums based on the attributes of the insured pool, receive premiums from the Fund, and pay benefit claims; the difference between premiums and the cost of benefits is their profit. See id. § 1632.170(a). Any surplus in the Fund may be used at OPM's discretion to reduce premiums or increase benefits. See 5 U.S.C. § 8909(b) ; 5 C.F.R. § 890.503(c)(2).

FEHBA requires that OPM's contracts with carriers “contain a detailed statement of benefits offered and shall include such maximums, limitations, exclusions, and other definitions of benefits as [OPM] considers necessary or desirable.” 5 U.S.C. § 8902(d). The contract between OPM and BCBSA states that “[t]he Carrier shall provide the benefits as described in the agreed upon brochure text” attached as an appendix, J.App., Vol. 1 at 57; the brochure is “the official statement of benefits,” id. at 131.1 It provides that the enrollee is “obligated to all terms, conditions, and provisions of [the] contract.” Id. at 58. Among those provisions is the grant to the carrier of the rights of subrogation and reimbursement (sometimes collectively referred to as subrogation). The contract states that if an enrollee receives benefits from the carrier for treatment of an injury caused by a third party, “the Carrier shall have the right to be subrogated and succeed to any rights of recovery against any person or organization from whom the [enrollee] is legally entitled to receive all or part of those same benefits....” Id. at 84. The carrier may also be reimbursed—i.e., “recover directly from the [enrollee] all amounts received by the [enrollee] by suit, settlement, or otherwise from any third party or its insurer ... for benefits which have also been paid under [the] contract.” Id. BCBSA is required to make “a reasonable effort to seek recovery of amounts to which it is entitled to recover in cases which are brought to its attention.” Id. (It appears that this requirement does not extend to pursuing subrogation (as opposed to reimbursement) because the carrier is not “required to recover any amounts from any person ... who causes an injury ... for which the [enrollee] makes claims for benefits.” Id. ). Reimbursement and subrogation recoveries obtained by experience-rated carriers like BCBSA must be returned to the Treasury Fund. See 48 C.F.R. § 31.201–5 ; id. § 1631.201–70(a), (g); id. § 1652.216–71(b)(2)(i). According to OPM, “FEHB carriers were reimbursed by approximately $126 million in subrogation recoveries in [2014].” Federal Employees Health Benefits Program: Subrogation and Reimbursement Recovery, 80 Fed.Reg. 29,203 (May 21, 2015).

The contract also provides that “[t]he Carrier's subrogation rights, procedures and policies, including recovery rights, shall be in accordance with the provisions of the agreed upon brochure text.” Id. at 61.2 The attached brochure says that if a third party causes injury to an enrollee and the Plan “paid benefits for that injury,” all recoveries the enrollee obtains “must be used to reimburse [the Plan] in full for benefits [it] paid.” Id. at 140. The Plan is entitled to reimbursement even if

804 F.3d 1094

the enrollee is not “made whole” for all damages, and the Plan's right of recovery is “not subject to reduction for attorney's fees and costs”; but the Plan may, in its discretion, reduce its share of the recovery based on these considerations. Id. (internal quotation marks omitted). Further, if the enrollee does not seek damages, he or she must permit the Plan to initiate recovery on his or her behalf. Finally, the Plan may “enforce [its] right of recovery by offsetting future benefits.” Id. at 141.

B. The Preemption Provision

FEHBA's preemption provision, 5 U.S.C. § 8902(m)(1), states: “The 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, or any regulation issued thereunder, which relates to health insurance or plans.” In June 2012, OPM issued a letter to all FEHBA carriers expressing its position that contractual rights to reimbursement and subrogation fall within the purview of § 8902(m)(1) and thus override state laws that relate to health insurance or plans. On January 7, 2015, OPM published in the Federal Register a proposed rule addressing the preemption of state laws limiting subrogation and reimbursement. See 80 Fed.Reg. 931. After notice and comment, OPM promulgated...

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21 practice notes
  • New Mexico ex rel. N.M. Env’t Dep't v. U.S. Envtl. Prot. Agency, No. 16–CV–465 MCA/LF
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • February 12, 2018
    ...2016) (citing Boyle for the test governing whether federal common law preempts state law); Helfrich v. Blue Cross & Blue Shield Ass'n , 804 F.3d 1090, 1092, 1098 (10th Cir. 2015) (holding that federal health plan provision preempted state antisubrogation law); Ayala v. United States , 980 F......
  • In re Anthem, Inc. Data Breach Litig., Case No. 15-MD-02617-LHK
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • February 14, 2016
    ...the Court addresses this displacement theory in its conflict preemption discussion. See Helfrich v. Blue Cross and Blue Shield Ass'n , 804 F.3d 1090, 1097 (10th Cir.2015) (“On the other hand, no conflict, no displacement.”)....
  • United States v. Supreme Court of N.M., No. 14-2037
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • June 7, 2016
    ...Materials, Inc. , 451 U.S. 630, 640, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981) )); see also Helfrich v. Blue Cross and Blue Shield Ass'n , 804 F.3d 1090, 1098 (10th Cir. 2015) (“In our view, the analysis in Boyle requires the displacement of the Kansas antisubrogation regulation in the context ......
  • United States v. Supreme Court of New Mex., Nos. 14–2037 &amp
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • June 7, 2016
    ...Materials, Inc. , 451 U.S. 630, 640, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981) )); see also Helfrich v. Blue Cross and Blue Shield Ass'n , 804 F.3d 1090, 1098 (10th Cir. 2015) (“In our view, the analysis in Boyle requires the displacement of the Kansas antisubrogation regulation in the context ......
  • Request a trial to view additional results
21 cases
  • New Mexico ex rel. N.M. Env’t Dep't v. U.S. Envtl. Prot. Agency, No. 16–CV–465 MCA/LF
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • February 12, 2018
    ...2016) (citing Boyle for the test governing whether federal common law preempts state law); Helfrich v. Blue Cross & Blue Shield Ass'n , 804 F.3d 1090, 1092, 1098 (10th Cir. 2015) (holding that federal health plan provision preempted state antisubrogation law); Ayala v. United States , 980 F......
  • In re Anthem, Inc. Data Breach Litig., Case No. 15-MD-02617-LHK
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • February 14, 2016
    ...the Court addresses this displacement theory in its conflict preemption discussion. See Helfrich v. Blue Cross and Blue Shield Ass'n , 804 F.3d 1090, 1097 (10th Cir.2015) (“On the other hand, no conflict, no displacement.”)....
  • United States v. Supreme Court of N.M., No. 14-2037
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • June 7, 2016
    ...Materials, Inc. , 451 U.S. 630, 640, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981) )); see also Helfrich v. Blue Cross and Blue Shield Ass'n , 804 F.3d 1090, 1098 (10th Cir. 2015) (“In our view, the analysis in Boyle requires the displacement of the Kansas antisubrogation regulation in the context ......
  • United States v. Supreme Court of New Mex., Nos. 14–2037 &amp
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • June 7, 2016
    ...Materials, Inc. , 451 U.S. 630, 640, 101 S.Ct. 2061, 68 L.Ed.2d 500 (1981) )); see also Helfrich v. Blue Cross and Blue Shield Ass'n , 804 F.3d 1090, 1098 (10th Cir. 2015) (“In our view, the analysis in Boyle requires the displacement of the Kansas antisubrogation regulation in the context ......
  • Request a trial to view additional results

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