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Supreme Court rules Missouri insurance law preempted by federal law

[JURIST] The US Supreme Court [official website] on Tuesday ruled [opinion, PDF] in Coventry Health Care of Missouri, Inc. v. Nevils [SCOTUSblog backgrounder] that a Missouri statute, which served to expand insurance benefits for federal employees, is preempted under federal law. Under the Federal Employees Health Benefits Act of 1959 (FEHBA), the Office of Personnel Management (OPM) [official website] is authorized to contract with private carriers for federal employees’ health insurance policies. These policies include "subrogation" clauses that allow the insurers to recover funds incurred by the insureds from third parties, most often through tort lawsuits. Missouri, like other states, has a consumer-protection statutes that invalidates subrogation clauses in insurance contracts. FEHBA contains an express-preemption provision, §8902(m)(1) [text], which states that 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 . . . which relates to health insurance or plans." The court found that contractual subrogation and reimbursement prescriptions plainly "relate to . . . payments with respect to benefits," and therefore they override state laws barring subrogation and reimbursement. Furthermore, the court determined that the statute preempts the Missouri state law.

The case arose when Jodie Nevils was injured in a car accident. He was a federal employee with an FEHBA health insurance plan offered through Coventry Health Care of Missouri. Coventry paid his medical expenses incurred in the accident. Nevils reached a settlement with the driver who caused his injuries, but Coventry recovered funds from the settlement through a lien. Nevils satisfied the lien, then filed a state class action suit alleging that the Missouri law does not permit subrogation reimbursement in this context. Oral arguments were heard [JURIST report] in this case in March. The opinion was reached by a 8-0 vote, with Justice Ginsburg writing the majority opinion and Justice Thomas filing a concurrence.

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