Teresa Bell v. Blue Cross & Blue Shield of OK , 823 F.3d 1198 ( 2016 )


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  •                 United States Court of Appeals
    For the Eighth Circuit
    ___________________________
    No. 14-3731
    ___________________________
    Teresa Bell,
    lllllllllllllllllllll Plaintiff - Appellant,
    v.
    Blue Cross and Blue Shield of Oklahoma, a Division of Health Care Service
    Corporation, a Mutual Legal Reserve Company agent of Health Care Service
    Corporation; Blue Cross and Blue Shield of Texas, a Division of Health Care
    Service Corporation, a Mutual Legal Reserve Company agent of Health Care
    Service Corporation,
    lllllllllllllllllllll Defendants - Appellees,
    ------------------------------
    Association of Federal Health Organizations; United States,
    lllllllllllllllllllllAmici on Behalf of Appellees.
    ____________
    Appeal from United States District Court
    for the Western District of Arkansas - Fayetteville.
    ____________
    Submitted: September 23, 2015
    Filed: May 26, 2016
    ____________
    Before WOLLMAN, COLLOTON, and KELLY, Circuit Judges.
    ____________
    COLLOTON, Circuit Judge.
    This appeal concerns a dispute between Teresa Bell and two Blue Cross and
    Blue Shield insurance carriers that administer Bell’s government-sponsored benefit
    plan (“the Plan”). Bell was injured in a motor vehicle accident in Arkansas, and the
    Plan paid medical benefits on Bell’s behalf. Bell then received a payment from a
    different carrier that insured the party who was allegedly responsible for Bell’s injury.
    The Blue Cross carriers contend that under the terms of Bell’s benefit plan, she
    must use any monies obtained from the alleged tortfeasor’s insurer to reimburse the
    Plan for medical benefits paid by Blue Cross. Bell responds that under Arkansas law,
    she is not required to reimburse the Plan unless she has been wholly compensated for
    her injuries, and that she was not “made whole” by the payments from Blue Cross and
    the alleged tortfeasor’s insurer. Blue Cross’s position is that a provision of the
    Federal Employees Health Benefits Act, 5 U.S.C. § 8902(m)(1), expressly preempts
    Bell’s state-law defense, and that the Plan governs the question of reimbursement.
    We conclude that federal law preempts the Arkansas state-law defense, and that Bell
    must reimburse the Plan. We therefore affirm the decision of the district court.*
    I.
    The Federal Employees Health Benefits Act of 1959 (“FEHBA”), 5 U.S.C.
    §§ 8901-14, creates a “comprehensive program of health insurance for federal
    employees.” Empire HealthChoice Assur., Inc. v. McVeigh, 
    547 U.S. 677
    , 682
    (2006). Under the Act, the Office of Personnel Management, commonly known as
    OPM, contracts with private carriers to offer federal employees a variety of health-
    care plans. 5 U.S.C. § 8902(a). One of these plans is the Blue Cross and Blue Shield
    *
    The Honorable Timothy L. Brooks, United States District Judge for the
    Western District of Arkansas.
    -2-
    Service Benefit Plan, a government-wide plan that is established between OPM and
    the Blue Cross and Blue Shield Association. See 5 U.S.C. § 8903(1); 
    McVeigh, 547 U.S. at 682
    . Blue Cross and Blue Shield companies in their respective localities
    administer this plan.
    Each contract between OPM and a carrier like Blue Cross must include “a
    detailed statement of benefits offered.” 5 U.S.C. § 8902(d). OPM issues official
    descriptions of plan terms through a “statement of benefits” or “brochure.” See 
    id. §§ 8902(a),
    (d), 8907. The Statement of Benefits for the contract at issue here
    includes a section discussing the rights of the parties when others are responsible for
    injuries to an employee. It provides, among other things, that if another person causes
    an employee to suffer an injury, and the Plan pays benefits for that injury, the
    employee must agree that the Plan is entitled to be reimbursed for its benefit
    payments even if the employee is not “made whole” for all of her damages in the
    recoveries that she receives.
    Teresa Bell, an employee of the Department of Veterans Affairs, received
    health-care benefits through a government-sponsored plan that was administered by
    Blue Cross and Blue Shield of Oklahoma and Blue Cross and Blue Shield of Texas
    (collectively, “Blue Cross”). In October 2010, she sustained personal injuries and
    medical expenses from a motor vehicle accident that occurred in Arkansas. Bell’s
    benefit plan paid $33,014.01 in medical benefits on her behalf. Bell also pursued a
    third party who allegedly caused her injury, and she received an undisclosed payment
    from Progressive Insurance Company, the alleged tortfeasor’s insurer, pursuant to a
    settlement.
    Bell and Blue Cross disputed whether Bell was required to use the funds
    received from Progressive Insurance to reimburse the Plan. Bell contends that under
    Arkansas law, the Plan cannot require reimbursement unless Bell has been wholly
    compensated for her injuries. See Shelter Mut. Ins. Co. v. Kennedy, 
    60 S.W.3d 458
    ,
    -3-
    461 (Ark. 2001). She represents that the payments from Blue Cross and Progressive
    did not wholly compensate her. Bell brought suit against Blue Cross in Arkansas
    state court, seeking a declaration that she is not required to reimburse the Plan.
    Blue Cross removed the action to federal court on the theory that Blue Cross
    was a “person acting under” a federal officer. See 28 U.S.C § 1442(a)(1). The
    district court, relying on Jacks v. Meridian Res. Co., 
    701 F.3d 1224
    (8th Cir. 2012),
    denied Bell’s motion to remand the case to state court.
    Blue Cross moved for judgment on the pleadings. According to Blue Cross,
    the Plan terms described above require Bell to use monies that she obtained from
    Progressive Insurance to reimburse the Plan for benefit payments made, even if Bell
    has not been “made whole.” Blue Cross asserts that federal law, 5 U.S.C.
    § 8902(m)(1), provides that the terms of the Plan preempt Arkansas law on the
    question of the carriers’ right to reimbursement, and that Bell must reimburse the
    Plan.
    The district court granted Blue Cross’s motion, concluding that § 8902(m)(1)
    expressly preempts Arkansas law. Bell appeals, and we review the district court’s
    decision de novo.
    II.
    Section 8902(m)(1) provides that “[t]he 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.” 5 U.S.C. § 8902(m)(1)
    (emphases added). The Supreme Court has observed that § 8902(m)(1) “is a puzzling
    measure, open to more than one construction.” 
    McVeigh, 547 U.S. at 697
    . On one
    view, the subrogation and reimbursement clauses in the contract between OPM and
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    Blue Cross function “as a condition or limitation on ‘benefits’ received by a federal
    employee.” 
    Id. Under that
    approach, the contractual terms “relate to . . . benefits”
    within the meaning of § 8902(m)(1), and thus preempt state law. 
    Id. An alternative
    reading, however, posits that § 8902(m)(1) refers to “contract terms relating to the
    beneficiary’s entitlement (or lack thereof) to Plan payment for certain health-care
    services he or she has received, and not to terms relating to the carrier’s postpayments
    right to reimbursement.” 
    Id. Under that
    interpretation, the contractual clauses would
    not conflict with or preempt Arkansas law.
    Because the Supreme Court in McVeigh deemed both constructions of the
    statute “plausible,” 
    id. at 698,
    the parties invoke rules of construction that favor their
    desired outcome. Bell cites a presumption against preemption that applies when a
    federal preemption clause is ambiguous. Blue Cross counters with OPM’s rule,
    promulgated in 2015, stating that § 8902(m)(1) has preemptive effect. The carriers
    argue that the court should defer to the agency’s reasonable construction of an
    ambiguous statute under the doctrine of Chevron, U.S.A., Inc. v. Natural Resources
    Defense Council, Inc., 
    467 U.S. 837
    (1984).
    Bell cites the Supreme Court’s guidance that “when the text of a pre-emption
    clause is susceptible of more than one plausible reading, courts ordinarily ‘accept the
    reading that disfavors pre-emption.’” Altria Grp., Inc. v. Good, 
    555 U.S. 70
    , 77
    (2008) (quoting Bates v. Dow Agrosciences LLC, 
    544 U.S. 431
    , 449 (2005)). “That
    assumption applies with particular force when Congress has legislated in a field
    traditionally occupied by the States.” 
    Id. at 77.
    The vitality of this presumption
    against preemption, however, has been a subject of debate within the Supreme Court.
    A dissenting opinion in Altria Group suggested that application of the presumption
    has been sporadic, 
    id. at 99
    (Thomas, J., dissenting), and the most recent decision in
    this area was splintered. See CTS Corp. v. Waldburger, 
    134 S. Ct. 2175
    , 2189 (2014)
    (plurality opinion) (applying presumption); 
    id. at 2189
    (Scalia, J., concurring in part
    -5-
    and concurring in the judgment) (rejecting presumption and applying ordinary
    principles of statutory construction).
    Whatever the force of the presumption against preemption as an interpretive
    tool, the Court has recognized that the presumption should not apply where
    “considerable federal interests” are at stake. United States v. Locke, 
    529 U.S. 89
    , 94,
    108 (2000). In Locke, a case involving regulations that affected maritime commerce,
    the Court opined that despite “the historic role of the States to regulate local ports and
    waters under appropriate circumstances,” the “‘assumption’ of nonpre-emption is not
    triggered when the State regulates in an area where there has been a history of
    significant federal presence.” 
    Id. at 108-09.
    Similarly, in Buckman Co. v. Plaintiffs’
    Legal Committee, 
    531 U.S. 341
    (2001), the Court rejected a presumption against
    preemption of state-law fraud-on-the-FDA claims, because “the relationship between
    a federal agency and the entity it regulates is inherently federal in character because
    the relationship originates from, is governed by, and terminates according to federal
    law.” 
    Id. at 347.
    This case involves federal interests comparable to those involved in Buckman
    and Locke. Although health care in general is an area of traditional state regulation,
    e.g., Rush Prudential HMO, Inc. v. Moran, 
    536 U.S. 355
    , 387 (2002), this dispute
    concerns benefits from a federal health insurance plan for federal employees that arise
    from a federal law. There is obviously a long history of federal involvement in
    federal employment and benefits. “[D]istinctly federal interests are involved.”
    
    McVeigh, 547 U.S. at 696
    . The scope of a federal employee’s reimbursement
    obligations has a significant impact on the federal treasury and on premiums or
    benefits for other employees. See 5 U.S.C. § 8909(b); 5 C.F.R. § 890.503(c)(2). The
    employee’s benefit plan “could be described as ‘federal in nature’ because it is
    negotiated by a federal agency and concerns federal employees.” 
    McVeigh, 547 U.S. at 696
    . “The United States no doubt has an overwhelming interest in attracting able
    workers to the federal workforce and in the health and welfare of the federal workers
    -6-
    upon whom it relies to carry out its functions.” 
    Id. at 701
    (internal quotation marks
    omitted). Under these circumstances, we see no warrant to place a thumb on the
    scales against preemptive effect of the federal statute. Ordinary principles of
    statutory construction should guide the decision. Accord Helfrich v. Blue Cross &
    Blue Shield Ass’n, 
    804 F.3d 1090
    , 1104-06 (10th Cir. 2015).
    Blue Cross argues that if the preemption statute is ambiguous, we should
    accord Chevron deference to the recent interpretation of OPM that subrogation and
    reimbursement clauses “relate to” the provision of benefits within the meaning of
    § 8902(m)(1), and that such clauses are “effective notwithstanding any state or local
    law.” 5 C.F.R. § 890.106(h). OPM concluded that its interpretation of the statute
    “comports with longstanding Federal policy, lowers the cost of benefits, and creates
    greater uniformity in benefits and benefits administration.” Federal Employees
    Health Benefits Program; Subrogation and Reimbursement Recovery, 80 Fed. Reg.
    931, 932 (Jan. 7, 2015). The agency believed that subrogation and reimbursement
    clauses “relate to the nature, provision, and extent of coverage or benefits (and the
    payment of benefits) by making those payments conditional upon a right to
    subrogation or reimbursement of equivalent amounts, either from a third-party, or
    from the enrollee, in the event a third party is obligated to pay for the same injury or
    illness.” 
    Id. OPM said
    that its interpretation “furthers Congress’s goals of reducing
    health care costs and enabling uniform, nationwide application of [Federal Employee
    Health Benefits] contracts.” 
    Id. (citing H.R.
    Rep. No. 105-374, at 9 (1997); H.R. Rep.
    No. 86-957, (1959)).
    The law concerning application of Chevron to an agency’s view on preemption
    is unsettled. The Supreme Court once assumed without deciding that Chevron is not
    applicable to the question whether a federal statute is pre-emptive, Smiley v. Citibank
    (S. Dakota), N.A., 
    517 U.S. 735
    , 744 (1996), then said its interpretation of a
    preemption statute was “substantially informed” by agency regulations, Medtronic,
    Inc. v. Lohr, 
    518 U.S. 470
    , 495 (1996), then later invoked Chevron in a preemption
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    case but ruled that an agency’s interpretation was impermissible, so deference was not
    actually accorded. Cuomo v. Clearing House Ass’n, 
    557 U.S. 519
    , 535-36 (2009).
    The Court in City of Arlington v. FCC, 
    133 S. Ct. 1863
    , 1874 (2013) (Scalia, J.),
    deferred to an agency’s interpretation concerning the scope of its own jurisdiction,
    but City of Arlington did not address a preemption question, and the opinion’s author
    previously joined an opinion concluding that “when an agency purports to decide the
    scope of federal pre-emption, a healthy respect for state sovereignty calls for
    something less than Chevron deference.” Watters v. Wachovia Bank, N.A., 
    550 U.S. 1
    , 22, 41 (2007) (Stevens, J., dissenting). Justice O’Connor wrote in 1996 that “[i]t
    is not certain that an agency regulation determining the pre-emptive effect of any
    federal statute is entitled to deference,” 
    Lohr, 518 U.S. at 512
    (O’Connor, J.,
    concurring in part and dissenting in part) (emphasis omitted), and it is not clear that
    the law has evolved materially since then.
    One state court has deemed Chevron applicable to OPM’s interpretation of
    § 8902(m)(1), Kobold v. Aetna Life Ins. Co., No. 1 CA-CV 12-0315, 
    2016 WL 1273024
    , at *1 (Ariz. Ct. App. Mar. 31, 2016), and another concluded that Chevron
    does not apply. Nevils v. Group Health Plan, Inc. (Nevils II), No. SC93134, slip op.
    9-12 (Mo. May 3, 2016). Like the Tenth Circuit in 
    Helfrich, 804 F.3d at 1109
    , we
    think it is unnecessary to decide. Even without deference to the agency under
    Chevron, the better reading of the statute is that Arkansas law is preempted.
    This court already ruled in 1994 that § 8902(m)(1) preempts state law that is
    inconsistent with a contract under the Federal Employees Health Benefits Act. In
    MedCenters Health Care v. Ochs, 
    26 F.3d 865
    , 867 (8th Cir. 1994), the court
    affirmed a district court’s ruling that a subrogation and reimbursement clause in a
    contract under the Act preempted and superseded Minnesota common law that
    established a “full recovery rule” as a predicate to reimbursement. See MedCenters
    Health Care, Inc. v. Ochs, 
    854 F. Supp. 589
    , 592-93 (D. Minn. 1993). Although
    Ochs was abrogated in part by the Supreme Court’s decision in McVeigh, because this
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    court also thought § 8902(m)(1) conferred federal jurisdiction, 
    see 26 F.3d at 867
    ;
    854 F. Supp. at 593 n.3, the analysis of Ochs concerning ordinary preemption was
    unaffected by McVeigh. Indeed, the Second Circuit opinion that was affirmed on the
    jurisdictional question in McVeigh likewise implied that § 8902(m)(1) would preempt
    a state-law defense to a subrogation claim. Empire HealthChoice Assur., Inc. v.
    McVeigh, 
    396 F.3d 136
    , 145 n.9 (2d Cir. 2005) (Sotomayor, J.), aff’d, 
    547 U.S. 677
    (2006).
    The better reading of the statute’s text supports the conclusion in Ochs. The
    Act gives preemptive effect to contractual terms that “relate to . . . benefits (including
    payments with respect to benefits).” The reimbursement and subrogation provisions
    are limitations on the payment of benefits. Each contract must “contain a detailed
    statement of benefits offered and shall include such maximums, limitations,
    exclusions, and other definitions of benefits as the Office considers necessary or
    desirable.” 5 U.S.C. § 8902(d). Blue Cross’s statement of benefits informs the
    insured that “[i]f another person . . . causes you to suffer an injury or illness, and if
    we pay benefits for that injury or illness, you must agree to the provisions listed
    below.” Those provisions advise the insured of Blue Cross’s “right of recovery to be
    reimbursed for our benefit payments even if you are not ‘made whole,’” and its right
    “to initiate recovery on your behalf (including the right to bring suit in your name).”
    Blue Cross also informs the insured that it “may delay processing of your claims
    until” it receives “the signed reimbursement agreement and/or assignment.” Because
    these provisions restrict the payment of benefits, they relate to “benefits (including
    payments with respect to benefits).”
    The reimbursement provision also requires an insured to make repayment of
    prior benefit payments if the insured recovers from a third party. Blue Cross “may
    seek a first priority lien on the proceeds of your claim in order to reimburse ourselves
    to the full amount of benefits we have paid or will pay.” That provision relates to
    “payments with respect to benefits” because, after an insured recovers from a third
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    party, the contract results in repayment of funds that were previously received as
    benefits. The contractual provisions also allow Blue Cross to enforce its “right of
    recovery by offsetting future benefits.” An offset of future benefits affects the
    payment of future benefits and therefore relates to payments with respect to benefits.
    The structure of the Act likewise favors giving preemptive effect to the
    contractual terms concerning reimbursement and subrogation. The Treasury credits
    all reimbursement and subrogation to the Federal Employees Health Benefits Fund
    under the Act. 
    McVeigh, 547 U.S. at 685
    . As Justice Breyer observed, “[a]fter
    benefits are paid, any surplus in the fund can be used at the agency’s discretion to
    reduce premiums, to increase plan benefits, or to make a refund to the Government
    and enrollees.” 
    Id. at 703
    (Breyer, J., dissenting); see 5 U.S.C. § 8909(b); 5 C.F.R.
    § 890.503(c)(2). Hence, the contractual provisions relate to benefits, including
    payments with respect to benefits, because they may trigger an increase in plan
    benefits through the workings of the statutory scheme.
    Bell relies on Nevils v. Group Health Plan, Inc. (Nevils I), 
    418 S.W.3d 451
    (Mo. 2014), vacated sub nom., Coventry Health Care of Missouri, Inc. v. Nevils, 
    135 S. Ct. 2886
    (2015), and Kobold v. Aetna Life Insurance Co., 
    309 P.3d 924
    (Ariz. Ct.
    App. 2013), vacated, 
    135 S. Ct. 2886
    (2015), in asserting that § 8901(m)(1) requires
    a more “immediate relationship” between the payment of benefits and the contractual
    provision in question. Nevils 
    I, 418 S.W.3d at 457
    ; 
    Kobold, 309 P.3d at 928
    . But the
    Arizona court has reversed course, see Kobold, 
    2016 WL 1273024
    , at *1, and the
    Missouri court’s conclusion, to which it recently adhered, was influenced by a
    presumption against preemption with which we respectfully disagree. See Nevils 
    I, 418 S.W.3d at 456
    . The text of § 8902(m)(1) includes no “immediacy” requirement,
    and the phrase “relate to” benefits is properly given a broad meaning in ordinary
    usage. See Morales v. Trans World Airlines, 
    504 U.S. 374
    , 384 (1992). Nothing
    about the context here, involving a statute that serves to promote uniformity in the
    -10-
    administration of federal employee benefits and stewardship of the public fisc,
    suggests a narrower meaning.
    Bell asserts that § 8901(m)(1) violates the Supremacy Clause of the
    Constitution because it provides that contractual terms, rather than federal law, will
    supersede and preempt state laws. Bell did not raise this constitutional argument in
    response to the motion for judgment on the pleadings in the district court, and the
    point is therefore forfeited. See 
    Helfrich, 804 F.3d at 1110
    . There is no obvious error
    that warrants correction on appeal. Others have been skeptical that § 8901(m)(1)
    presents a constitutional problem, see 
    id. (citing Boyle
    v. United Techs. Corp., 
    487 U.S. 500
    , 512-13 (1988)), but in any event, the statute can reasonably be construed
    to mean that federal law (either the Act itself or federal common law), not the
    contractual terms, has the preemptive force. See 
    McVeigh, 396 F.3d at 144-45
    (Sotomayor, J.); 
    id. at 155-56
    (Raggi, J., dissenting). Several Justices of the Missouri
    court have concluded that there is no basis to construe § 8901(m)(1) in a manner that
    is constitutional, because Congress plainly did not intend the creation of federal
    common law, and the Supreme Court in McVeigh rejected it. See Nevils II, slip op.
    at 14 (Wilson, J., concurring in the result); Nevils 
    I, 418 S.W.3d at 464-65
    (Wilson,
    J., concurring). Then-Judge Sotomayor, however, relied on “Congress’s stated intent
    to maintain ‘uniformity’ in FEHBA benefits and to ‘displace State or local law
    relating to health insurance or 
    plans.’” 396 F.3d at 145
    (quoting H.R. Rep. No. 105-
    374, at 9, 16 (1997)). We are not convinced that a saving construction would be
    antithetical to any congressional goal that must be discerned from the statute’s text.
    As we understand McVeigh, the Supreme Court held only that federal common law
    did not displace the entire area of state law involving “FEHBA-authorized contracts
    at 
    large.” 547 U.S. at 691-93
    . The Court left open the possibility that state law could
    be displaced more narrowly, when there is a “significant conflict . . . between an
    identifiable federal policy or interest and the operation of state law,” 
    id. at 693
    (quoting 396 F.3d at 150 
    (Sack, J., concurring)), and the Court’s reasoning does not
    -11-
    preclude construing § 8901(m)(1) to mean that federal common law or the Act
    displaces state law in the case of such a conflict.
    *      *       *
    For the foregoing reasons, the judgment of the district court is affirmed.
    ______________________________
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