NASP 2009 Annual Conference

John D. Kolb J. Scott Byerley Rebekah McGuire Dye

Governed by the Federal Employee Health Benefits Act Office of Personnel Management negotiates contracts with carriers to provide health plans to federal employees. “Premiums” are deposited in a special Treasury Fund. Carriers draw on the fund to pay for federal employee covered benefits.

FEHBA provides that federal law will preempt state or local law – 5 U.S.C. § 8902(m) “The provisions of any contract under this chapter which related to the nature or extent of coverage or benefits (including payment with respect to benefits ) shall supersede and preempt any State or local law, or any regulation issued there under, which relates to health insurance or plans.”

FEHBA provides that the sole defendant in a claims dispute is the OPM…thus federal court has jurisdiction over FEP claims disputes. Unlike ERISA, FEHBA is not vest federal courts with statutory jurisdiction all disputes under an FEP contract. Carriers had argued federal jurisdiction under complete preemption and federal interest provided federal jurisdiction.

The United States Supreme Court decided issue of federal jurisdiction on carrier reimbursement claims in Empire Health Assurance, Inc. v. McVeigh, 126 S.Ct (2006) Carrier filed suit seeking reimbursement from employee’s estate’s personal injury settlement. Supreme Court held that Carrier had not shown a “significant conflict” between state law and federal interest. Contains dictum: “We are not prepared to say…that a contract term would displace every condition state law places on that recovery.”

FEP carrier attempted to distinguish McVeigh by arguing that in some states there would be a significant conflict between state law and federal interest, thus creating federal jurisdiction. 11 th Circuit examined this type of case under Georgia law – BCBS Health Care Plans of Georgia, Inc. v. Gunter, 541 F.3d 1320 (11 th Cir. 2008). Court held that no conflict existed because Georgia Supreme Court had previously held that FEHBA preempted Georgia reimbursement statute.

Subrogation & Medicaid The Challenges Post Alhborn

State administered program overseen by the federal centers for Medicaid and Medicare (CMS). Funded in part by the federal government and in part by the state. Health insurance for the indigent; Serves low income people of every age. A payer of last resort.

42 U.S.C. § 1396 a(a)25(A) (B) - Requires each state Medicaid program to ascertain the legal liability of third parties that may be responsible for causing the injuries/medical costs; To seek reimbursement from the liable third party for medical care provided by the state.

Motor vehicle accidents Slip and falls, property related claims Work related injuries Medical malpractice Assault

Problem – No uniformity among state statutes State Statutes may include: Assignment language to MCO/HMO Notice requirement – prior to settlement Co-operation language Lien filing provisions Right to intervene/ independent right to pursue Attorney fee / cost contribution

States may retain rights to subrogation despite health plan /MCO/HMO risk, i.e., no assignment Legal decisions adversely effect recovery (Ahlborn)

Heidi Ahlborn injured - MVA in Arkansas Ark. Medicaid paid $215,645 in medical expenses Lawsuit settled for $550,000 Medicaid made claim against full settlement Settlement did not allocate the $550,000 the damages, i.e., medicals, pain and suffering Ark. sought to enforce its Medicaid statute that allowed it to recover its entire medical costs paid US Supreme Court ruled that federal Medicaid statutes limit subrogation to the amount properly allocated as medical expenses The parties stipulated post settlement that Ahlborn settled for one-sixth of her total possible claim

Plaintiff’s attorneys contend that a state agency is limited to the % formula used in Alborn Problem with that argument: 1. The parties in Alhborn stipulated to the formula and the amounts; 2. Dicta. The formula is not part of the holding of the case.

The Untenable Conundrum: To have one’s cake and eat it too Have argued catastrophic injuries in their complaint or settlement demand Now have to do an about-face and downplay the medical recovery

Damages are not allocated in the settlement, so no limitation on medicals Given severity of injuries set out in complaint or demand, it’s reasonable to believe lien amount within medicals Caution – Be reasonable or you may end up litigating and face unfavorable allocation

An increase in the number of subrogation disputes litigated Work harder for smaller recoveries Fiscal impact significant, not devastating

Colorado North Carolina Alaska Connecticut

Medicare Basics Part A – hospital and after hospital care insurance (42 U.S.C. §§ 1395c – 1395i-5) Part B – supplemental coverage for services such as physician services (42 U.S.C. §§ 1395j – 1395w-4) Part C – allows private companies to contract with the government to provide Medicare benefits (42 U.S.C. §§ 1395w-21 – 1395w-29) Part D – sets out rules for a prescription benefit program

Secondary Payer Provision Medicare is secondary, liable third parties are primary (42 U.S.C. § 1395y(b)(2) Medicare is “payer of last resort”

Medicare, Medicaid and SCHIP Extension Act of 2007 Enforcing Secondary Payer Statute Reporting Who What When Sanctions for Non-Compliance

Medicare Advantage Right of Billing (42 U.S.C. §1395w-22(a)(4) and 42 U.S.C. § 1395mm(e)(4) Preemption (42 C.F.R. § ) Case Law Nott v. Aetna U.S. Healthcare, Inc. 303 F.Supp.2d 565 (E.D. Pa. 2004) Care Choices HMO v. Engstrom, 330 F.3d 786 (6 th Cir. 2003)

Insured Will be governed by State insurance law Specifically excluded from ERISA (29 U.S.C. § 1003) Self-funded Look for statutory rights Look to state law definition of insurance If it does not cover, then state insurance law may simply not apply