Empire HealthChoice Assurance, Inc. v. McVeigh

PETITIONER:Empire HealthChoice Assurance, Inc., dba Empire Blue Cross Blue Shield
RESPONDENT:Denise F. McVeigh, as Administratrix of the Estate of Joseph E. McVeigh
LOCATION:Board of Immigration Appeals

DOCKET NO.: 05-200
DECIDED BY: Roberts Court (2006-2009)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 547 US 677 (2006)
GRANTED: Jan 06, 2006
ARGUED: Apr 25, 2006
DECIDED: Jun 15, 2006

Anthony F. Shelley – argued the cause for Petitioner
Sri Srinivasan – argued the cause for Petitioner
Thomas J. Stock – argued the cause for Respondent

Facts of the case

In accordance with the Federal Employees Health Benefits Act of 1959 (FEHBA), the Office of Personnel Management has negotiated a health insurance plan for federal employees with the Blue Cross Blue Shield Association. The plan requires the administrator to make a reasonable effort to recoup amounts paid for medical care from beneficiaries if those beneficiaries receive recoveries from another source (for example, a law suit or settlement against a third party that caused injury). In New York State, the plan is administered by Empire Healthchoice Assurance (Empire).

Empire brought suit in federal district court against the estate of Joseph McVeigh, a former federal employee who was injured in an accident and eventually won a settlement with the third party allegedly responsible for his injuries. Empire sought reimbursement for the money spent on McVeigh’s medical care. Denise McVeigh, the administrator of Joseph McVeigh’s estate, argued that the district court did not have jurisdiction to hear the case under FEHBA and that it should be heard instead by the state court. The district court and Second Circuit Court of Appeals agreed, dismissing the case for lack of jurisdiction.


Under the Federal Employees Health Benefits Act of 1959, are suits brought by insurers against beneficiaries to recoup medical expenses heard in federal or state court?

Media for Empire HealthChoice Assurance, Inc. v. McVeigh

Audio Transcription for Oral Argument – April 25, 2006 in Empire HealthChoice Assurance, Inc. v. McVeigh

Audio Transcription for Opinion Announcement – June 15, 2006 in Empire HealthChoice Assurance, Inc. v. McVeigh

Ruth Bader Ginsburg:

The second case I have to announce is Empire HealthChoice Assurance v. McVeigh, No. 05-200.

The Federal Employee Health Benefits Act of 1959, which I will refer to as FEHBA, as its name conveys, establishes a health-insurance program for Federal employees.

The Act authorizes the Office of Personal Management, OPM, to contract with private carriers to offer Federal employees an array of healthcare plans.

The most heavily enrolled plan for which OPM has contracted is the Blue Cross Blue Shield Service Benefit Plan, administered by local Blue Cross Blue Shield companies.

This case concerns the proper forum for reimbursement claims, claims that arise when a planned beneficiary injured in an accident whose medical bills have been paid by the carrier recovers damages unaided by the carrier in a state-court tort action against a third party alleged to have caused the accident.

FEHBA contains a preemption clause under which terms of healthcare plans displace state law on issues relating to coverage or benefits.

The Act contains no provision on the subrogation or reimbursement rights of carrier.

Annually renewed contracts between OPM and the Blue Cross Blue Shield Association, however, have obligated the carrier to make a reasonable effort to recoup amounts paid for medical care.

The instant case originated when the administrator of a plan beneficiary’s estate pursued tort litigation in state court against parties alleged to have caused the beneficiary’s injuries.

The carrier had notice of the state-court action, but took no part in it.

When the tort action terminated in a settlement, the carrier filed suit against the insured worker in federal court, seeking reimbursement of the full amount the carrier had paid for the worker’s medical care.

The question presented: Does 28 U.S.C. §1331 authorizing jurisdiction over civil actions arising under the laws of the United State encompass the carrier’s action.

In accord with the U.S. Court of Appeals for the 2nd Circuit, we hold that §1331 does not cover the carrier’s suit for reimbursement.

FEHBA itself provides for federal-court jurisdiction only when a planned beneficiary disputes the denial of coverage or benefits.

Even though the Act makes no express provision for federal-court jurisdiction over reimbursement suits brought by carriers against planned beneficiaries, the carrier here urges that its suit belongs in federal court; that is, so the carrier maintains, because the entire scheme is pervasively federal.

The master contract with Blue Cross is negotiated with a Government agency, OPM, benefits are paid from a fund maintained in the U.S. Treasury, and reimbursements are returned to that fund.

On the other hand, the personal-injury suit that generated the settlement out of which the carrier seeks reimbursement has no federal element to it.

Suits of that character are governed by state law.

The carrier here is essentially seeking a portion of the recovery gained in the state-court litigation, and such wrap-up claims are normally pursued in the court in which the personal-injury action is launched.

A carrier’s commencement of a separate federal case to reach the proceeds of the settlement can be costly for the injured worker, and we are reluctant to attribute to Congress a purpose unexpressed in FEHBA’s text to place such suits in federal court.

We do not read FEHBA’s preemption clause to open the federal-court door to a carrier’s reimbursement claim.

For one thing, that clause has a peculiar feature: it makes contract terms in the Blue Cross plan preempted.

Ordinarily, federal preemption provisions make federal laws, not termed in a contract with a private carrier, preemptive.

That unusual feature inclines us to read the clause modestly.

Congress no doubt could expressly provide that reimbursement claims of the kind here involved warrant the exercise of federal-court jurisdiction; but for reasons spelled out at length in the Court’s opinion, we conclude that the presentations made in this case fall short of demonstrating that a federal forum is available to the carrier here.

Federal courts should await a clear signal from Congress before treating a carrier’s suit for a share in a worker’s personal-injury judgment or settlement as a case arising under the laws of the United States.

Accordingly, we affirm the judgment of the Court of Appeals for the 2nd Circuit; the Chief Justice and Justices Stevens, Scalia and Thomas have joined this opinion; Justice Breyer has filed a dissenting opinion, joined by Justices Kennedy, Souter and Alito.