Recovery of Medical Bills: Once Is Enough

Faegre Drinker Biddle & Reath LLP

Strange as it sounds, Missouri state law allowed federal workers to recover medical bills twice: once under their federal health insurance plan and again from the person (or person’s insurer) responsible for their injuries.  The law prohibited the federal plan from recovering any part of its payment from settlements or verdicts gained by the worker, even though the plan was not only allowed but required by its contact with the Office of Personnel Management (OPM) to do so.

Coventry Health covered the medical bills of federal employee Jodie Nevils after an auto accident.  When he later won a settlement from the other driver’s insurer, Coventry placed a lien on it for repayment of its outlay.  Jodie satisfied the lien but then filed a class action against Coventry for violating Missouri’s anti-subrogation law.  The Missouri Supreme Court ruled in favor of Jodie, and when the U.S. Supreme Court remanded the case for reconsideration, the Missouri court did so again.

The U.S. Supreme Court granted certiorari and on April 18 unanimously ruled that the OPM contract’s subrogation provisions (1) preempt contrary state law and (2) do not violate the Supremacy Clause of the Constitution, because they flow from the federal statute underlying the OPM contract.

The decision means that when a health plan covers a federal employee’s medical bills and the employee then wins a verdict or settlement covering the same expenses, the federal health plan can look to that verdict or settlement for reimbursement of its payment.  Any state law to the contrary is preempted.

The case is Coventry Health v. Nevils, No. 16-149 (U.S., 2017).

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Faegre Drinker Biddle & Reath LLP

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