Federal Employee Health Benefit Act Subrogation

Be aware that the U.S. Office of Personnel Management, which runs the Federal Employee health insurance program under the Federal Employee Health Benefit Act is trying to pull a fast one. That agency has posted on its website a letter . http://www.opm.gov/carrier/carrier_letters/2012/2012-18.pdf to the effect that federal law preempts state law with regard to subrogation of health benefits paid to or for a federal employee. The letter cites Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006) as saying "it is plausible to construe subrogation and reimbursement contract terms as a condition or limitation on benefits received by a Federal employee, allowing these FEHB Program contract requirements to preempt state law . . . ."

The letter then cites several District and Court of Appeal opinions to support it. However, The 2006 Supreme Court case to which the letter refers holds exactly the opposite. After suggesting it might be plausible to put the interpretation that state subrogation law is preempted, the Court holds that subrogation of FEHBA is not preempted: " 126 S.Ct. 2121, 2136.

This often come up when the issue is whether the Oklahoma "make whole" rule applies. The particular case which called this to my attention was one in which there was a small liability policy ($25,000) and some $17,000 in unpaid medical bills when the FEHBA plan sought to recover all of the liability money for its subrogation claim, leaving the federal employee owing the remaining bills. It's almost as if the agency is saying "We don't care what the Supreme Court rules, we're going to use our own interpretation. Don't let them do that to your client.