The United States Supreme Court (SCOTUS) added another administrative law case to its argument docket on Friday, granting certiorari in Coventry Health Care of Missouri v. Nevils (SCOTUSblog case page), a case of whether deference is due a regulatory interpretation of a statute that preempts State law. The issues present an opportunity for clarification of regulatory preemption, but the case might also fail on other terms.
The Statute: Coventry Health presents significant issues from an arcane setting. The Federal Employees Health Benefits Act (FEHBA) provides health benefits to federal employees, dependents, and retirees, and authorizes the Office of Personnel Management (OPM) to contract with private insurance carriers to administer 
benefit plans, and to promulgate regulations to implement the program. Specifically, the FEHBA provides:
[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, or any regulation issued thereunder, which relates to health insurance or plans.
The FEHBA provides also that:
The Office of Personnel Management may prescribe regulations necessary to carry out this chapter.
The Facts: Nevils was injured in a vehicle accident and received FEHBA health care benefits from Coventry, but also acquired a personal injury settlement from a third party. Coventry sought reimbursement for the health care benefits it paid, Neville made the reimbursement, but then sued alleging that the insurer had improperly obtained reimbursement for medical benefits it paid because Missouri law prohibited its health insurers from demanding such reimbursements.
Intervention: OPM codified its position through notice and comment rulemaking under the Administrative Procedure Act (APA) in a 2015 Federal Employees Health Benefits Program; Subrogation and Reimbursement Recovery final rule that seeking subrogation or reimbursement “relate[s] to … benefits” and “payments with respect to benefits,” and, therefore, FEHBA preempts state laws that would prevent subrogation from an employee’s personal injury recovery. SCOTUS, in an early edition of this case and at the behest of the Solicitor General, granted certiorari and remanded to the Missouri Supreme Court for its consideration of the impact of the intervening OPM regulations.
On remand, the Missouri Supreme Court construed FEHBA not to preempt Missouri’s law as violating the Supremacy Clause of the United States Constitution and expressly declined to defer to OPM’s regulation. The State court asserted that SCOTUS has “never held that a regulation promulgated by an executive branch administrative agency determines the scope of Congress’ exercise of its legislative prerogative to expressly preempt state law.”
Questions Needing Answers: Coventry Health’s petition for certiorari now granted presented two questions:
- Whether FEHBA preempts state laws that prevent carriers from seeking subrogation or reimbursement pursuant to their FEHBA contracts.
- Whether FEHBA’s express-preemption provision, …, violates the Supremacy Clause.
That focus on preemption reflects a litigation posture favorable to the insurers by ignoring the regulatory intervention, but the undertone of Chevron deference to an agency interpretation is clearly present.
Rather than direct preemption or even Supremacy Clause issues, this case may better present the preemption version of whether deference is owed to an agency’s interpretation of the statute it is delegated to administer. In one sense, the question is the preemption version of the question of deference to an agency interpretation of its own regulatory jurisdiction, resolved affirmatively in City of Arlington v. FCC. SCOTUS has previously assumed without deciding that the pre-emptive meaning (as contrasted with substantive meaning) of a statute must be decided de novo by the courts – Coventry may pose the opportunity for resolving that question.
Consider also whether deference is due an agency interpretation in regulation that clarifies a preemption statute only under a general regulatory delegation that does not speak to preemption. Put another way, can a general delegation reach interpretation of a preemption provision under the Supreme Clause.
Even more in the weeds, the statute provides for preemption by contract clause, not regulation. SCOTUS might reject deference to the regulatory preemption on that basis alone.
The Solicitor General is likely again to be invited to participate because Coventry presents a major question of agency power. The Solicitor General will likely support deference to agency interpretation of preemption of State law. Whether SCOTUS will stretch agency power that far may be another question entirely – perhaps answered by the Spring of 2017.
Many thanks, as always, to SCOTUSblog for not only their analysis, but their generous document library.
The post Monday Morning Regulatory Review – 11/7/16: SCOTUS Grants New Regulatory Preemption Case appeared first on Federal Regulations Advisor.