Coventry Health Care of Mo., Inc. v. Nevils

Background

A former federal employee (Jodie Nevils) was covered by a federal employee health plan run under FEHBA. After a car crash, the insurer paid Nevils’ medical bills then asserted a lien on the settlement he recovered from the at-fault driver. Nevils repaid the insurer and sued, saying Missouri law bars insurers from getting paid back in these circumstances. Missouri courts split, and the state supreme court ruled for Nevils, prompting review by the U.S. Supreme Court.

Reasoning

The Justices considered whether FEHBA’s preemption language — saying contract terms that “relate to ... payments with respect to benefits” trump state laws — covers insurer rules for getting reimbursement or pursuing third-party payments. The Court explained that those recovery provisions plainly relate to payments because they produce payments to the carrier tied to benefits the carrier already paid. The Court therefore reversed the Missouri decision and held that FEHBA’s clause preempts state laws that bar such recoveries.

Real world impact

The ruling allows OPM-negotiated federal employee plans to enforce contractual recovery terms nationwide, even where state law would forbid them. That may mean insurers can claim part of personal-injury settlements to recoup medical payments, which could lower plan costs and affect settlement amounts for injured federal employees. The decision is based on the statute, not individual contracts, and applies unless Congress or courts change the law.

Dissents or concurrances

Justice Thomas agreed with the judgment but warned about a possible constitutional problem if Congress lets an agency make contracts that preempt state law without clear limits; however that issue was not raised by the parties and was left for later.