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

Background

A former federal employee insured under a health plan run through the federal employees program was hurt in a car crash. His insurer, a private company contracted by the Office of Personnel Management (OPM), paid medical bills and later claimed part of the settlement the employee got from the driver. The employee sued under Missouri law, which bars insurers from claiming such repayments, and the Missouri Supreme Court sided with the employee.

Reasoning

The Court considered whether a federal statute (FEHBA § 8902(m)(1)) that says certain contract terms “relate to” coverage and payments overrides state laws like Missouri’s ban. The Court held that contractual subrogation and reimbursement plainly “relate to … payments with respect to benefits,” so the statute preempts conflicting state law. The justices explained that the statute itself — not the private contracts — makes those contract terms enforceable nationwide, and that this approach fits the Supremacy Clause. The Court also noted OPM’s 2015 rule confirming that result but relied on the statute alone.

Real world impact

Because of the ruling, insurers who operate under FEHBA contracts can seek repayment or pursue third-party recoveries even where a State bans such practices. The opinion reverses the Missouri Supreme Court and sends the case back for further proceedings. The Court noted that recoveries have translated into sizeable reimbursements (the opinion cites about $126 million in subrogation recoveries in 2014).

Dissents or concurrances

Justice Thomas joined the judgment but warned that giving an executive agency broad contracting power could raise delegation concerns; that issue was not argued and was left for later review.