Amicus Curiae Brief — Coventry Health Care of Mo., Inc. v. Nevils, 137 S. Ct. 1190 (2017) (No. 16-149)

RECORQ

, AND {

BRIEFG |

[Supreme tout. US.

FILED

DEC 27 20%6

OFFICE OF THE CLERK _

No. 16-149

pe ______HH_——____+

In the Supreme Court of the GAnited States

COVENTRY HEALTH CARE OF Missour], INC.,

FKA GROUP HEALTH PLAN, INC., PETITIONER

Vv.

JODIE NEVILS

ON WRIT OF CERTIORARI

TO THE SUPREME COURT OF MISSOURI

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONER

IAN HEATH GERSHENGORN

Acting Solicitor General

Connsel af Record

BENJAMIN C, MIZER

Principal Deputy Axzxistant

Altorney General

EDWIN S. KNEEDLER

Deputy Solicitor Genera!

ZACHAKY D. Trivp

Assistant to the Solicitor

General

ALISA B. KLEIN

HENRY C. WHITAKER

Altorneys

Departinent of Justice

Washingtou, D.C. 20530-0001

SupremeCtBriefs@ usdoj.gov

(202) 514-2217

QUESTIONS PRESENTED

The federal government provides health insurance

to federal workers pursuant to the Federal Employees

Health Benefits Act of 1959, 5 U.S.C. 8901 et seq. The

Act authorizes the federal government to offer hene-

fits and impose “limitations” and “other definitions of

benefits.” 5 U.S.C. 8902(d). The Act further provides

that “[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” relating to health insurance. 5 U.S.C.

8902(m)(1). Federal regulations provide that subroga-

tion or reimbursement terms in such a contract im-

pose a “condition of and a limitation on” benefits and

benefits payments, “relate to the nature, provision,

and extent of coverage or benefits (including pay-

ments with respect to benefits),” and “are therefore

effective notwithstanding any state or local law” relat-

ing to health insurance. 5 C.F-R. 890.106(b)(1) and (h).

The questions presented are:

1. Whether a carrier may seek subrogation or re-

imbursement pursuant to the terms of its contract with

the federal government, under 5 U.S.C. 8902(m)(1),

notwithstanding state law prohibiting insurance sub-

rogation.

2. Whether Section 8902(m)(1) is consistent with

the Supremacy Clause, U.S. Const. Art. V1, Cl. 2.

(T)

TABLE OF CONTENTS

Page

i 1

HERES ES IESE eee eee EN RTT Pe 2

Re Or III sts. ccnsercinerereceeensvonnstenancinseiienenitannmmanineates 8

I. Section 8902(m)(1) requires that subrogation and

reimbursement clauses in FE HB contracts be cong

effect notwithstanding State anti-subrogation laws...

A. OPM’s regulations embody by far the best.

interpretation of Section 8902(m)(1)................0000 12

B. OPM’s regulations are authoritative....................... 20

II. Congress has ample constitutional authority to

shield FEHB contracts from State interference......... 27

SD secciesnttcsncs<vcsihsinasseniseniuunsioenstsdstislasiianmsaniiaiitiapacamaineeatabcins 32

TABLE OF AUTHORITIES

Cases:

Arizona v. California, 283 U.S. 423 (1981) .....-ccccccccceesereee 29

Arkansas La. Gas Co. v. Hall, 453 U.S. 571 (1981)............ 29

Bates v. Dow AgroSciences LLC, 544 U.S. 431 (2008)......... 7

Batterton v. Francis, 432 U.S. 416 (1977)..........ccccccseeseenees 21

Bell v. Blue Cross & Blue Shield, F.3d 1198

(8th Cir. 2016), petition for cert. pending,

No. 16-504 (filed Oct. 11, 2016) ......0.........000 8, 11, 16, 26, 28

Benton House, LLC v. Cook & Younts Ins., Inc.,

249 S.W.3d 878 (Mo. Ct. App. 2008). .........ccccceccecseeeceseneeeees 6

Boyle v. United Techs. Corp., 487 U.S. 500

ITE hnethesrapianninrhientiineasainatindeneiehtnamsiaeaninieateatie 12, 27, 29, 30, 31

Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S

I TIITIITITs:scnidniiensuniiinieiniasomielaseiepeneniniisameiniiniaatanerainetens 26

Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691

RR a aE SPE Sat OW eS SPREE Smee ae a aoe Eee 22

Cases—Continued: Page

Chamber of Commerce of the U.S. v. Whiting, 563

SIA ITT naseeninninissinpeeemenenccitiapreniatidnessiiiaeanmniadadiaonane 11, 26

Chevron U.S.A. Inc. v. Natural Res. Def. Council,

eg icernctscecersineeiainetsatiadsiiesenamiteaiiaieannnes 9, 20

Cipollone v. Liggett Grp., Inc., 505 U.S. 504 (1992)....... 7, 21

City of Arlington v. FCC, 133 S. Ct. 1863 (2013).......... 10, 22

City of New York v. FCC, 486 U.S. 57 (1988).................000. 22

Clearfield Trust Co. v. United States, 318 U.S. 363

ITT clasicdnsebinecraiinliheiins icieanzaiemnigeassidtasiualinainiabiabidaitutin deametutibdingienis 30

Cuomo v. Clearing House Ass'n, 557 U.S. 519

STi nisissieieindapeahaenaiichenithanpiiniiiacintenioamiinca an biaetilaiiine aanciiet 10, 22, 23

Empire Healthchoice Assurance, Inc. v. McVeigh:

396 F.3d 136 (2d Cir. 2005), aff'd, 547 U.S. 677

Sicilia cieatinadapis cceencesiinnichestieninadiiaisdmiendnetadind 28, 31

fe 2, 11, 13, 18, 27, 31

Entergy La., Inc. v. Louisiana Pub. Serv. Comm'n,

EE IIIT siciipuininideidindsiapieentninttipipeetisinninainiedmigieainienianess 29

Federal Express Corp, v. Holowecki, 552 U.S. 389

Si isieisiinbeestilidiaicictatondescessadeniie tibietliaibaddanaiabeabiiabaseamitwecediiene 2A

FMC Corp. v. Holliday, 498 U.S. 52 (1990).............. 4, 16, 19

Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936

BRIERE NS” Se RRO Se OE ee a Iee te 25, 30

Helfrich v. Blue Cross & Blue Shield Ass'n, 804 F.3d

ey ME HT incccicncsiesisiinsenietiaouniietinicintnncnesasnmien passim

Hillman v. Maretta, 133 S. Ct. 1943 (2013) .............ccccececee 29

Kobold v. Aetna Life Ins. Co., 370 P.3d 128 (Ariz. Ct.

a a bisteiestnciainiccevceicinianinsiensasioebtdiipeinasiandiiiaiianenieacen 8,17

McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316

Sali baiinsenincicnnnidicciessiteiipiiieiniinmiiseniesiiitmiandaatad ii cnpcarmmeniens 28

Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996).........ccccccereecees 22

Morales v. Trans World Airlines, Inc., 504 U.S. 374

Cases—Continued: Page

National Cable & Telcomms. Ass'n v. Brand X

Internet Servs., 545 U.S. 967 (2005) ..........cceccceceereeereesneees 14

New Orleans Assets, L.L.C. vy. Woodward, 363 F.3d

Ne i ciiticeainiinieiicriatersiacipntinesiniarecnemnumeaminis 4

New York v. FERC, 535 U.S. 1 (2002) .0......c.ccccesceseeseeeseeeeee 22

Northwest, Inc. v. Ginsberg, 134 8. Ct. 1422 (2014)........... 15

Preston v. Ferrer, 552 U.S. 346 (2008) ..........:cccceesceseseseeenens 20

Puerto Rico v. Franklin Cal. Tax-Free Trust,

Ge I aicienitsecntcctaiinriiniieicmininnncetininiis 11, 25

Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947) ....... 27

Rowe v. New Hampshire Motor Transp. Ass'n,

CO a cssinininssnatoppunaenemiadiia 29

Skidmore v. Swift, 323 U.S. 134 (1944) .........c.ccceccceeseneenees 24

Smiley v. Citibank (S_D.), N.A., 517 U.S. 735

CU cccecsccicncainiietisinalanmatassibbaeiansuaeimeiaenanaeiaaiuisianen 10, 22, 23, 24

United States vy. Kimbell Foods, Inc., 440 U.S. 715

SII acll scan laege dae citetleelnteeeebdaheindeisesiausnisisaianaiiil 32

United States v. Locke, 529 U.S. 89 (2000) ..............00 11, 26

United States v. New Mexico, 455 U.S. 720 (1982)............. 29

United States v. Yazell, 382 U.S. 341 (1966).............ccccces 32

Constitution, statutes and regulations:

U.S. Const. Art. VI, Cl. 2 (Supremacy Clause) .................. 28

Act of Sept. 17, 1978, Pub. L. No. 95-368, 92 Stat.

ea a a alee ileta pap eeaciiniasaalnpeiiianens 3, 18

Employee Retirement Income Security Act of 1974,

BD UA. BI OO BI cencetcncnrnetreerenensssnscscnorseennsmnmnerennsnmneees 4

Federal Arbitration Act, 9 U.S.C. 2.......cccccsceesssesennereeenens 30

VI

Statutes and regulations—Continued: Page

Federal Aviation Administration Authorization Act

of 1994, Pub. L. No. 103-305, 108 Stat. 1569 (49

U.S.C. 13501 et seq.):

a siercsenenterinnhingesiionmie 29

as iiteeeniianeerstrrneeriaiecnin 29

Federal Employees’ Group Life Insurance Act of

1954, ch. 752, 68 Stat. 736 (5 U.S.C. 8701 et seq. ):

TE cteinichnicpinsishinsastincainananininietacemssonmemnenies 29

Federal Employees Health Benefits Act of 1959,

I cnaictinieraisiinimndieneenicrhineiecnmiabeneneunnns 1

5 a nsec cheah ieeasebedicndeinndaceniebnencommsiiai 2

co iareeciemrlnmatunsienhaievingeaeiiinnasiail 2,9

Oe iadittrrcinnerinascriarnisninentidaniatenianttininan passim

Oe ED ccencicncesseinecesicnsciscnesenjennionaennieats passim

Se a aiaicieensesnecetineneinnieneniasenantnonnaendiannetinganinandaiiith 2

a icsccssctsecehanisipnissinchamsipiiniannisanniediiuciniatiati 2

I nsdaiecnnsnicnnicpsinsisvecinictscasiinentnaiesavnienasiihi 3

a ceeueneenbcapeideaiienesiaigioin 3

BO I a vnconscseesnvecndinisantditstécunsiednidanhietieniiniissiassiieannimnats 3

POR i craencecdediadiabasiidenbiancemnenlibadinasaaalapialatiatats 2

i IE aeriiancitrenssctntnseinetnensitnenittinneiiannsinionicimeinensintn 20

Federal Employees Health Care Protection Act of

1998, Pub. L. No. 105-266, § 3(c), 112 Stat. 2366......... 3, 18

Medical Device Amendments of 1976, 21 U.S.C. 360k ...... 23

ET a2 oss arcincnicigeininenitincsnieddihdetpnnionsdaniainetannmneninanttion 27

I diastrencissnccissiisciissathiehastanasiocnsneentinineadiinauneminnndie 27

Be iaiicnnitpinmssnenctenennecenienninnnidicnaninnineniciemionne 27

ee BIE weenecescnrecnnsscinisentnincnteninecninionsinnniabininninnttiate 27

I has ok carssenssesecicepseriantoleidniiiniatinatstantasinisaiaediesinnatiin 22

I css cic cnatateiaselicasinlinceliniemintiinaieniaiaentnabinidbabenal 23

BD ic I ceescieerscnevenssnarssnsusinnsctoeenatoennsintenihteasennionannininies 14

Vil

Statutes and regulations—Continued: Page

i csiiesinensaniatanabenoadanepennntl 30

le I is tcinrnineenctncanseaneaseinnionsseanabieniaiansinite 15

I iicisteh hanes cesiencnensiscnainiieansbanansdeineeabnsten teeta 27

5 C.F.R.:

I tclaeineidiesiadeiessaseianinsibaamuinoaiiale 4

RD osc cccsnesendeschiencsnpiosonenssisotisitipates passim

ai cociiesihssanienhettibicnanabiiiehilenmstiaapannes 5,13

ty NE iiecsicsnicinseneivccisindsiontvontetinnmnionsinsetioon passim

Miscellaneous:

Black’s Law Dictionary:

in aisceidissseapicapnisicsennitiaatatuinibnatenlatabatesialehaiilidil 15

ERE a SE EE Soy ee ee A 4

80 Fed. Reg.:

(Jan. 7, 2015):

SST hiaianeciuiibsiienttuiestiesaidiaimientndnbionabeentnth 2, 6, 19, 20, 31

(May 21, 2015):

eR heiniitiipcinrasivnceesbansiiinemnininceeutaitacetin 1, 2, 4, 5, 19

TTT ses ishtscrceicinidnsssatenianenabiababiiieiineiiiapeeticienndt 5

i Ta doensidacearstinnnatinnetndennoncunninenetienneemiapessicuacesnuiais 5

H.R. Rep. No. 374, 105th Cong., Ist Sess. (1997)........... 3, 18

H.R. Rep. No. 282, 95th Cong., Ist Sess. (1977).........0++ 3,17

H.R. Rep. No. 1211, 94th Cong., 2d Sess. (1976)................ 18

Office of Personnel and Management, FEHB Pro-

gram Carrier Letter No. 2012-18 (June 18, 2012)............ 29

S. Rep. No. 257, 105th Cong., 2d Sess. (1998)............... 18, 32

S. Rep. No. 903, 95th Cong., 2d Sess. (1978)...........cseseee 18

In the Supreme Court of the Gnited States

No. 16-149

COVENTRY HEALTH CARE OF MISSOURI, INC.,

FKA GROUP HEALTH PLAN, INC., PETITIONER

Vv.

JODIE NEVILS

ON WRIT OF CERTIORARI

TO THE SUPREME COURT OF MISSOURI

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONER

INTEREST OF THE UNITED STATES

The federal government provides health insurance

to federal employees, retirees, and their dependents,

under the Federal Employees Health Benefits Act of

1959 (FEHB Act or Act), 5 U.S.C. 8901 et seg. This

case presents the questions (i) whether subrogation or

reimbursement clauses in FEHB contracts are effec-

tive under the Act’s preemption provision, 5 U.S.C.

8902(m)(1), notwithstanding state law prohibiting

insurance subrogation; and (ii) whether Section

8902(m)(1) is constitutional.

The United States has a substantial interest in the

resolution of those questions. The federal government

provides health benefits to more than eight million

federal employees, retirees, and dependents under the

FEHB program. 80 Fed. Reg. 29,203 (May 21, 2015).

“The government’s share of FEHB premiums in 2014

(1)

2

was approximately $33 billion.” Jbid. “FEHB carri-

ers were reimbursed by approximately $126 million in

subrogation recoveries,” which “translate to premium

cost savings for the federal government and FEHB

enrollees.” Jbid. The federal government also has a

“strong * * * interest” in ensuring that it can ad-

minister the FEHB program on a uniform basis, with-

out variation based on a patchwork of state and local

laws. 80 Fed. Reg. 932 (Jan. 7, 2015). At the Court’s

invitation, the Solicitor General filed an amicus brief

on behalf of the United States at an earlier stage in

this case. 135 S. Ct. 323 (2014).

STATEMENT

1. The FEHB Act “establishes a comprehensive

program of health insurance for federal employees.”

Empire Healthchoice Assurance, Inc. v. McVeigh, 547

U.S. 677, 682 (2006). Today, more than eight million

federal workers, retirees, and dependents are enrolled

in FEHB plans. 80 Fed. Reg. at 29,203.

The Act vests the Office of Personne] and Man-

agement (OPM) with broad authority to administer

the FEHB program, see 5 U.S.C. 8901-8913, and to

promulgate regulations necessary to carry out the

Act’s objectives, 5 U.S.C. 8913. OPM contracts with

private insurance carriers to offer a range of health-

eare plans. 5 U.S.C. 8902, 8903. The Act directs that

each contract between OPM and a carrier “shall con-

tain a detailed statement of benefits offered,” and

“shall include such maximums, limitations, exclusions,

and other definitions of benefits as [OPM] considers

necessary or desirable.” 5 U.S.C. 8902(d).

Federal employees may enroll in a carrier’s plan

under the terms of the contract between OPM and the

earrier. 5 U.S.C. 8905(a). OPM issues official descrip-

3

tions of plan terms through a statement of benefits or

plan brochure. 5 U.S.C. 8907. The government pays

the bulk of the premiums, 5 U.S.C. 8906(b)(1), which

are deposited into the Employee Health Benefits

Fund in the U.S. Treasury, 5 U.S.C. 8909.

The Act contains an express-preemption provision.

It provides:

The terms of any contract under this chapter

which relate to the nature, provision, or extent of

coverage or benefits (including payments with re-

spect to benefits) shall supersede and preempt any

State or loca! law, or any regulation issued there-

under, which relates to health insurance or plans.

5 U.S.C. 8902(m)(1). Congress originally enacted the

provision in 1978 “to establish uniformity in Federal

employee health benefits and coverage.” H.R. Rep.

No. 282, 95th Cong., Ist Sess. 1 (1977) (1977 House

Report); see Act of Sept. 17, 1978 (1978 Act), Pub. L.

No. 95-368, 92 Stat. 606. Congress broadened it to its

current form in 1998, to ensure that “national plans

{ean] offer uniform benefits and rates to enrollees

regardless of where they may live,” and to “prevent

carriers’ cost-cutting initiatives from being frustrated

by State laws.” H.R. Rep. No. 374, 105th Cong., Ist

Sess. 9 (1997) (1997 House Report); see Federal Em-

ployees Health Care Protection Act of 1998 (1998 Act),

Pub. L. No. 105-266, § 3(c), 112 Stat. 2366.

2. Petitioner is a FEHB insurance carrier that has

entered into a contract with OPM to furnish health

Lenefits. At all relevant times, Part II of petitioner’s

contract with OPM (titled “BENEFITS”), Pet. App.

122a, contained a section titled “SUBROGATION,” id.

at 129a-130a. “Subrogation” occurs when an insurer

pays an insured for benefits, and then steps into the

4

insured’s shoes to demand repayment from a third

party who caused the loss. See Black’s Law Diction-

ary 1654 (10th ed. 2014). “{[SJubrogation rights will

commonly subsume reimbursement,” which occurs

when the insurer demands repayment from an insured

who has recovered twice for the same injury, once

from the insurer and again from a third party who

caused the loss. New Orleans Assets, L.L.C. v. Wood-

ward, 363 F.3d 372, 377 (5th Cir. 2004).

The subrogation clause in petitioner’s contract with

OPM stated, among other things, that petitioner

“shall subrogate FEHB claims” in a State where

“subrogation is prohibited,” if petitioner also “subro-

gates for at least one plan covered under” the Em-

ployee Retirement Income Security Act of 1974

(ERISA), 29 U.S.C. 1001 et seg. Pet. App. 130a; see

F'MC Corp. v. Holliday, 498 U.S. 52, 58 (1990) (ERISA

preempts state anti-subrogation laws).' It is undis-

puted that the subrogation clause required petitioner

to “seek reimbursement or subrogation” in Missouri

“when an insured obtains a settlement or judgment

against a tortfeasor for payment of medical expenses.”

Pet. App. 45a. It is also undisputed that the term

“subrogation” in the contract encompasses reim-

bursement. See Pet. 8; Resp. Br. 7.

3. OPM has issued detailed regulations governing

subrogation and reimbursement clauses in FEHB

contracts. 5 C.F.R. 890.106; see 80 Fed. Reg.

at 29,203. Those regulations provide that a carrier’s

“right to pursue and receive subrogation and reim-

bursement recoveries constitutes a condition of and a

limitation on the nature of benefits or benefit pay-

' The plan brochure stated, “[i}f you do not seek damages you

must agree to let us try. This is called subrogation.” Pet. App. 147a.

5

ments and on the provision of benefits under the

plan’s coverage.” 5 C.F.R. 890.106(b)(1) (emphasis

added). The regulations further provide:

A ecarrier’s rights and responsibilities pertaining

to subrogation and reimbursement under any

FEHB contract relate to the nature, provision, and

extent of coverage or benefits (including payments

with respect to benefits) within the meaning of 5

U.S.C. 8902(m)(1). These rights and responsibili-

ties are therefore effective notwithstanding any

state or local law, or any regulation issued there-

under, which relates to health insurance or plans.

5 C.F.R. 890.106(h) (emphasis added). This regulation

“formalizes OPM’s longstanding interpretation of

what Section 8902(m)(1) has meant since Congress

enacted it in 1978,” and it applies to “all FEHBA con-

tracts.” 80 Fed. Reg. at 29,204.*

OPM explained that these regulations “comport |

with longstanding Federal policy and further{] Con-

gress’s goals of reducing health care costs and ena-

bling uniform, nationwide application of FEHB con-

tracts.” 80 Fed. Reg. at 29,203. OPM noted that, in

2014, “FEHB carriers were reimbursed by approxi-

mately $126 million in subrogation recoveries,” “trans-

lating] to premium cost savings for the federal gov-

ernment and FEHB enrollees.” Jbid. OPM also stat-

ed that the regulations further “a strong federal in-

terest in national uniformity” in coverage, benefits,

* OPM’s regulations also require carrier contracts entered into

after June 22, 2015, to specify that benefits and benelits payments

are extended “on the condition” that the carrier may pursue and

receive subrogation and reimbursement. 5 C.F.R. 890.106(b)(2);

see 80 Fed. Reg. at 29,203-29,204.

6

and administration. 80 Fed. Reg. at 932. Disuni-

formity, OPM explained, “is administratively burden-

some, gives rise to uncertainty and litigation, and

results in treating enrollees differently, although

enrolled in the same plan and paying the same premi-

um.” Jbid. OPM further stated that “Congress enact-

ed the preemption provision to avoid such disparities,

and to enhance the ability of the Federal Government

to offer its employees a program of health benefits

governed by a uniform set of legal rules.” bid.

4. a. Respondent is a former federal employee who

enrolled in and was insured under petitioner’s FEHB

plan. Pet. App. 45a. He was injured in an automobile

accident, and petitioner paid his medical expenses.

Ibid. Respondent sued the driver who caused his in-

juries and recovered a monetary award in a settlement.

Ibid. As contemplated by its contract with OPM,

petitioner asserted a lien (for $6,592.24) against part

of the settlement proceeds to cover medical bills peti-

tioner had paid arising from the accident. Jbid. Re-

spondent repaid that amount, satisfying the lien. /bid.

Respondent then brought this class action suit

against petitioner in Missouri state court, alleging

that petitioner had improperly obtained reimburse-

ment for medical benefits it paid. Pet. App. 45a.

Respondents’ state-law claims were “based on the

premise that Missouri law does not permit the subro-

gation of tort claims.” Jbid.; see Benton House, LLC

v. Cook & Younts Ins., Inc., 249 S.W.3d 878, 882 (Mo.

Ct. App. 2008) (“[AJn insurer cannot seek subrogation

from its insured.”). In response, petitioner argued

that Section 8902(m)(1) makes subrogation and reim-

bursement clauses in FEHB contracts effective not-

withstanding state law. The state trial court granted

7

summary judgment for petitioner, Pet. App. 28a-32a,

and the state court of appeals affirmed, id. at 33a-43a.

The Missouri Supreme Court reversed. Pet. App.

44a-54a. The court started “with the assumption that

the historic police powers of the States [are] not to be

superseded by ... Federal Act unless that [is] the

clear and manifest purpose of Congress.” /d. at 47a

(brackets in original) (quoting Cipollone v. Liggett

Grp., Inc., 505 U.S. 504, 516 (1992)). The court found

Section 8902(m)(1) ambiguous as to whether subroga-

tion and reimbursement were included within its

preemptive scope. The court then concluded that it

had “a duty to accept the reading that disfavors

preemption.” Jd. at 49a (quoting Bates v. Dow Agro-

Sciences LLC, 544 U.S. 431, 449 (2005)).

Judge Wilson concurred, joined by Judge Brecken-

ridge. Pet. App. 55a-72a. He stated that “it defies

logic to insist that benefit repayment terms do not

relate to the nature or extent of |respondent’s] bene-

fits,” and determined that “Congress plainly intended

for § 8902(m)(1) to apply to the benefit repayment

terms in [petitioner’s] contract.” Jd. at 60a, 66a.

Judge Wilson nonetheless concurred, reasoning that

Congress cannot make the terms of FEHB contracts

enforceable notwithstanding state law. Jd. at 67a.

b. Petitioner filed a petition for a writ of certiorari,

seeking this Court’s review of the Missouri Supreme

Court’s decision. The Court invited the Solicitor Gen-

eral to file a brief expressing the views of the United

States. 135 S. Ct. 323. While the petition was pend-

ing, OPM promulgated its regulations governing sub-

rogation and reimbursement. See pp. 4-6, supra. This

Court granted certiorari, vacated the Missouri Supreme

8

Court’s decision, and remanded for further considera-

tion in light of the new regulations. Pet. App. 73a.

ec. On remand, the Missouri Supreme Court reaf-

firmed its prior ruling. Pet. App. la-13a. The court

stated that the “OPM regulation does not overcome

the presumption against preemption and demonstrate

Congress’ clear and manifest intent to preempt state

law.” Jd. at 2a. But see Bell v. Blue Cross & Blue

Shield, 823 F.3d 1198 (8th Cir. 2016) (finding state

anti-subrogation law preempted), petition for cert.

pending, No. 16-504 (filed Oct. 11, 2016); Helfrich v.

Blue Cross & Blue Shield Ass’n, 804 F.3d 1090 (10th

Cir. 2015) (same); Kobold v. Aetna Life Ins. Co., 370

P.3d 128 (Ariz. Ct. App. 2016) (same).

Judge Wilson concurred, joined by a majority of

the judges of the Missouri Supreme Court. Pet. App.

14a; id. at 13a (identifying judges). In the concurring

judges’ view, Congress’s “attempt to give preemptive

effect to the provisions of a contract between the fed-

eral government and a private party is not a valid

application of the Supremacy Clause” and, “therefore,

does not displace Missouri law here.” /d. at 14a.

SUMMARY OF ARGUMENT

I. Subrogation and reimbursement clauses in

FEHB contracts are effective notwithstanding state

anti-subrogation laws because Congress has shielded

FEHB contracts from state interference, 5 U.S.C.

8902(m)(1), and subrogation and reimbursement clauses

fall within the scope of that protective umbrella.

OPM has recently promulgated regulations codify-

ing its longstanding interpretation of the FEHB Act

to have that effect. 5 C.F.R. 890.106(b)(1) and (h).

That interpretation bars Missouri from prohibiting

subrogation that a FEHB contract requires. /bid.

9

Those regulations embody by far the best interpreta-

tion of the statute. At a minimum, they reasonably

resolve any ambiguity and are therefore binding un-

der Chevron U.S.A. Inc. v. Natural Resources De-

fense Council, 467 U.S. 837 (1984).

A subrogation or reimbursement clause “relate|s]

to the nature, provision, and extent of coverage or

benefits (including payments with respect to bene-

fits),” 5 U.S.C. 8902(m)(1), because such a clause im-

poses a “condition of and a limitation on the nature of

benefits or benefit payments and on the provision of

benefits under the plan’s coverage.” 5 C.FR.

890.106(b)(1). When subrogation is triggered, a carri-

er’s payments to a beneficiary must be paid back.

Moreover, Congress has assigned to OPM the power

to decide what “limitations * * * and other defini-

tions of benefits” a carrier contract “shall contain.” 5

U.S.C. 8902(d). OPM has reasonably concluded that

subrogation is such a “limitation” on benefits, 5 C.F.R.

890.106(b)(1), and therefore relates to the nature,

provision, and extent of benefits and benefit payments

under the FEHB Act’s preemption provision, 5 U.S.C.

8902(m)({1). See 5 C.F-R. 890.106(h).

OPM’s common-sense interpretation furthers Sec-

tion 8902(m)(1)’s purposes. Congress enacted that

provision to ensure that uniform, national rules will

govern the administration of benefits for federal

workers—and to prevent individual States from un-

dermining the federal government’s cost-cutting ef-

forts or creating unfair disparities between similarly

situated federal employees. If individual States could

prohibit FEHB subrogation, the federal government

would spend more money to insure federal employees,

and federal employees who pay the same premiums

10

under the same plan would receive different benefits:

Federal employees in anti-subrogation States would

get to keep payments, whereas those in other States

would have to pay them back. Out-of-state enrollees

in the plan who cannot receive the advantages of an

anti-subrogation law (the ability to keep benefit pay-

ments) would nonetheless suffer their disadvantage

(the increased premiums needed to pay for those

unreturned benefits)—and would cross-subsidize the

expanded benefits received solely by in-state workers.

The Missouri Supreme Court disagreed, reasoning

that a “presumption against preemption” applied and

effectively trumped Chevron, leaving OPM powerless

to interpret Section 8902(m)(1). Pet. App. 2a. That is

wrong for three reasons, each of which independently

warrants reversal. And collectively, they make it even

clearer that the decision below is wrong.

First, this Court has repeatedly applied Chevron

deference to regulations interpreting the substantive

scope of a statutory provision that preempts state law.

E.g., Cuomo v. Clearing Howse Ass’n, 557 U.S. 519,

525 (2009); Smiley v. Citibank (S.D.), N.A., 517 U.S.

735, 743-744 (1996) (rejecting an argument that the

presumption against pre-emption “in effect trumps

Chevron”). A “general conferral of rulemaking au-

thority * * * validate[s] rules for all the matters the

agency is charged with administering.” City of Ar-

lington v. FCC, 133 8. Ct. 1863, 1874 (2013). And the

ease for deference is particularly strong here because

Congress has charged OPM with determining what

“limitations” to impose and what “other definitions of

benefits” to prescribe in its carrier contracts. 5

U.S.C. 8902(d). Chevron therefore applies to OPM’s

1]

interpretation of both Section 8902(m)(1) itself and the

substantive terms in that provision.

Second, even without OPM’s regulations, it would

be improper to “presume” that Congress intended to

preserve a role for state law under the FEHB pro-

gram, because Congress enacted Section 8902(m)(1) to

prevent state regulation that might interfere with its

implementation. When a “statute ‘contains an express

pre-emption clause,’” the Court does “not invoke any

presumption against pre-emption.” Puerto Rico vy.

Franklin Cal. Tax-Free Trust, 1386 S. Ct. 1938, 1946

(2016) (quoting Chamber of Commerce of the U.S. v.

Whiting, 563 U.S. 582, 594 (2011)).

Third, even overlooking both OPM’s regulations

and the express-preemption provision, a presumption

against preemption would not apply: There is no basis

for “presuming” that Congress wanted to allow States

to regulate benefits under “a federal health insurance

plan for federal employees that arise from a federal

law.” Bell v. Blue Cross & Blue Shield, 823 F.3d 1198,

1202 (8th Cir. 2016) (emphases added), petition for

cert. pending, No, 16-504 (filed Oct. 11, 2016). “[Al]n

‘assumption’ of nonpre-emption is not triggered when

[a] State regulates in an area where there has been a

history of significant federal presence.” United States

v. Locke, 529 U.S. 89, 108 (2000). And “ijt is an un-

derstatement to say that ‘there has been a history of

significant federal presence’ in the area of federal

employment.” Helfrich v. Blue Cross & Blue Shield

Ass’n, 804 F.3d 1090, 1105 (10th Cir. 2015).

Il. The Act’s express-preemption provision is con-

stitutional. Although it is “unusual” for a statute to

provide that the terms of a federal contract preempt

state law, Empire Healthchoice Assurance, Inc. v.

12

MeVeigh, 547 U.S. 677, 697 (2006), that creates no

constitutional problem. Section 8902(m)(1) itself does

the preempting here, with the reference to contract

terms establishing the scope of the preemption. Sec-

tion 8901(m)(1) thus creates a protective umbrella

under which OPM can enter into contracts with carri-

ers to provide uniform, nationwide coverage, sheltered

from state interference. Congress plainly has the

authority to create such a protected zone, and it has

done so many times.

Indeed, this case involves an area of “uniquely fed-

eral interest” where uniform federal common law

would apply—even without an express-preemption

provision—when there is a “significant conflict” be-

tween state law and federal interests. McVeigh, 547

U.S. at 692-693 (quoting Boyle v. United Techs. Corp.,

487 U.S. 500, 507 (1988)). It follows a fortiori from

McVeigh and Boyle that Congress can enact a statute

declaring that uniform federal law will govern the

terms and enforcement of FEHB contracts.

ARGUMENT

I. Section 8902(m)(1) Requires That Subrogation And

Reimbursement Clauses In FEHB Contracts Be Given

Effect Notwithstanding State Anti-Subrogation Laws

A. OPM’s Regulations Embody By Far The Best Inter-

pretation Of Section 8902(m)(1)

1. a. Congress has granted OPM authority to de-

termine what health “benefits” a carrier will offer in a

contract, and to include in the contract such “limita-

tions” and “other definitions of benefits as [it] consid-

ers necessary or desirable.” 5 U.S.C. 8902(d). And

Congress has further provided that contract terms

that “relate to the nature, provision, or extent of cov-

erage or benefits (including payments with respect to

13

benefits) shall supersede and preempt any State or

local law * * * which relates to health insurance or

plans.” 5 U.S.C. 8902(m)(1) (emphasis added). It is

undisputed that Missouri’s law prohibiting health-

insurance subrogation “relates to health insurance or

plans.” Jbid. Accordingly, the only questions are

(1) what is included in the “nature, provision, or ex-

tent of coverage or benefits (including payments with

respect to benefits)” available under a FEHB con-

tract; and (2) whether a subrogation clause “relate[s]|

to” the nature, provision, or extent of those benefits or

benefit payments. /bid.

OPM’s regulations answer both questions. They

provide that a carrier’s “right to pursue and receive

subrogation and reimbursement recoveries constitutes

a condition of and a limitation on the nature of bene-

fits or benefit payments and on the provision of bene-

fits under the plan’s coverage.” 5 C.F.R. 890.106(b)(1).°

OPM’s regulations further provide that “[a] carrier’s

rights and responsibilities pertaining to subrogation

and reimbursement” under a FEHB contract “relate

to the nature, provision, and extent of coverage or

benefits (including payments with respect to bene-

fits)” within the meaning of Section 8902(m)(1), and

“are therefore effective notwithstanding any state or

local law” relating to health insurance or plans. 5

C.F.R. 890.106(h) (emphasis added). Petitioner there-

fore may obtain subrogation according to the terms of

its contract with OPM, notwithstanding Missouri law.

b. In Empire Healthchoice Assurance, Inc. Vv.

McVeigh, 547 U.S. 677 (2006), this Court addressed

® Contracts now must specify that benefits and benefits payments

are extended “on the condition” that the carrier may pursue and

receive subrogation and reimbursement. 5 C.F.R. 890.106(b)(2).

14

whether a FEHB carrier’s action for subrogation and

reimbursement arose under federal law, and thus

could be bought in federal court under 28 U.S.C. 1331.

In concluding that such an action did not arise under

federal law, the Court described Section 8902(m)(1) as

a “puzzling measure” that was “open to more than one

construction”—including the interpretation OPM has

adopted. McVeigh, 547 U.S. at 697-698. The Court

explained that a “reimbursement clause” in a contract

between OPM and a carrier could be interpreted as a

“condition or limitation on ‘benefits’ received by a fed-

eral employee,” and thus as a contract term “‘relat-

fing] to ... coverage or benefits’ and ‘payments with

respect to benefits.’” Jd. at 697 (brackets in original).

On the other hand, the Court noted, Section 8902(m)(1)

could be read to refer to a beneficiary’s initial enti-

tlement to benefits, not a carrier’s entitlement to

obtain reimbursement later. bid.

The Court did not definitively interpret Section

8902(m){1) in McVeigh, however, because it would not

be a basis for federal jurisdiction on either interpreta-

tion. 547 U.S. at 697. Section 8902(m)(1) is a “choice-

of-law prescription,” the Court concluded, not a “ju-

risdiction-conferring provision.” /bid.

McVeigh therefore left OPM with authority to

adopt regulations definitively resolving the textual am-

biguity the Court found as to whether subrogation and

reimbursement clauses fit within Section 8902(m)(1)’s

terms. See National Cable & Telecomms. Ass’n v.

Brand X Internet Servs., 545 U.S. 967, 982 (2005).

OPM has now exercised that authority, issuing regula-

tions providing that a carrier’s “right to pursue and

receive subrogation and reimbursement recoveries

constitutes a condition of and a limitation on the na-

15

ture of benefits or benefit payments and on the provi-

sion of benefits under the plan’s coverage.” 5 C.ER.

890.106(b)(1); see 5 C.F.R. 890.106(h) (such terms are

“effective notwithstanding any state or local law”).

c. OPM’s interpretation is the most natural read-

ing of the statutory language. A subrogation or reim-

bursement clause is a “limitation[]” that serves to

“defin[e]” the “benefits” that a plan offers, 5 U.S.C.

8902(d), by imposing a “condition of and a limitation

on” those benefits and benefit payments, and thus on

the provision of those benefits, 5 C.F.R. 890.106(b)(1).

It does so by making benefits and benefit payments

contingent rather than final: When subrogation is

triggered, the benefits paid by the carrier must be

paid back. The common sense of this understanding is

confirmed by the Medicare secondary-payer statute,

which provides that Medicare payments are “condi-

tioned on reimbursement” and must be repaid if the

recipient later receives payment from another plan.

42 U.S.C. 13895y(b)(2)(B) (“Conditional Payment”).

Subrogation and reimbursement clauses in turn

“relate to” the “nature, provision, or extent” of those

benefits and benefit payments for purposes of Section

8902(m)(1). The ordinary meaning of the phrase “re-

late to” “is a broad one,” meaning “to stand in some

relation; to have bearing or concern; to pertain; refer;

to bring into association with or connection with.”

Morales v. Trans World Airlines, Inc., 504 U.S. 374,

383 (1992) (quoting Black’s Law Dictionary 1158 (5th

ed. 1979)); see Northwest, Inc. v. Ginsberg, 134 S. Ct.

1422, 1428, 1430-1431 (2014) (the phrase “related to”

in an express-preemption provision “expresses a

‘broad pre-emptive purpose’”). As set forth above,

subrogation and reimbursement clauses “limit{]” and

16

“defin{e]” the benefits that are provided in the first

place. 5 U.S.C 8902(d). Such a clause imposes a “limi-

tation” on benefits and any payments with respect to

those benefits, ibid., making them conditional in “na-

ture” rather than final: When subrogation is trig-

gered, benefits paid by a carrier must be paid back.

And they also define the “extent” of benefits and

payments with respect to benefits, because they de-

fine the extent of the payments the insured can keep.

Subrogation clauses therefore relate to the “nature,

provision, or extent” of the “benefits” themselves, as

well as to the “nature, provision, or extent” of “pay-

ments with respect to benefits.” 5 U.S.C. 8902(m)(1).

That conclusion is consistent with this Court’s cas-

es. This Court has held that a state “antisubrogation

law ‘relate[s] to’ an employee benefit plan,” within the

meaning of ERISA’s preemption clause. FMC Corp.

v. Holliday, 498 U.S. 52, 58 (1990) (brackets in origi-

nal). There is no basis for concluding that Congress

intended a broader role for state law—and thus less

uniformity—in regulating the federal government’s

relationship with federal employees than in regulating

private retirement plans under ERISA. The fact that

a payment may need to be refunded is closely “con-

nected to” and “associated with” the nature and extent

of both the benefits themselves and any payment of

benefits that was made in the first place.

It is thus no surprise that the courts of appeals that

have considered OPM’s regulations have likewise

concluded that they set forth the best reading of the

statute. See Bell v. Blue Cross & Blue Shield, 823

F.3d 1198, 1203 (8th Cir. 2016) (“[T)he better reading

of the statute” is that “reimbursement and subroga-

tion provisions are limitations on the payment of bene-

17

fits.”), petition for cert. pending, No. 16-504 (filed Oct.

11, 2016); Helfrich v. Blue Cross & Blue Shield Ass’n,

804 F.3d 1090, 1106 (10th Cir. 2015) (“(TJhe best

construction of the preemption provision * * *

strongly support(s] Blue Cross” because “an enrollee’s

ultimate entitlement to benefit payments is condi-

tioned upon providing reimbursement from any later

recovery or permitting the Plan to recover on the

enrollee’s behalf”); see also Kobold v. Aetna Life Ins.

Co., 370 P.3d 128, 132 (Ariz. Ct. App. 2016) (“The

connection between issuing benefit payments and

seeking subrogation and reimbursement is not so

attenuated as to make the regulations’ interpretation

unreasonable.”). And in his original concurring opin-

ion below, Judge Wilson stated that it “defies logic to

insist that benefit repayment terms do not relate to

the nature or extent of [respondent’s] benefits”:

“(TJerms requiring [him] to pay benefits back to [peti-

tioner| that [petitioner] previously had paid out are

terms that relate to ‘payment with respect to [his]

benefits.’” Pet. App. 60a-61a.

2. The interpretation embodied in OPM’s regula-

tions also directly furthers Section 8902(m)(1)’s pur-

poses of “promot[ing} uniformity in the administration

of federal employee benefits and stewardship of the

public fise.” Bell, 823 F.3d at 1204.

a. Congress enacted Section 8902(m)(1) in re-

sponse to state laws “requiring not only specific types

of care but the extent of benefits, family members to

be covered, the age limits for family members, exten-

sion of coverage, [and] the format and the type of

informational material that must be furnished, includ-

ing in some instances the type of language to be used.”

1977 House Report 6-7. Congress was concerned that

18

such “mandated benefit” laws would result in

“liJncreased premium costs to both the Government

and enrollees,” as well as “[{a] lack of uniformity of

ben|eJfits for enrollees in the same plan which would

result in enrollees in some States paying a premium

based, in part, on the cost of benefits provided only to

enrollees in other States.” H.R. Rep. No. 1211, 94th

Cong., 2d Sess. 3 (1976); see S. Rep. No. 903, 95th

Cong., 2d Sess. 7 (1978) (“These laws in effect pre-

sented serious problems from the standpoint of the

uniformity of benefits under the program.”). Con-

gress accordingly provided in 1978 that FEHB con-

tract terms that “relate to the nature or extent of

coverage or benefits (including payments with respect

to benefits)” preempt any state law relating to health

insurance or plans, “to the extent that such law or

regulation is inconsistent with such contractual provi-

sions.” 1978 Act, 92 Stat. 606.

Congress later expanded the preemption provision.

See 1998 Act § 3(c), 112 Stat. 2366. First, Congress

expanded it to preempt state laws without regard

to whether they are “inconsistent” with FEHB con-

tracts terms, “thereby giving the federal! contract

provisions clear authority.” S. Rep. No. 257, 105th

Cong., 2d Sess. 15 (1998) (1998 Senate Report). Sec-

ond, Congress expanded it to reach terms relating to

the “provision” of coverage or benefits. 5 U.S.C.

8902(m)(1). Congress thereby “strengthen[ed| the

ability of national plans to offer uniform benefits and

rates to enrollees regardless of where they may live,”

and “prevent{ed] carriers’ cost-cutting initiatives from

being frustrated by State laws.” 1997 House Re-

port 9; see McVeigh, 547 U.S. at 686 (describing this

history).

19

b. OPM’s interpretation of Section 8902(m)(1) ad-

vances Congress’s goals of “reducing health care costs

and enabling uniform, nationwide application of

FEHB contracts,” by ensuring that subrogation and

reimbursement clauses are uniformly enforceable and

effective regardless of where the federal employee

resides. 80 Fed. Reg. at 29,203.

“The FEHB program insures approximately 8.2

million federal employees, annuitants, and their fami-

lies, a significant proportion of whom are covered

through nationwide fee-for-service plans with uniform

rates.” 80 Fed. Reg. at 29,203. OPM estimated that

“FEHB carriers were reimbursed by approximately

$126 million in subrogation recoveries” in 2014. bid.

Accordingly, “[sjubrogation recoveries translate to

premium cost savings for the federal government and

FEHB enrollees.” /bid.

OPM’s regulations similarly further Congress’s

purpose of promoting national uniformity in coverage,

benefits, and administration. 80 Fed. Reg. at 932; ef.

Holliday, 498 U.S. at 60 (“Application of differing

state subrogation laws to [ERISA] plans would * * *

frustrate plan administrators’ continuing obligation to

calculate uniform benefit levels nationwide.”). Disuni-

formity “is administratively burdensome, gives rise to

uncertainty and litigation, and results in treating

enrollees differently, although enrolled in the same

plan and paying the same premium.” 80 Fed. Reg.

at 932. Federal employees “in states without [anti-

subrogation] laws would have to pay reimbursements

that are then used to benefit enrollees throughout the

country, even those who live in states where they

could keep their tort recoveries without paying reim-

bursements.” Helfrich, 804 F.3d at 1099. Depending

20

on where they lived, federal employees insured under

the same plan and paying the same premiums would

obtain different benefits under different conditions

and limitations, and would be able to keep different

payment amounts. The disuniformity here thus would

result in unfairness and real-world financial harm to

federal employees.

“Congress enacted the preemption provision to

avoid such disparities, and to enhance the ability of

the Federal Government to offer its employees a pro-

gram of health benefits governed by a uniform set of

legal rules.” 80 Fed. Reg. at 932; see Helfrich, 804

F.3d at 1099. Indeed, Missouri’s anti-subrogation rule

is indistinguishable in this respect from the state

mandated-benefit laws that Congress enacted the

preemption provision to target: Those laws created

the same kind of disuniformity, increased costs, and

unfair cross-subsidization. See pp. 17-18, supra.

B. OPM’s Regulations Are Authoritative

At the very least, OPM’s regulations reasonably in-

terpret the relevant provisions of the FEHB Act, and

are therefore controlling under Chevron U.S.A. Inc. v.

Natural Resources Defense Council, 467 U.S. 837,

843-844 (1984). Indeed, no court has held that OPM’s

interpretation is unreasonable. See Pet. App. 3a (de-

scribing it as “plausible”); Resp. Mo. Sup. Ct. Br. 31,

36 (same). OPM issued its regulations pursuant to

express authority to issue regulations to carry out the

Act, 5 U.S.C. 8913(a), which includes not only the

preemption provision, 5 U.S.C. 8902(m)(1), but also

the grant of authority to prescribe the “benefits of-

fered” as well as the “limitations” and “other defini-

tions of benefits as [it] considers necessary or desira-

ble,” 5 U.S.C. 8902(d). This Court has held that,

21

where Congress has granted an agency authority to

prescribe definitions of terms in a statute, the agen-

cy’s rules exercising that authority are entitled to

heightened deference. See Chevron, 467 U.S. at 843-

844 & n.12 (citing, inter alia, Batterton v. Francis,

432 U.S. 416, 424-426 (1977)).

The Missouri Supreme Court nonetheless “de-

cline[d|” to provide any deference to OPM’s regula-

tions, on the theory that Chevron deference does not

apply to regulations interpreting an express-

preemption provision. Pet. App. 5a. The court then

relied on a “presumption against preemption” to de-

finitively foreclose OPM’s interpretation. /d. at 2a;

see id. at 3a (“{T]he ‘historic police powers of the

States’ are generally preempted only when the federal

statute at issue indicates that preemption is the ‘clear

and manifest purpose of Congress.’”) (quoting Cipol-

lone v. Liggett Grp., Inc., 505 U.S. 504, 516 (1992)).

That approach is fundamentally misguided and con-

flicts with this Court’s holdings that (1) Chevron ap-

plies to regulations interpreting substantive terms in

statutory provisions that have preemptive effect; (2) a

“presumption against preemption” does not apply to

when interpreting an express-preemption provision;

and (3) a “presumption against preemption” does not

in any event apply in an area like this, with a history

of significant federal presence. Each of those errors

independently warrants reversal. Collectively, they

make the decision below clearly wrong.

1. This Court recently rejected an argument, simi-

lar to the one the Missouri Supreme Court adopted

below, that Chevron applies to some parts of a statute

an agency is charged with administering, but not to

others. Rather, a “general conferral of rulemaking

22

authority * * * validate|s] rules for all the matters

the agency is charged with administering.” City of

Arlington v. FCC, 133 S. Ct. 1863, 1874 (2013). “(T]he

whole includes all of its parts.” /bid. Indeed, in City

of Arlington, the Court specifically noted that it had

deferred to an agency “assertion that its broad regula-

tory authority extends to preempting conflicting state

rules.” Jd. at 1871 (citing City of New York v. FCC,

486 U.S. 57, 64 (1988), and Capital Cities Cable, Inc. v.

Crisp, 467 U.S. 691, 700 (1984)).

Chevron accordingly applies here. OPM’s rulemak-

ing authority under Section 8913(a) encompasses all of

the Act’s parts—including its preemption provision,

5 U.S.C. 8902(m)(1), as well as its grant of authority

to OPM to determine what benefits to offer and what

“limitations” and “other definitions of benefits” to

impose, 5 U.S.C. 8902(d). And OPM’s authority under

the latter provision necessarily encompasses authority

to flesh out the substantive terms that appear in the

preemption provision, namely, “the nature, provision,

or extent of coverage or benefits (including payments

with respect to benefits).” 5 U.S.C. 8902(m)(1).

This Court has consistently relied on Chevron when

analyzing regulations that interpret the substantive

scope of federal statutes that preempt state law. See

Cuomo v. Clearing House Ass'n, 557 U.S. 519, 525

(2009); New York v. FERC, 535 U.S. 1, 28 (2002); Med-

tronic, Inc. v. Lohr, 518 U.S. 470, 496 (1996); Smiley

v. Citibank (S.D.), N.A., 517 U.S. 735, 739-744 (1996).

For example, in Smiley, the Court applied Chevron to

defer to a regulation interpreting the term “interest”

in 12 U.S.C. 85, a provision that the Court had previ-

ously held was preemptive. Smiley, 517 U.S. at 737-

745. The Court declined to decide whether Chevron

23

would apply to “the question of whether a statute is

pre-emptive.” Jd. at 744. But the Court explained

that that was “not the question at issue,” because

“there [wajs no doubt that § 85 pre-empts state law.”

Ibid. Rather, the only question in the case was “the

substantive (as opposed to pre-emptive) meaning of a

statute,” namely, the meaning of “interest.” Jbid.

The Court applied Chevron deference to the agency’s

interpretation of that term: The “regulation deserves

deference,” the Court stated, and was “obviously”

reasonable. /d. at 745. And “the presumption against

; pre-emption,” the Court explained, does not

“trump{] Chevron.” Id. at 744 (citation omitted).

Similarly, in Lohr, the Court relied on Chevron to

give “substantial weight” to the Food and Drug Ad-

ministration’s interpretation of what constitutes a

“requirement” within the meaning of the express-

preemption provision of the Medical Device Amend-

ments of 1976, 21 U.S.C. 360k. Lohr, 518 U.S. at 496.

And in Clearing House, the Court unanimously

agreed that the Chevron framework applied to a regu-

lation interpreting the phrase “visitorial powers” in an

express-preemption provision, 12 U.S.C. 484(a), con-

cluding that the agency could “give authoritative

meaning to the statute within the bounds of [the]

uncertainty” as to that phrase’s meaning. Clearing

House, 557 U.S. at 525; see id. at 5388 (Thomas, J.,

concurring in part and dissenting in part) (the regula-

tion “falls within the heartland of Chevron”). The

Court ultimately held that the agency had stretched

the statute beyond its “outer limits.” Jd. at 525. But

Chevron defined where those “outer limits” were

placed: The question was whether the regulation

2A

could “be upheld as a reasonable interpretation of the

National Bank Act.” Jd. at 523-524 (emphasis added).

OPM’s regulations warrant deference here for the

same reasons. As in Smiley, Lohr, and Clearing

House, there is no doubt that the statutory provision

at issue (Section 8902(m)(1)) triggers preemption.

The only question is a substantive question about its

scope: whether a subrogation clause “relate|s]| to the

nature, provision, or extent of coverage or benefits

(including payments with respect to benefits).” 5

U.S.C. 8902(m)(1). OPM’s conclusion that subrogation

rights impose a “condition of and a limitation on”

benefits and benefit payments, and therefore relate to

the nature, provision, and extent of benefits or benefit

payments, 5 C.F.R. 890.106(b)(1) and (h), is embodied

in “a full-dress regulation” that was “adopted pursu-

ant to the notice-and-comment procedures of the Ad-

ministrative Procedure Act.” Smiley, 517 U.S. at 741.

OPM’s interpretation also lies at the heart of the

agency’s responsibilities and expertise under the

FEHB Act. OPM’s regulations therefore are “author-

itative.” Clearing House, 557 U.S. at 525.*

2. Even without OPM’s regulations, it would be in-

correct to “presume” that Congress wanted to permit

state regulation of subrogation and reimbursement

required under FEHB contracts and OPM regula-

tions, because Congress enacted Section 8902(m)(1)

for the very purpose of preventing state interference

* At a minimum, OPM’s “experience[d] and informed judgment”

is entitled to a “measure of respect” sufficient to uphold its inter-

pretation. Federal Express Corp. v. Holowecki, 552 U.S. 389, 399

(2008) (quoting Skidmore v. Swift, 323 U.S. 134, 140 (1944)). See

Helfrich, 804 F.3d at 1109-1110 (adopting OPM’s interpretation

under Skidmore without deciding whether Chevron would apply).

25

with OPM’s administration of this national program.

When a “statute ‘contains an express pre-emption

clause,’” the Court does “not invoke any presumption

against pre-emption but instead ‘focus[es] on the plain

wording of the clause, which necessarily contains the

best evidence of Congress’ pre-emptive intent.’”

Puerto Rico v. Franklin Cal. Tax-Free Trust, 136

S. Ct. 1938, 1946 (2016) (quoting Chamber of Com-

merce of the U.S. v. Whiting, 563 U.S. 582, 594 (2011));

see Gobeille vy. Liberty Mut. Ins. Co., 136 S. Ct. 936,

946 (2016) (ERISA “certainly contemplated the pre-

emption of substantial areas of traditional state regu-

lation.”) (citation omitted).

The one-two punch of giving no deference to OPM’s

interpretation of Section 8902(m)(1) and its substan-

tive terms, coupled with applying a “presumption

against preemption” to narrow Section 8902(m)(1), is

particularly problematic. That approach would render

the expert federal agency powerless to interpret the

scope of a statutory provision that could have a signif-

icant effect on its ability to implement, on a nation-

wide basis, the program Congress has charged it with

administering. Congress used broad phrasing in Sec-

tion 8902(m)(1) precisely to give broad protection for

OPM and carriers against state interference in pre-

scribing, implementing, and enforcing contract terms.

But because Section 8902(m)(1) paints with a broad

brush, it may be ambiguous whether a particular kind

of contract provision falls within its aegis. Application

of a “presumption against preemption” that trumps

Chevron thus would be a one-way ratchet, leading to

more and more cramped interpretations of Section

8902(m)(1)—and thus permitting more and more of

the state interference Congress enacted it to prevent.

26

3. Even ignoring both OPM’s regulations and Sec-

tion 8902(m)(1), there would be no “presumption”

favoring state regulation here, because “this dispute

concerns benefits from a federal health insurance plan

for federal employees that arise from a federal law.”

Bell, 823 F.3d at 1201-1202 (emphases added). “[{A]jn

‘assumption’ of nonpre-emption is not triggered when

the State regulates in an area where there has been a

history of significant federal presence.” United States

v. Locke, 529 U.S. 89, 108 (2000). For example, in

Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S.

341 (2001), this Court held that no presumption

against preemption applied when a State sought to

impose common-law fraud duties upon “the relation-

ship between a federal agency and the entity it regu-

lates.” Jd. at 347. That relationship “is inherently

federal,” the Court explained, because it “originates

from, is governed by, and terminates according to

federal law.” Jbid.; see Locke, 529 U.S. at 108 (declin-

ing to apply a presumption against preemption of

state regulations touching upon “national and interna-

tional maritime commerce”).

“It is an understatement to say that ‘there has been

a history of significant federal presence’ in the area of

federal employment.” Helfrich, 804 F.8d at 1105

(citation omitted). “Congress has legislated on the

matter from the outset.” Jbid. And, as in Buckman,

the relationship among the federal government, an

insurance carrier that has contracted with the federal

government to furnish health benefits to federal em-

ployees, and those employees, “is inherently federal”

because it “originates from, is governed by, and ter-

minates according to federal law.” 531 U.S. at 347.

27

As a result, application of a presumption against

preemption is exactly backwards: “The conflict with

federal policy need not be as sharp as that which must

exist for ordinary preemption when Congress legis-

lates ‘in a field which the States have traditionally

oceupied.’” Boyle v. United Techs. Corp., 487 U.S.

500, 507 (1988) (emphasis added) (quoting Rice v.

Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)).

Preemption is thus more likely here, not less.

Accordingly, there can be no “presumption” in fa-

vor of allowing States to regulate the terms upon

which the federal government provides benefits to

federal workers pursuant to a federal contract entered

into under a federal statute. Congress enacted the

express-preemption provision precisely to confirm

that OPM can administer FEHB plans free from state

interference. And “there is hardly an area in which a

state would have less of a legitimate interest than this

employment relationship.” Helfrich, 804 F.3d at 1100.

II. Congress Has Ample Constitutional Authority To Shield

FEHB Contracts From State Interference

Section 8902(m)(1)’s wording is “unusual” because

it states that “[t]he terms” of a federal contract “shall

supersede and preempt” state law. McVeigh, 547 U.S.

at 697; 5 U.S.C. 8902(m)(1). But that language is not

unique, 5 U.S.C. 8959, 8989, 9005(a); see 10 U.S.C.

1103(a); 49 U.S.C. 10709(b), and it does not create any

constitutional problem.

1. Section 8902(m)(1) is properly understood to do

the preempting itself, with the reference to contract

terms defining the scope of the preemption. Section

8902(m)(1) thereby provides a protective umbrella

under which OPM can contract with carriers on a

uniform national basis, without interference by a

28

patchwork of state and local law. So long as FEHB

contract terms “relate to the nature, provision, or

extent of coverage or benefits (including payments

with respect to benefits),” Section 8902(m)(1) ensures

that those terms will be uniformly enforceable na-

tionwide, notwithstanding any state law relating to

“health insurance or plans.” 5 U.S.C. 8902(m)(1). And

an easy, shorthand way of ensuring that an agency’s

contracts will be governed by uniform federal law is to

enact a statute declaring that the agency’s contracts

“shall supersede and preempt” state law. Ibid. But it

is still the statute, not the contract itself, that does the

preempting.

Section 8902(m)(1) is reasonably interpreted in this

uncontroversial manner, which is faithful to Con-

gress’s purpose. See Bell, 823 F3d at 1204 (“[T]he

statute can reasonably be construed to mean that

federal law,” not “the contractual terms, has the

preemptive force.”); Empire Healthchoice Assurance,

Inc. v. McVeigh, 396 F.3d 136, 144-145 (2d Cir. 2005)

(Sotomayor, J.) (similar), aff’d 547 U.S. 677 (2006);

OPM, FEHB Program Carrier Letter No. 2012-18,

at 1 (June 18, 2012) (“[FEHBA] preempts state laws

prohibiting or limiting subrogation and reimburse-

ment”) (Pet. App. 116a).

This interpretation eliminates any conceivable con-

stitutional doubt. Section 8902(m)(1) is a “Law[] of

the United States” within the meaning of the Suprem-

acy Clause. U.S. Const. Art. VI, Cl. 2. And “i]t is the

very essence of supremacy * * * to modify every

power vested in subordinate governments, as to ex-

empt its own operations from their own influence.”

McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 427

(1819). Indeed, the Constitution itself provides simi-

29

lar protection from state interference in some con-

texts. J/bid.; e.g., United States v. New Mexico, 455

U.S. 720, 735 (1982) (private parties may be constitu-

tionally immune from state taxation when acting pur-

suant to a federal contract); Arizona v. California, 283

U.S. 423, 451 (1931) (“The United States may perform

its functions without conforming to the police regula-

tions of a state.”); Helfrich, 804 F.3d at 1100 n.7 (col-

lecting cases). Federal common law does as well.

K.g., Boyle, 487 U.S. at 504 (“(O]bligations to and

rights of the United States under its contracts are

governed exclusively by federal law.”).

Congress has enacted many laws providing a pro-

tective umbrella for both private and public action,

similar to that afforded by Section 8902(m)(1). This

Court recently and unanimously found preemption

under the Federal Employees’ Group Life Insurance

Act of 1954, 5 U.S.C. 8709(d)(1), which provides that

“[t]he provisions of any contract” under that Act

“shall supersede and preempt” state law. Jbid.; see

Hillman v. Maretta, 133 S. Ct. 1943, 1948 (2013).

Under the “filed rate doctrine,” Congress has enabled

sellers of electricity and natural gas to set rates (and

the government to approve those rates), without state

interference. See Entergy La., Inc. v. Louisiana Pub.

Serv. Comm’n, 539 U.S. 39, 47 (2003); Arkansas La.

Gas Co. v. Hall, 453 U.S. 571, 578-579 (1981). The

Federal Aviation Administration Authorization Act of

1994, 49 U.S.C. 14501(c)(1) and 41713(b)(4)(A), enables

private air and motor carriers to establish rates,

routes, and services, without state interference. See

Rowe v. New Hampshire Motor Transp. Ass’n, 552

U.S. 364 (2008). ERISA enables private parties to

form employee benefit plans, protected from state

30

inference. 29 U.S.C. 1144(a); see Gobeille, 136 S. Ct.

at 942-947. And the Federal Arbitration Act, 9 U.S.C.

2, enables private parties to agree to arbitration, pro-

tected from state interference. See Preston v. Ferrer,

552 U.S. 346, 349-350 (2008).

Section 8902(m)(1) does essentially the same thing

for OPM and the carriers that provide federal benefits

to federal employees. Indeed, if the federal govern-

ment itself did all the carriers’ work in-house, there

would be no question that its subrogation efforts

would be immune from state interference. Congress

is not disabled from providing the same protection

from state interference when it chooses to furnish the

same benefits through contracts with private carriers.

2. In any event, Congress has the power to declare

that the terms of a FEHB contract themselves

preempt state law. Even absent “a clear statutory

prescription,” the terms of a federal contract can

displace state law. Boyle, 487 U.S. at 504. In Boyle,

the Court held that design specifications in a federal

procurement contract for a military helicopter

preempted a state-law tort suit against the contractor

alleging that the design was defective. The Court

explained that “obligations to and rights of the United

States under its contracts are governed exclusively by

federal law.” IJbid.; see Clearfield Trust Co. v. United

States, 318 U.S. 363, 366-367 (1943). And although the

dispute in Boyle was “between private parties,” the

Court found it “plain that the Federal Government’s

interest in the procurement of equipment is implicated

by suits such as the present one.” 487 U.S. at 506.

This Court recognized in McVeigh that, under

Boyle, federal common law would govern the terms of

a FEHB contract—and thus that the contract terms

31

would preempt state law—if a “significant conflict”

were demonstrated “between an identifiable federal

policy or interest and the operation of state law.” 547

U.S. at 692-693 (quoting Boyle, 487 U.S. at 507); ef.

McVeigh, 396 F.3d at 142 (“We recognize the possibil-

ity that at a later stage in the proceedings, a signifi-

cant conflict might arise between New York state law

and the federal interests underlying FEHBA.”).

OPM’s regulations embody its expert determina-

tion that a significant conflict exists. See 80 Fed. Reg.

at 932 (application of state anti-subrogation laws to

FEHB contracts conflicts with “major goals of Con-

gress” in cost-savings and uniformity); cf. Boyle, 497

U.S. at 511 (relying on a federal statute as evidence of

a “significant conflict”). Indeed, “(t]he conflict be-

tween the state regulation and the federal contractual

requirement” here “is a stark one, starker than in

Boyle.” Helfrich, 804 F.3d at 1099. “In Boyle, the

prospect of tort liability could deter a contractor from

doing the government’s bidding or cause it to raise the

contract price. Here, state law outright forbids [the

carrier] from fulfilling its contractual obligation” to

subrogate. Ibid.

Congress enacted and expanded Section 8902(m)(1)

to ensure that OPM could implement the FEHB pro-

gram free from state interference by providing that

the contract terms supersede state law, without any

need to demonstrate an inconsistency on a case-by-

case basis. See pp. 17-18, swpra. It follows a fortiori

from McVeigh and Boyle that Section 8920(m)(1) is

constitutional: Congress has the constitutional au-

thority to clarify and confirm that uniform federal law

governs FEHB contract terms, when uniform federal

law might govern those same terms even without a

32

statute. “[F Jederal programs that ‘by their nature are

and must be uniform in character throughout the

Nation’ necessitate formulation of controlling federal

rules.” United States v. Kimbell Foods, Inc., 440 U.S.

715, 728 (1979) (quoting United States v. Yazell, 382

U.S. 341, 354 (1966)). There is no hasis for concluding

that federal courts have the authority to determine

that “controlling federal rules” of a uniform nature

must apply in this context, ibid., but that Congress

cannot make that same determination itself to “giv[e]

the federal contract provisions clear authority.” 1998

Senate Report 15.

CONCLUSION

The judgment of the Supreme Court of Missouri

should he reversed.

Respectfully submitted.

[IAN HEATH GERSHENGORN

Acting Solicitor General

BENJAMIN C, MIZER

Principal Deputy Assistant

Attorney General

HM DWIN S. KNEEDLER

Deputy Solicitor Gencral

ZACHARY D,. TRIPP

Assistant to the Solicitor

Generel

ALISA B. KLt&tin

HENRY C. WHITAKER

Attorneys

DECEMBER 2016