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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2017

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0695%3A09. Public record. Not legal advice.