Coventry Health Care of Missouri, Inc. v. Nevils

In Coventry Health Care of Missouri, Inc. v. Nevils, a federal employee enrolled in a Federal Employees Health Benefits Act (FEHBA) plan was injured in a car accident. The plan paid over $100,000 in medical expenses. After the enrollee obtained a tort settlement from a third party, the insurer sought reimbursement under the plan’s subrogation clause, which required repayment of benefits if the enrollee recovered from a third party. A Missouri law, however, prohibited such subrogation recoveries. The enrollee argued that state law barred the insurer’s claim. The insurer contended that FEHBA expressly preempted state laws interfering with the contractual terms of FEHBA plans. The United States Supreme Court unanimously held that FEHBA’s preemption provision, 5 U.S.C. § 8902(m)(1), expressly displaced state anti-subrogation statutes, allowing federal health insurers to enforce contractual reimbursement rights.

The U.S. Supreme Court ruled unanimously that FEHBA preempts Missouri’s anti-subrogation law. The contractual subrogation clause is enforceable despite conflicting state law.

Whether the Federal Employees Health Benefits Act preempts a state law that prohibits health insurers from exercising contractual subrogation rights to recover benefits paid from an enrollee’s third-party tort recovery.

The decision affirmed the uniform application of FEHBA contracts across all states, protecting the financial stability of the federal employee health benefits program. It prevented a patchwork of state restrictions from undermining contractual cost-containment provisions and influenced similar preemption analyses in other federal benefits contexts.