Helfrich v. Blue Cross & Blue Shield Assoc
804 F.3d 1090
10th Cir.2015Background
- Helfrich, a federal employee, received $76,561.88 in FEHBP benefits after a car accident and later settled with the tortfeasor for $100,000. Blue Cross (BCBSA/BCBSKC) sought reimbursement under the FEHB Plan’s subrogation/reimbursement provisions.
- The Plan’s brochure (the official statement of benefits) conditions benefit payments on the carrier’s right to subrogation and reimbursement; recoveries by experience-rated carriers are returned to the federal Employees Health Benefits Fund.
- Kansas Administrative Reg. 40-1-20 prohibits subrogation/reimbursement clauses in insurance contracts issued in Kansas; Helfrich sued in Kansas state court seeking a declaration that the clause was unenforceable under that regulation.
- Blue Cross removed to federal court and counterclaimed for reimbursement; the district court entered judgment for Blue Cross, finding FEHBA preempted Kansas law under 5 U.S.C. § 8902(m)(1).
- On appeal, the Tenth Circuit affirmed, holding (1) federal common law displaces the Kansas regulation under Boyle and (2) FEHBA’s express preemption (and OPM’s implementing regulation/interpretation) covers subrogation/reimbursement clauses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal common law displaces Kansas antisubrogation regulation | Helfrich: federal common-law displacement not warranted; state law governs reimbursement | Blue Cross: Boyle-style federal-common-law displacement applies because FEHBP contracts implicate uniquely federal interests and conflict with state law | Held: Yes — federal common law displaces the Kansas regulation (majority) |
| Whether FEHBA § 8902(m)(1) preempts Kansas antisubrogation regulation | Helfrich: presumption against preemption and McVeigh ambiguity mean state law should survive | Blue Cross/APO/OPM: § 8902(m)(1) covers terms "relating to...coverage or benefits (including payments)" and thus preempts state limits on subrogation/reimbursement; OPM regulation supports this | Held: Yes — § 8902(m)(1) preempts the Kansas rule; court gives deference to OPM’s reasonable interpretation |
| Whether OPM’s rule/interpretation is entitled to deference | Helfrich: agency view should get limited weight; statutory text ambiguous | Blue Cross/United States: Chevron/agency expertise justify deference to OPM’s final rule interpreting § 8902(m)(1) | Held: Court defers to OPM’s view (and finds it persuasive even under lesser deference standards) |
| Constitutional concern: can contract terms preempt state law under Supremacy Clause | Helfrich: allowing contract terms to preempt state law raises constitutional problems | Blue Cross: analogous precedents (e.g., Boyle) and federal interests avoid a constitutional problem | Held: Court skeptical of the constitutional objection and declines to address it in depth because it was not preserved below |
Key Cases Cited
- Boyle v. United Techs. Corp., 487 U.S. 500 (federal common law may displace state law where uniquely federal interests and a significant conflict exist)
- Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U.S. 677 (FEHBA preemption provision is ambiguous and warrants cautious interpretation; recognized federal interests in FEHBP reimbursement disputes)
- O’Melveny & Myers v. FDIC, 512 U.S. 79 (federal interest must be sufficiently specific to displace state law)
- Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341 (presumption against preemption inapplicable where federal presence/interest is dominant)
- United States v. Kimbell Foods, Inc., 440 U.S. 715 (federal programs requiring national uniformity may require federal rules)
- Downey v. State Farm Fire & Cas. Co., 266 F.3d 675 (7th Cir.: private insurers administering a federal program implicate federal law)