Cert Granted in Empire HealthChoice Assurance, Inc. v. McVeigh

The Supreme Court agreed Friday to hear Empire HealthChoice Assurance, Inc. v. McVeigh (05-200). The case presents the question of whether federal courts have jurisdiction over disputes about contract terms of federal employees’ health insurance plans formed pursuant to the Federal Employee Health Benefits Act (FEHBA).

Under FEHBA, the federal government forms contracts with health insurance carriers to offer benefits plans to federal employees. This case involves the enforcement of one such plan’s contract terms, which require a beneficiary who receives compensation from a third party for an injury to reimburse the plan for any benefits paid in connection with that injury. The petitioner carrier sued the respondent beneficiary for failure to so reimburse.

The Second Circuit upheld the district court’s dismissal of the suit for lack of federal question jurisdiction. A divided panel held that Congress did not intend federal courts to enforce the contract terms of FEHBA plans since Congress had not created a private right of action for suits against beneficiaries and did not explicitly grant federal courts the power to adjudicate such contract disputes. This decision conflicts with similar decisions in the Seventh and Eighth Circuits, which held that federal courts do have jurisdiction over the enforcement of contracts formed under FEHBA.

The petitioners argued that federal law governed such litigation because of the FEHBA preemption clause, which states that the terms of contracts formed under the statute preempted state laws or regulations relating to health insurance. Moreover, petitioners argued, FEHBA contract litigation involves both unique federal interests and a significant conflict between the application of state law and federal policies, thus satisfying the criteria for the application of federal common law.

The United States’ amicus brief supporting cert. can be found here.