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New York Life Insurance Co. v. United States

September 15, 1999

NEW YORK LIFE INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
UNITED STATES, DEFENDANT-APPELLEE.



Before Rich, *fn1 * Schall, and Bryson, Circuit Judges.

The opinion of the court was delivered by: Schall, Circuit Judge.

Appealed from: United States Court of Federal Claims Judge Robert H. Hodges, Jr.

New York Life Insurance Company ("New York Life") appeals the April 22, 1998 decision of the United States Court of Federal Claims dismissing its complaint against the United States. New York Life Ins. Co. v. United States, 41 Fed. Cl. 60 (1998). In its suit, New York Life sought to recover money it paid as insurer under a group health plan between December 21, 1990 and August 10, 1993 for the medical expenses of its insurance agents age 65 and over. It contended that, during the indicated period, the primary responsibility for paying health care costs for these agents rested with Medicare. The Court of Federal Claims dismissed the complaint for failure to state a claim upon which relief could be granted, based upon its Conclusion that Medicare was a secondary payer and that New York Life was responsible as the primary payer. We vacate and remand.

BACKGROUND

A. The statutory and regulatory scheme

Until 1980, Medicare "paid for services without regard to whether they were also covered by an employer group health plan. As a cost-cutting measure, however, Congress eventually enacted a series of amendments designed to make Medicare a `secondary' payer with respect to such plans." Health Ins. Ass'n of Am. v. Shalala, 23 F.3d 412, 414 (D.C. Cir. 1994), cert. denied, 513 U.S. 1147 (1995). These amendments are known as the "Medicare as Secondary Payer" ("MSP") statute or the MSP provisions. They are codified at 42 U.S.C. § 1395y. When the MSP statute applies, a private group health plan must pay for an expense first. Thus, it is the "primary payer." Medicare pays for any remaining amount of the expense not satisfied by the group health plan. Consequently, it is the "secondary payer." See Blue Cross & Blue Shield of Texas, Inc. v. Shalala, 995 F.2d 70, 73 (5th Cir. 1993).

At issue in this case is the version of the "working aged" provision of the MSP statute that was in effect between December 21, 1990 and August 10, 1993, when New York Life made the payments that it sought to recover in its suit in the Court of Federal Claims. That provision made Medicare a secondary payer with respect to working individuals who were over age 64 but under age 70, and who were covered by group health plans. It was enacted as part of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, 96 Stat. 324, 353, and was codified at 42 U.S.C. § 1395y(b) (Supp. IV 1992). See New York Life Ins. Co., 41 Fed. Cl. at 61 n.1.

The working aged MSP provision in effect during the time period at issue made Medicare a secondary payer with respect to working aged individuals by providing in pertinent part as follows:

A group health plan--

(I) may not take into account, for any item or service furnished to an individual 65 years of age or older at the time the individual is covered under the plan by reason of the current employment of the individual (or the individual's spouse), that the individual is entitled to benefits under [Medicare], and

(II) shall provide that any employee age 65 or older, and any employee's spouse age 65 or older, shall be entitled to the same benefits under the plan under the same conditions as any employee, and the spouse of such employee, under age 65.

42 U.S.C. § 1395y(b)(1)(A)(i) (Supp. IV 1992). See also Pub. L. No. 101-239, 103 Stat. 2106, 2229 (1989); New York Life Ins. Co., 41 Fed. Cl. at 61.

The statute did not explain the language, "individual . . . covered under the plan by reason of the current employment of the individual." It did, however, incorporate by reference a definition of "group health plan" from the Internal Revenue Code, 26 U.S.C. § 5000(b)(1). That definition provided that a "group health plan" is "any plan of, or contributed to by, an employer . . . to provide health care . . . to the employer's employees . . . ." 26 U.S.C. § 5000(b)(1) (1992).

The Medicare Act authorized the Secretary of Health and Human Services to "prescribe such regulations as may be necessary to carry out the administration" of the Medicare program. 42 U.S.C. § 1395hh(a)(1) (1989). The Health Care Finance Administration ("HCFA"), which is part of the Department of Health and Human Services, is the agency charged with administering Medicare payments. See New York Life Ins. Co., 41 Fed. Cl. at 61. Originally, hcfa's regulations provided no guidance for determining whether the working aged MSP provision applied to a particular class of individuals. Specifically, the regulations did not identify what relationships were covered by the terms "employer," "employee," and "employment." See 42 C.F.R. § 405.340-344 (1985); New York Life Ins. Co., 41 Fed. Cl. at 61 n.3. In 1989, however, HCFA published a final rule expressly defining the term "employed" for purposes of the working aged MSP provision. See 54 Fed. Reg. 41716, 41744 (October 11, 1989); 42 C.F.R. § 411.70(d) (1989); New York Life Ins. Co., 41 Fed. Cl. at 61. The regulation provided that "`Employed' encompasses not only employees but also . . . self-employed persons." 42 C.F.R. § 411.70(d) (1989); see New York Life Ins. Co., 41 Fed. Cl. at 61.

In 1993, in the Omnibus Budget Reconciliation Act of 1993 ("OBRA 93"), Pub. L. No. 103-66, 107 Stat. 312, Congress made changes in the wording of the MSP statutory scheme. Specifically, it amended the definition of "group health plan" in 26 U.S.C. § 5000(b)(1) to include plans that "provide health care (directly or otherwise) to . . . others associated or formerly associated with the employer in a business relationship, or their families." OBRA 93, § 13561(e)(2)(A)(ii), 107 Stat. 595. In addition, it added the following definition of "current employment status" to the working aged MSP provision: "An individual has `current employment status' with an employer if the individual is an employee, is the employer, or is associated with the employer in a business relationship." OBRA 93, § 13561(e)(1)(H)(i), 107 Stat. 595, codified at 42 U.S.C. § 1395y(b)(1)(E)(ii) (1994). The statutory amendments became effective on August 10, 1993. OBRA 93, PL 103-66, 107 Stat 312.

A. The present dispute

New York Life provides a group health plan for its qualifying insurance agents. Between December 21, 1990 and August 10, 1993, it maintained contractual relationships with both active and retired agents. See New York Life Ins. Co., 41 Fed. Cl. at 62. During that period, it paid health expenses before Medicare for active agents age 65 and over, so long as the agents qualified for coverage under the group health plan. From January of 1991 through June of 1992, it also paid health expenses before Medicare for retired agents age 65 and over who met the qualifications of the plan. Finally, beginning in July of 1992, it paid health expenses before Medicare for retired agents age 65 and over whenever younger agents with the same qualifications would be entitled to coverage. See id.

Eventually, New York Life sought reimbursement from HCFA for the health expense payments of its agents age 65 and over that it had made primary to Medicare between December 21, 1990 and August 10, 1993. In making this claim, it acknowledged that, by reason of the statutory amendments effected by OBRA 93, it was the primary payer for health care expenses of its agents age 65 and over after August 10, 1993. It argued, however, that the MSP statute did not apply to its group health plan prior to the enactment of OBRA 93. After HCFA denied the claim, New York Life filed suit in the Court of Federal Claims, seeking recovery under the Tucker Act, 28 U.S.C. 1491(a)(1994).

In due course, New York Life moved for summary judgment. In so doing, it argued that, although the medical and hospital expenses that it had paid had been covered by its group health plan, the primary payer should have been Medicare. It reasoned that its agents were independent contractors and that, during the relevant period, the working aged MSP provision applied only to common law employees. See New York Life Ins. Co., 41 Fed. Cl. at 62. Because the provision did not apply to its agents, New York Life argued, Medicare as primary payer should have reimbursed it for the payments it had made under its plan. See id.

For its part, the government moved to dismiss New York Life's complaint for failure to state a claim upon which relief could be granted. The government contended that the MSP working aged provisions were not limited to common law employees prior to OBRA 93, but covered independent contractors as well. According to the government, OBRA 93 did not expand the working aged provisions to include independent contractors. Rather, it simply clarified the existing statute. Thus, New York Life was properly the primary payer on claims of its agents age 65 and older under its group health plan. See id. at 62-63.

In the Court of Federal Claims, both New York Life and the government asked the court to decide whether independent contractors were covered under the pre-OBRA 93 version of the MSP statute before deciding whether or not New York Life's agents were independent contractors, as asserted by New York Life. The parties adopted this stance because it was the government's position that the agents were covered by the statute in either event. Accordingly, in addressing the parties' motions, the Court of Federal Claims assumed that New York Life's agents were independent contractors. See id. at 60. The issue thus became whether, prior to OBRA 93, the working aged MSP provision applied to such "self-employed" independent contractors, as 42 C.F.R. ยง ...


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