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How CIGA Outflanks Medicare
A Panel of the Ninth Circuit Court of Appeal, in a de novo review, has held that the California Insurance Guarantee Association (“CIGA”) is not responsible for reimbursement to Medicare for conditional payments made for injured workers’ medical treatment. CIGA v. Alex M. Azar II; et al., United States Court of Appeals for the Ninth Circuit, Central District (Nos. 17-56526; 17-56528), October 10, 2019.
In the Opinion by Judge Jacqueline Nguyen, the Court addressed CIGA’s request for declaratory and injunctive relief on the issue. While there is no fact-filled backstory regarding any particular injured worker, the opinion provides interesting fodder for anyone that enjoys statutory construction puzzles.
Underlying the dispute, Medicare made payments for medical expenses for certain injured workers whose claims were being administered by CIGA. Medicare demanded reimbursement from CIGA just as it does from solvent carriers, which are the primary payers for work related medical expenses. Medicare argued that CIGA was also a “primary payer” because CIGA had stepped into the shoes of the insolvent carrier. Therefore, Medicare maintained its status as secondary payer for work related treatment even when CIGA is administering the claim. CIGA’s response to Medicare was, and I paraphrase, “You may be the secondary payer but we are, and always will be, the payer of last resort. And besides, we are statutorily prohibited from reimbursing you.”
Nevertheless, the District Court agreed with Medicare that CIGA was liable for reimbursement. The Lower Court opined that CIGA is a primary payer for covered claims. As such, the Federal Medicare Act preempts the State Guarantee Act because the two statutes are in conflict with each other:
• CIGA arose from the California Guarantee Act to insure against loss from an insolvent carrier’s failure to fulfill its obligations. Cal. Ins. Code §§ 1063 – 1063.18. Among its several distinguishing factors, CIGA does not assume liability for claims where there is any other insurance, and does not cover claims of assignees, or those claiming right of subrogation. Furthermore, CIGA may not pay obligations to a state or federal government. §1063.1(c)(4).
• The Federal Medicare Act specifically provides that any payment made by Medicare for expenses that can reasonably be expected to be paid under the Workers’ Compensation statutory scheme, shall be conditioned on reimbursement. 42 U.S.C. §§1395y(b)(2)(A)(ii); (b)(2)(B)(i). Medicare is, therefore, a secondary payer when it comes to Workers’ Compensation and, in general, prohibits payments when a “primary plan” is reasonably expected to make payments for the same medical care.
As the District Court pointed out, if CIGA is a primary payer in the administration of covered claims, then it is impossible for CIGA to comply with both statutes. On appeal, the Ninth Circuit Panel reversed the District Court’s decision and held that CIGA is not liable for reimbursement to Medicare because it is not a primary payer. The Court does delve into preemption doctrine to some degree. It points out that there is no preemption clause in the Medicare Act (though there is in the implementing regulations). The Court further points out that insurance regulation is traditionally within the purview of the states. Therefore, without an express intent to preempt state law, it cannot be assumed that Congress meant for the Medicaid Act to preempt the Guarantee Act.
The real crux of the holding is that CIGA is not a primary payer because it does not actually stand in the shoes of the insolvent insurer. The Court finds error in classifying CIGA as a primary payer based on the nature of benefits provided (e.g. temporary disability, permanent disability and treatment). We should instead classify according to what triggers the obligation. A work-related injury triggers a solvent insurer’s obligations; CIGA’s obligations are triggered only by an insurer’s insolvency.
The Court analogized legal malpractice insurance to CIGA. In an instance of legal malpractice in a bodily injury case, malpractice insurance might have to pay damages for a client’s unrecovered medical expenses. Clearly, legal malpractice insurance is not a primary medical insurance plan. The triggering event would be the malpractice and not the injury.
Likewise, CIGA is not a “primary plan” within the meaning of the Medicare Act. The Guarantee Act prohibits CIGA from reimbursing Medicare unless and until the U.S. Supreme Court says otherwise.
By Heather Franco, Associate Partner, Riverside, October 11, 2019