Court Rules CIGA Not a “Primary Plan” Under the MSP

On October 10, 2019, the 9th Circuit Court of Appeals issued a landmark decision holding that the California Insurance Guaranty Association (CIGA) was not a primary plan under the Medicare Secondary Payer Act (MSP) (CIGA v. Azar, 2019 WL 5076945 (9th Cir., Oct. 10, 2019) (link to 9th Cir. Opinion)). The court’s ruling alleviates CIGA’s responsibility to reimburse the Center for Medicare and Medicaid Services (CMS) for conditional payments made on behalf of workers’ compensation claimants and may also obviate its need to adhere to Medicare Set-Asides for claim settlements.

The ruling stems from a lawsuit filed by CIGA seeking to curtail conditional payment reimbursement requests from CMS that were unrelated to covered claims. CIGA asked the court for a declaratory judgment holding that 1) CIGA is not a primary plan under the MSP, 2) that CMS must adhere to the claims bar date, and 3) that CMS’s all-or-nothing billing practice is improper and must not continue. The district court found in favor of CMS on the first two issues but agreed that CMS should only seek reimbursement for conditional payments from CIGA where the diagnostic code related to a covered claim. The parties cross-appealed.

The 9th Circuit focused exclusively on the preeminent issue; whether CIGA was a primary plan under the MSP. Like the district court, the 9th Circuit examined the issue in terms of federal preemption. The court began by reviewing the MSP to determine whether CIGA could be deemed a primary plan. While MSP does not define “primary plan”, it provides examples, such as state workers’ compensation acts. The court found that CIGA shares little with state workers’ compensation laws. While it may pay workers’ compensation claims, CIGA is triggered by an insolvency, not a work-related injury. Further, the California insurance laws specifically define CIGA’s as insolvency insurance. The court cited numerous examples of CIGA being deemed an “insurer of last resort”; a term antithetical to being a primary plan.

Finding that CIGA could not be deemed a primary plan under the MSP, the court turned its attention to whether Congress intended the MSP to preempt state laws governing insurer solvency. Congressional intent is derived from the statutory language and surrounding framework. Nothing in the MSP expressly related to insurer solvency. The closest indication the court could find was that the MSP supersedes state law with respect to Medicare Advantage plans under Part C and prescription drug plans under Part D, but that Congress clarified that those provisions did not apply to state laws relating to plan solvency. Thus, the 9th Circuit reversed.

What happens next is still an open question. CMS has until November 24, 2019 to seek an en banc appeal (review by the full 9th Circuit panel of judges) and until January 8, 2020 to file a writ of certiorari to the U.S. Supreme Court. It also has the option of amending the MSP to expressly apply to guaranty funds. Until then, this ruling is good law in the 9th Circuit and persuasive elsewhere. The application of the ruling to other guaranty funds requires a state-by-state analysis, though there is benefit to be gained from coordination. The NCIGF Legal Committee will be working with members to ensure the most effective response.

If you have any questions or comments, please reach out to John Blatt (jblatt@ncigf.org).

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