USCA1 Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

____________________

No. 95-1964

UNITED STATES OF AMERICA,

Plaintiff, Appellee,

v.

RHODE ISLAND INSURERS' INSOLVENCY FUND

Defendant, Appellant.

____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Francis J. Boyle, Senior U.S. District Judge]

__________________________

____________________

Torruella, Chief Judge,

___________

Cyr and Stahl, Circuit Judges.

______________

____________________

Margaret A. Robbins,
____________________

with whom Joseph C. Tanski

_________________

and Hutchi
______

Wheeler & Dittmar were on brief for appellant.

_________________
Clifford M. Pierce, Assistant
___________________

Regional

Counsel, Department

Health and Human Services, with whom Sheldon Whitehouse, United Sta
__________________
Attorney, and

Michael P. Iannotti, Assistant

United States Attorn

___________________
were on brief for appellee.

____________________

April 5, 1996
____________________

CYR,
CYR,

Circuit Judge.
Circuit Judge.
_____________

whether

section 1395y(b)(2)(a)

Act, 42

U.S.C.

various sections

Act

of the

Fund (the

"MSP provision"), preempts

to shift

Insolvency Fund

financial responsi-

from the

"Fund") to the

court held the

appeal is

Medicare Secondary-Payer

insurance coverage

The district

in this

Rhode Island Insurers'

which purport

for "primary"

Insurers' Insolvency

program.

of the

1395y(b)(2)(a) (the

(the "RIIIFA")

bility

The question

Rhode Island

federal Medicare

challenged RIIIFA provi-

sions preempted, the Fund appealed, and we now affirm.

I
I

BACKGROUND
BACKGROUND
__________

Enacted by

the Rhode

Island Legislature in

1988, the

RIIIFA requires all insurers licensed in Rhode Island to make pro

___

rata
____

monetary contributions to the Fund to meet certain types of

insurance claims

which have

lodged against licensed

become insolvent, R.I.

excluded classes

insolvency

"deemed

by

of insurance

[to be]

licensed

[under the policy] on

subject

Gen. Laws

claims).

Rhode Island

the insurer

Rhode Island

to the

insurers

27-34-3 (listing

Upon a declaration

insurer,

extent of

the covered claims," id.

___

the

of

Fund is

the obligations

27-34-8(a)(2),

to specified limitations on the amount of coverage, see,

___

e.g., id.
____ ___

27-34-8(a)(1)(iii)

The RIIIFA

defines the

[insurance] claim

term

(setting $300,000 cap per claim).

"covered claim"

. . . submitted

as "an[y]

by a claimant," id.
___

unpaid

27-34-

5(8), but excludes

any amount "due any . .

subrogation recoveries or otherwise," id.

___

. [other] insurer as

27-34-5(8)(ii)(C).

"nonduplication of

ants

recovery" provision requires all

to exhaust in the first instance

of recovery under any

which

Fund claim-

any "claim or legal right

governmental insurance or guaranty program

is also a covered

claim," and permits

the Fund to reduce

its

payments on covered

Id.
___

claims by the

amount thus recoverable.

27-34-12(b).

In

1989-90, the

approximately

$14,000

in

federal

Medicare

medical benefits

program

to

disbursed

three

Medicare

beneficiaries who had sustained injuries in automobile accidents.

When

the

their Rhode

Island-licensed automobile

American Universal Insurance

insurance carrier,

Company ("AUIC"), was declared

insolvent, the three Medicare beneficiaries filed claims

the Fund.

The Fund allowed their claims but deducted the $14,000

previously disbursed to them

citing RIIIFA

States

RIIIFA

against

under the federal Medicare program,

27-34-5(8)(ii)(C) and 27-34-12(b).

promptly challenged

the

27-34-5(8)(ii)(C) and

deductions on

The United

the ground

27-34-12(b), which

that

purport to

shift "primary" insurance coverage from the Fund to Medicare, are

inconsistent with federal law, and thus preempted.

The pertinent

the Social

Security Act, 42

Reconciliation

express purpose

ments by

able

their

MSP provision,

Act of

U.S.C.

1980), was

of lowering

found in Title

1395y(b) (Omnibus

enacted by

Congress

XVIII of

Budget

for the

overall federal

Medicare disburse-

requiring Medicare beneficiaries to

exhaust all avail-

private automobile insurance

Medicare coverage.

coverage before

resorting to

See H.R. Rep. No. 1167, 96th Cong., 2d

___

Sess. 389, reprinted in 1980 U.S.C.C.A.N. 5526; infra note 3.

_________ __
_____

that

end, the

beneficiary for

can

MSP provision

prohibits Medicare

medical expenses if

payments to

"payment has been

To

made, or

reasonably be expected to be made promptly (as determined in

accordance with regulations) under . . . an automobile or liabil-

ity insurance policy or

plan (including a self-insured plan)

under no-fault insurance."

42

C.F.R.

411.32(a)

42 U.S.C.

the third party payer

1395y(b)(2)(A); see also

___ ____

("Medicare benefits

benefits payable by a third party

or

are

secondary

to

payer even if the State law or

____ __ ___ _____ ___

states that its benefits are

secondary to

______ ____ ___ ________ ___

Medicare benefits

or otherwise
__ _________

limits its payments

______ ___ ________

beneficiaries.") (emphasis added).1

_____________

program

Moreover, once the

id.
___

becomes subrogated

1395y(b)(2)

to the rights

(B)(iii), and

[insurance] plan" for reimbursement in the

es, id.
___

Medicare

United States

see id.
___ ___

the Fund balked

sue the

in-

"primary

form of double damag-

at voluntary

reimbursement, the

filed suit in federal district

court for $28,000,

The United States

alleged that the MSP

permit the 1989-90 Medicare payments

"primary"

may

of the

1395y(b)(2)(B) (ii) & (b)(3)(A).

When

not

to Medicare
__ ________

makes a payment on a claim covered by private insurance,

the United States

sured,

_________

liability payments,

since the

provision does

to be characterized as

injuries to

the three

Medicare

beneficiaries were

covered under

a "primary

plan"

____________________

1The Medicare

regulations define a "plan"

as "any arrange-

ment, oral or written, by one or more entities, to provide health

benefits
illness."

or medical care or assume legal liability for injury or

42 C.F.R.

411.21.

their

AUIC automobile

insurance policies

and

therefore the

Fund, as

primary

policy

the "deemed"

AUIC

insurer, must

insurance coverage

meet the

under

each beneficiary's

before Medicare could be held liable.

See R.I. Gen. Laws

___

27-34-8(a)(2).

pleadings,

based

The United

on its

cap

maximum $300,000

States moved for

preemption claim.

cross-motion for judgment on

judgment on

The Fund

the

filed a

the pleadings, arguing, among other

things,

that the first

clause of the

U.S.C.

1012(b), see
___

infra note
_____

The district

court

McCarran-Ferguson Act, 15

2, forecloses

the preemption

claim.

States.

892

granted judgment

for

the

United

United States v. Rhode Island Insurers' Insolvency Fund,

_____________
______________________________________

F. Supp.

370 (D.R.I.

McCarran-Ferguson Act's

1995).

First, the

court

ruled the

anti-preemption presumption inapplicable

because

the MSP

provision

relat[ing] to the business

is a

federal statute

"specifically

of insurance," thus coming

express

exception to

374-79.

Employing conventional preemption analysis, the district

court

the anti-preemption

within an

Id. at
___

went on to conclude that the MSP provision, ordaining that

Medicare

coexist

provides

"secondary"

medical

with RIIIFA's shift of primary

Medicare program as a subrogee-insurer.

II
II

DISCUSSION
DISCUSSION
__________

A.
A.

presumption.

Standard of Review
Standard of Review
__________________

coverage

only,

cannot

liability to the federal

Id. at 379-80.
___

We review judgments on the pleadings de novo, accepting

__ ____

all

allegations

appellant.

and

reasonable

inferences

favorable

to

the

See Santiago de Castro v. Morales Medina, 943 F.2d

___ ___________________
_______________

129, 130 (1st Cir. 1991).

presents a pure

Similarly, a federal preemption ruling

question of law subject to plenary

review.

See
___

New Hampshire Motor Transp. Ass'n

__________________________________

v. Town of Plaistow, 67 F.3d

_________________

326, 329 (1st Cir. 1995).

B.
B.

The McCarran-Ferguson Act

The McCarran-Ferguson Act
_________________________

As

this court

under the Supremacy

be found only

has

recognized, "[f]ederal

preemption

Clause, see U.S. Const. art. VI, cl. 2, will

___

if there

is `clear' evidence

of a

congressional

intent to preempt state law, or we are persuaded that the federal

and state statutes, by their very terms, cannot coexist."

Summit
______

Inv. and Dev. Corp. v. Leroux, 69 F.3d 608, 610 (1st Cir. 1995);
____________________
______

see
___

69

also Louisiana Pub. Servs. Comm'n v. FCC, 476 U.S. 355, 368____ ____________________________
___

(1986).

In the

field of insurance

McCarran-Ferguson Act,

15 U.S.C.

regulation, however, the

1011-1015,

may preclude the

application

of

normal

federal preemption

principles

provided

three conditions are met.2

____________________

2 The McCarran-Ferguson Act provides, in pertinent part:

(a)

The business of

engaged therein, shall

insurance, and

be subject to

several States which relate

every person

the laws of

the

to the regulation or taxa-

tion of such business.

(b)

No

Act of

Congress

shall

be construed

to

invalidate, impair, or supersede any law enacted by any

State

for the

insurance,

purpose of

or which

business, unless

regulating the

imposes

a fee

or tax

such Act specifically

business of insurance:

business of
upon such

relates to the

Provided, That . . . [the Sher-

First, the

in Title XVIII

of insurance."

have

here,

the MSP provision

must not "specifically relat[e] to the business

Second, the state law

here, the RIIIFA

must

been enacted "for the purpose of regulating the business of

insurance."

or

federal statute

Third, the MSP provision

supersede" the

United

RIIIFA provisions

States the "primary" insurer.

the Treasury v. Fabe, 113

_____________
____

must "invalidate, impair,

which purport to

make the

See United States Dep't of

___ ______________________

S. Ct. 2202,

2208 (1993); Villafane__________

Nerez v. FDIC, 75 F.3d 727, 735 (1st Cir. 1996).

_____
____

The

district court

ruled

the

McCarran-Ferguson

Act

inapplicable because the first precondition recited above was not

met;

that is, it found that the MSP provision does "specifically

relat[e]

to the

business of

Marion County v. Nelson,

______________
______

1996)

(holding that

expressly

permits

towns, is a

insurance."

1996 WL 130728, at

a federal

statute, 12

national banks

to

sell

See Barnett Bank of

___ ________________

*12 (U.S. Mar. 26,

U.S.C.

92, which

insurance in

statute which "specifically relates to

small

the business

of insurance," and preempts a state statute which prohibits banks

from selling

insurance).

MSP provision does

not come

"business of insurance" set

On

appeal, the Fund argues

within the definition

that the

of the

term

forth in United Labor Life Ins. Co.

___________________________

v. Pireno, 458 U.S. 119 (1982).

______

The United States responds that

Pireno,
______

a case decided under the second or "antitrust" clause of

______

____________________

man, Clayton, and FTC antitrust acts] shall be applicable to the

business of

insurance to

the extent

that

such business is not regulated by State law.

15 U.S.C.

1012.

15

U.S.C.

1012(b), see supra note

___ _____

2, is not applicable in the

present case.

statute

Because

"specifically

irrespective of any

Pireno, 458
______

tive, and

test),

130728,

we conclude that the

relating to

the business

formal application of

U.S. at 129 (noting

we need not reach this issue.

*9

(citing

extended three-factor

ens, 44 F.3d
___

Pireno as
______

of insurance,"

the Pireno test,

______

that no one factor

that the three-part standard

at

MSP provision is

see
___

is disposi-

contemplates a balancing

See Barnett Bank, 1996 WL

___ ____________

"context[],"

but

foregoing

analysis); Owensboro Nat'l Bank

____________________

v. Steph______

388, 391 (6th Cir. 1994), petition for cert. filed,

________ ___ _____ _____

64 U.S.L.W. 3069 (U.S. July 13, 1995)

(No. 95-74); infra note 5.

_____

The relevant inquiry under the first clause of section 1012(b) of

the

McCarran-Ferguson Act focuses on

two basic elements:

"spe-

cific relation" and "business of insurance."

1.
1.

"Specific Relation"
"Specific Relation"
_________________

The

import of

the

"specific

relation" element

readily discernible from its pre-enactment history.

the United

States Supreme Court

is

Before 1944,

consistently had held

that the

Dormant Commerce Clause of the United States Constitution did not

_______

invalidate

state

burdens on

interstate commerce.

with an

late

ruled

insurance

laws

which

imposed

However,

impermissible

when first confronted

affirmative congressional enactment purporting

___________

the interstate

that the

commerce" and

business of

business

subject

insurance directly,

of insurance

to regulation

is

part of

to regu-

the Court

"interstate

(hence, preemption)

under

Congress's commerce-clause

powers.

See United States v. South___ ______________

______

Eastern Underwriters Ass'n, 322 U.S. 533, 544 (1944).

__________________________

Congress

promptly

Eastern Underwriters, by
_____________________

repudiated

enacting the

the holding

first clause

in

South______

of section

1012(b), see supra note 2,

___ _____

which restored immunity from

commerce-clause challenges to State

insurance laws.

dormant

See Pruden___ _______

tial Ins. Co. v. Benjamin, 328 U.S. 408, 429-30 (1946); Silver v.
_____________
________
______

Garcia,
______

760 F.2d

33,

36-37 (1st

further, however, by providing

Cir.

1985).

Congress

went

that even statutes enacted pursu-

ant to Congress's commerce-clause powers, for general application

to interstate

commerce, would

not preempt state

insurance laws

unless the federal statute expressly announced Congress's specif-

ic

law.

intention to inject itself

into the area

of state insurance

See Barnett Bank, 1996 WL 130728, at *10 ("[T]he [McCarran]

___ ____________

Act does not seek to insulate state insurance regulation from the

reach of

all federal

regulation primarily

law.

against

Rather, it

seeks to

inadvertent federal

protect state

intrusion

--

say, through

enactment of

a federal

statute that

describes an

affected activity in broad, general terms, of which the insurance

business happens

guson

Act

1012 imposes

gressional power

form

of

to comprise

inverse

one part.").

no substantive constraint

to regulate

insurance, but simply

preemption,

general federal rules

letting state

law

on the con-

"creates `a

prevail

over

those that do not "specifically relate[]

to the business of insurance."'"

(quoting

Thus, McCarran-Fer-

Villafane-Nerez, 75 F.3d at 735

_______________

NAACP v. American Family Mut. Ins. Co.,

_____
______________________________

978 F.2d 287,

293 (7th Cir.1992), cert. denied, 113 S. Ct. 2335 (1993)).

_____ ______

That

is to say, section 1012 "`impos[es] what is, in effect, a clear--

statement

rule.'"

Barnett Bank,
____________

Id.
___

1996 WL

(quoting Fabe, 113 S.

____

130728, at

*12 (rejecting argument

Fabe's "clear-statement" rule imposed any

____

that a

federal statute referring

Ct. at 2211); see

___

that

heightened requirement

to "insurance" must

also "use

the words 'state law is pre-empted,' or the like").

The parties dispute whether the Medicare program itself

_______

specifically relates to insurance,

after

the

arguably at

section

the

1945 enactment

least, is

of

since it was established long

the

not the

McCarran-Ferguson Act,

typical insurer

1012 (i.e., a private insurance

Fund points

to the

recent decision

and,

contemplated by

carrier).

For example,

in Kachanis
________

v. United
______

States, 844 F. Supp. 877 (D.R.I. 1994), which held that a Federal
______

Employees' Compensation Act ("FECA")

United States to

liable to

recover in subrogation

an injured

relating to the

employee, is not

business of

no specific

mention of

unlike

plainly generic

from any "third

a statute

insurance."

FECA does provide insurance-like

the

provision, which allows the

Id.
___

party"

"specifically

at 882

("[W]hile

benefits to employees, there is

insurance in

"third

the statute.").

party"

However,

reference in

FECA,

connoting a regulation of

pass both insurers and

provision

ance,"

see
___

in the

42

general application which might encom-

non-insurers (e.g., tortfeasors), the MSP

Medicare Act

U.S.C.

specifically adverts

1395y(b)(2)(A)

to "insur-

(precluding

Medicare

coverage if "payment has been made, or can reasonably be expected

10

to be made promptly . . . under . . . an automobile

or liability

insurance policy or plan") (emphasis added), as does its legisla_________

tive history.3

Whether the Medicare program or any other govern-

____________________

3The House Report provides, in relevant part:

Under Title VIII, Medicare will have residual

rather than primary liability for the payment
of services required
result of an injury

by a

beneficiary as

or illness sustained

a
in

an auto accident where payment for the provision of such services

can also be made under

an automobile insurance
_________
provision, it is

policy.
______

Under

expected that Medicare will

ordinarily pay for the beneficiary's

the

this

care in

usual manner and then seek reimbursement

from the private insurance carrier after, and

_________ _______
to the extent that, such

carrier's liability

under the private policy for the services has

been determined.
is the

Under present law, Medicare

primary payor

(except where

men's compensation program

a work-

is determined

to

be responsible for payment for needed medical

services) for hospital

and medical

received by beneficiaries.
in cases

in which

services is

services

This is true even

a beneficiary's

related to an

need for

injury or illness

sustained in an auto accident and the services

could have

been

paid for

by a

private

insurance carrier under the terms of an auto_________ _______

_____
mobile insurance
______ _________
care has

policy.
______

As a result, Medi-

served to relieve

of obligations

to pay

private insurers
_______ ________

the costs

of medical

care in cases where there would otherwise

liability
tract.
_____

under

the private
_______

The original

inclusion of this

program policy in the

the attendant

law

difficulties involved

ascertaining private
_______

and

insurance con_________ ____

concerns that prompted

the administrative
in

be

insurance liability
_________ _________

delays in

payment

no

longer justify retaining the policy, particularly

if

it

is

understood

that immediate

payment may be made by Medicare with recovery

attempts

undertaken

liability is

only subsequently

established.

when

In order to avoid

excessive administrative costs and efforts in

pursuing

minor

recoveries,

the

committee

expects the Secretary of HHS to establish

regulations

rules

regarding

the

in

minimum

11

mental "insurer" technically is

of insurance" is not

*9 ("The word

interpreted it

for

considered part of the "business

material. Barnett Bank, 1996 WL

____________

'relates' is

highly general, and

broadly in other pre-emption

example, the

Internal Revenue

130728, at

this Court

contexts.").

Service is

not part

has

Thus,

of the

"business of insurance,"

Regulation,

rendered

terms."

1219

the

See
___

which

and yet

resulted in

McCarran-Ferguson

we have held

tax

that a

on insurance

Act "inapplicable

Hanover Ins. Co. v. Commissioner,

_________________
____________

(1st Cir.),

cert. denied,
_____ ______

Texas Employers' Ins. Ass'n v.

____________________________

444 U.S.

Treasury

companies,

by

its

598 F.2d

915 (1979);

Jackson, 820 F.2d

_______

own

1211,

see also
___ ____

1406, 1414-15

(5th Cir. 1987), cert. denied, 490 U.S. 1035 (1989) (holding that
_____ ______

the Longshore and

Harbor Workers' Compensation

relates to "business of insurance").

Therefore

Act specifically

we conclude that

Congress expressly and deliberately injected itself into the area

of state insurance law

with its enactment of the

See Barnett Bank, 1996 WL

___ _____________

130728, at *11 ("The

MSP provision.

language of the

Federal Statute before us is not general.

to insurance.

It refers specifically

Its state regulatory implications are not surpris-

ing, nor do we believe them inadvertent.").

2.
2.

"Business of Insurance"
"Business of Insurance"
_____________________

____________________

amounts

estimated

as

recoverable

procedures for seeking recovery

carriers.
________
to

the

from private
_______

Such procedures are to be similar

those currently

seeking

and

recovery

employed by
in workmen's

Medicare in
compensation

cases.

H.R. Rep. No. 1167,

96th Cong., 2d Sess. 389,

U.S.C.C.A.N. 5526 (emphasis added).

12

reprinted in 1980
_________ __

The second element

that the federal statute actually

pertain

to activities that are

part of the

ance"

is satisfied as

well.

The MSP provision regulates

core

relationship between

private insurer

"`Statutes aimed

at protecting or

[between insurer

and insured], directly or

regulating

2208

(1969)).

The

SEC v.
___

and its

the

insured.

regulating th[e] relationship

the "business of insurance."'"

(quoting

"business of insur-

National Sec., Inc.,

____________________

indirectly, are laws

Fabe, 113
____

393 U.S.

"core" matters encompassed within

S. Ct. at

453, 460

the term "busi-

ness of insurance"

that

could

be

enforcement,"

may include "the

issued,

its

type of [insurance]

reliability,

policy

interpretation,

and

cf. id. at 2211,4 as well as the standards govern___ ___

ing performance under insurance contracts, cf. id. at 2212.

___ ___

e.g., Barnett Bank, 1996 WL 130728, at *9

____ ____________

See,
___

(noting that 12 U.S.C.

12 "specifically relates to the business of insurance" because,

inter
_____

alia, it
____

banks

from guaranteeing the 'payment of any premium on insurance

policies issued

its

"sets forth

certain specific

through its agency'").

rules prohibiting

The MSP

provision, and

implementing regulations, explicitly prohibit private insur-

ers from

negotiating or

____________________

enforcing

any insurance-contract

term

4Fabe
____
"business of

defines the

activities encompassed

insurance," albeit in

second prong of

within the

the process of

term

applying the

1012(b), i.e., whether a state priority statute

is a law enacted "for

the purpose of regulating the

insurance."

Nonetheless,

"business of

insurance" is a term

second prongs under

Fabe is
____

1012(b).

apposite to the
common to both the

business of

extent that

first and

See Atlantic Cleaners & Dyers v.

___ __________________________

United States, 286 U.S. 427, 433 (1932) (same word or phrase used
_____________
repeatedly in statute

is presumed to have same

v. Marshall, 608 F.2d 525, 528 (1st Cir. 1979).

________

13

meaning); Fortin
______

which purports to make

lieu of

Medicare the primary-insurance obligor in

a private insurance

state law.

secondary

See 42
___

C.F.R.

carrier, even though

411.32(a)

("Medicare benefits

are

to benefits payable by a third party payer even if the

____ __ ___

State law or the third party payer

_____ ___

sis added).

authorized by

states [otherwise].") (empha______ _________

This overt federal intervention

directly control-

ling the core contract

relationship at both the

negotiation and

performance stages

establishes that the MSP

provision "spe-

cifically

relat[es] to

explains the litany

conclusion

factors.5

many

the

business of

of unanimous decisions

without

insurance," and

that reach the

extended analysis

of

the

See Colonial Penn. Ins. Co. v. Heckler, 721 F.2d

___ _______________________
_______

fully

same

Pireno
______

431,

____________________

5The more specific challenges made by the Fund, based on the

three-factor Pireno
______

test,

gain it

nothing.

First,

the

Fund

contends that the MSP provision does not involve a practice which
has

the effect

risk,

of

see Pireno,
___ ______

transferring or
458 U.S.

spreading a

at 129,

policyholders'

because the

MSP provision

merely shifts risk between the Medicare program and the Fund, not
between the insured and the Fund.
_______
be read so narrowly.
ance

We do not think Pireno is

______

It held only that

company activities, such as

peer review

committee

bills were "reasonable," are

risk

allocation in

federal statute

whether

insurance

contracts.

the [regulated]

States can

at 130-31.

from imposing the

to the policyholder, who

The same consideration attends to

Finally, despite

Id. at 129 (second factor is

___

practice is

relationship between

sured").

Id.
__

the Medicare program clearly and

second Pireno factor as well.

______

policy

medical

have to pay higher premiums to offset the insurer's

increased liability exposure.

"whether

claimants'

prohibiting a private insurer

directly affects the allocation of risk

the

of a medical

not part of the rough and tumble of

primary insurance obligation on

is likely to

purely peripheral insur-

an insurer's use

to consider

to

an integral

the [private]
the

part of

insurer and

MSP provision

that the

the

the in-

United

pursue "any entity" for reimbursement, see id. (third

___ __

factor is "whether
ties within

the [regulated] practice is

the insurance

reimbursement to

industry"), the MSP

limited to enti-

provision limits

recoveries from "primary plans,"

whose defini-

tion lists only entities which are clearly "within" the insurance
industry.

See 42 U.S.C.
___

1395y(b)(2)(A) ("primary plan" means

14

442 n.6 (3d

Co., 763
___

States
______

Cir. 1983); Varacalli v. State Farm Mut. Auto. Ins.

_________
___________________________

F. Supp.

205, 209

(E.D.

Mich. 1990) (citing

United
______

v. Blue Cross and Blue Shield of Michigan, 726 F. Supp.

________________________________________

1517,

1523 (E.D. Mich. 1989));

1155, 1165 n.8 (S.D.N.Y. 1984).

Statute

is a

federal

Abrams v. Heckler,
______
_______

As

582 F. Supp.

the Medicare Secondary-Payer

statute "specifically

relat[ing] to

the

business of insurance," the McCarran-Ferguson Act is inapplicable

and the

preemptive effect of

Island Insurers'

the MSP provision upon

Insolvency Fund Act therefore

the Rhode

must be reviewed

under conventional preemption principles.

C.
C.

Conventional Preemption Analysis

Conventional Preemption Analysis
________________________________

Notwithstanding

Ferguson Act, the Fund

the

inapplicability of

argues that the priority mandated

MSP provision does not trump the RIIIFA,

preemption analysis,

the McCarran-

by the

even under conventional

because the priority provisions

in the two

statutes

at

are compatible. See Summit Inv. and Dev. Corp., 69 F.3d

___ __________________________

610.

First,

the Fund

permits the United

points

a payment

such payment can

"reasonably be

to the Medicare

argues, it would

beneficiary to

the MSP

States to seek reimbursement

insurer has made

quently, it

out that

only if another

beneficiary, or

expected to be

be unreasonable
____________

expect reimbursement

provision

made."

for any

from the Fund,

if

Conse-

Medicare

because the

____________________

"a group health plan

men's

compensation

insurance

policy

or large group health plan,

law

or plan

or

plan, an
. .

automobile

or no-fault

Kachanis, 844 F. Supp. 877 (D.R.I. 1994) (holding

________
ble

. . . a
or

work-

liability

insurance"); cf.
___

1012 applica-

to FECA provision allowing United States to recover from any

"third party").

15

RIIIFA

exhaustion provision

exhaust

all governmental

ments.

This argument

federal preemption,

RIIIFA

the

liability as

requires

insurance before

altogether

however,

exhaustion provision

mutually

explicitly

inconsistent

receiving Fund

disregards

by implicitly

continues in

allocations

claimants

pay-

the function

assuming

that

to

of

the

force notwithstanding

of

primary

insurance

denoted in the MSP provision and the RIIIFA.

Thus,

the Fund's argument is fatally circular: the Medicare beneficiary

could "reasonably expect" the Fund

to take the primary insurance

risk if and because the MSP provision preempts the Fund's exhaus__
_______

tion provisions.

Second, the

plan,"

as

defined

by

1395y(b)(2)(B)(ii),

insurance

policy

Fund contends that

the

MSP

(b)(3)(A)

or

it is

provision,

("an

plan"), because

not a

see
___

automobile

it

is

not

42

or

"primary

U.S.C.

liability

the Medicare

beneficiaries' private insurance carrier, but rather a non-profit

governmental agency.

The Fund

further argues that it

"plan," as defined by

Medicare regulations, because an insurance

insolvency-guarantor statute like the

"policy," and therefore is not

by

one or more entities,

is not a

RIIIFA is not an insurance

an "arrangement, oral or written,

to provide health

benefits or medical

care or assume legal liability for injury of illness."

411.21; see supra note 1.

___ _____

Neither contention is tenable.

The RIIIFA itself provides

that, upon a declaration of

insolvency, the Fund is "deemed the insurer to

______

obligations

42 C.F.R.

the extent of the

[under the policy] on the covered claims," see R. I.

___

16

Gen.

Laws

specified

27-34-8(a)(2) (emphasis

added), subject

limitations on the amount of coverage.

is deemed the private

solely to

Thus, the Fund

insurer, and hence a "primary

plan" under

the MSP provision and its regulations.6

III
III

CONCLUSION
CONCLUSION
__________

For the foregoing reasons,

the district court judgment

___ ________ _____ ________

is affirmed, with costs to plaintiff-appellee.

__ ________ ____ _____ __ __________________

____________________

6Finally,

the

Fund

raises

a puzzling

challenge

to

the

implicit district court ruling that RIIIFA's preempted provisions

are severable from its non-preempted
no part of

RIIIFA can

Legislature
insolvent

provisions.

be struck down

envisioned

the Fund

because the Rhode

only

insurers' policyholders,

It argues that

as a

and that

"last

resort" for

it would

enacted RIIIFA at all had it known that its core

Island

not have

"covered claim"

definition was going to be so severely restricted with respect to

Medicare

benefits.

contention

from

its

seems counterproductive

If the preempted
the

Aside

proper

from the

RIIIFA provision is

relief is

not, as

conjectural nature,

Fund's standpoint.

not severable, of

the

this

Fund apparently

course,

assumes, a

holding that the entire RIIIFA stands as enacted, but the invali_______
dation of the
______
extinction.
U.S. 612,
er,

as

entire RIIIFA, which

______

would result in

appellant's

See, e.g., Hooper v. Bernalillo County Assessor, 472

___ ____ ______
__________________________
624 (1985).

Beyond this, no more need be said, howev-

any nonseverability

decision

is for

the

Rhode Island

___
courts.
down

See Zobel v. Williams, 457 U.S. 55, 65

___ _____
________

portion of

state statute,

but

leaving ultimate

nonseverability for state-court resolution).

___

17

(1982) (striking

issue of