Cal. Ins. Guarantee Ass’n v. Azar, __ F.3d __, 2019 WL 5076945 (9th Cir. Oct. 10, 2019).
The California Insurance Guarantee Association (CIGA) is a state-run insurance scheme that pays benefits on behalf of insolvent insurers. California law prohibits CIGA from reimbursing state and federal agencies, like Medicare. In contrast, the Medicare Act contains a Secondary Payer Provision that requires a primary insurer to reimburse Medicare for any medical care included under the beneficiary’s policy with a primary insurer. In this case, CIGA administered workers’ compensation claims for several individuals whose insurers were insolvent. CIGA notified the Center for Medicare Services that some of the beneficiaries were entitled to medical care under Medicare, and Medicare paid for those expenses. CMS contended CIGA was the primary insurer required to reimburse Medicare for those expenses. CIGA sought a declaratory judgment to the contrary, but the district court ruled that federal law preempted California law, obligating CIGA to reimburse CMS.
The Ninth Circuit reversed, holding that insurance regulation is a field traditionally occupied by the states, and that nothing in the Medicare Act suggested that Congress intended to interfere with state regulation of insolvent insurers. Specifically, the Court determined that the Secondary Payer Provision did not apply to CIGA, so it was not obligated to reimburse Medicare for the medical expenses at issue. CIGA is not a workers compensation plan within the meaning of the Medicare regulations—an insured employee’s work-related injury is insufficient to trigger CIGA’s obligations, even though CIGA happened to pay the obligations of an insolvent workers compensation plan here. CIGA is simply an insurer of last resort that pays claims when there is no other insurer available.
Peder K. Batalden
Horvitz & Levy LLP
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