California Insurance Guarantee Association, Plaintiff-Appellee/ Cross-Appellant,
Alex M. Azar II, Secretary of Health and Human Services; U.S. Department of Health & Human Services; Center for Medicare and Medicaid Services, Defendants-Appellants/ Cross-Appellees.
and Submitted May 16, 2019 Pasadena, California
from the United States District Court for the Central
District of California No. 2:15-cv-01113-ODW-FFM Otis D.
Wright II, District Judge, Presiding
Tenny (argued) and Alisa B. Klein, Appellate Staff; Nicola T.
Hanna, United States Attorney; Joseph H. Hunt, Assistant
Attorney General; Civil Division, United States Department of
Justice, Washington, D.C.; for
T. Whitmer (argued), Hugh S. Balsam, and Julie L. Young,
Locke Lord LLP, Chicago, Illinois, for
Benjamin F. Aiken, Orrick Herrington & Sutcliffe LLP,
Washington, D.C.; John Blatt, National Conference of
Insurance Guaranty Funds, Indianapolis, Indiana; Thomas
Welsh, Orrick Herrington & Sutcliffe LLP, Sacramento,
California; for Amicus Curiae National Conference of
Insurance Guaranty Funds.
Becerra, Attorney General; Diane S. Shaw, Senior Assistant
Attorney General; Lisa W. Chao, Supervising Deputy Attorney
General; Laura E. Robbins, Deputy Attorney General; Office of
the Attorney General, Los Angeles, California; for Amicus
Curiae Dave Jones, Insurance Commissioner of the State of
Before: Jacqueline H. Nguyen and John B. Owens, Circuit
Judges, and Michael M. Baylson, [*] District Judge.
panel reversed the district court's judgment in favor of
Medicare in an action brought by the California Insurance
Guarantee Association ("CIGA"), seeking declaratory
relief after Medicare paid for and demanded reimbursement
from CIGA for medical expenses of certain individuals whose
workers' compensation benefits CIGA was administering.
provides funding when one of its member insurers becomes
insolvent and unable to pay its insureds' claims.
California state law prohibited CIGA from reimbursing state
and federal government agencies, including Medicare. The
district court concluded that federal law preempted
California law to the extent it prohibited CIGA from
panel held that as a "secondary payer," Medicare
was entitled to seek reimbursement from a beneficiary's
"primary payer," typically private insurance. The
panel further held that CIGA was not a primary plan, and
specifically not a "workmen's compensation law or
plan," 42 U.S.C. § 1395y(b)(2)(A)(ii), but instead
CIGA was an insolvency insurer of last resort. The panel
noted that insurance regulation was a field traditionally
occupied by the states, and the panel presumed that the
Medicare secondary payer provisions did not preempt state
insurance laws unless Congress clearly manifested its intent
to do so. The panel held that nothing in the Medicare statute
or its implementing regulations suggested that Congress meant
to interfere with state schemes to protect against insurer
insolvencies. The panel reversed and remanded for further
NGUYEN, CIRCUIT JUDGE:
requires insurers providing certain types of coverage to
participate in the California Insurance Guarantee Association
("CIGA"), which provides funding when a member
insurer becomes insolvent and unable to pay its insureds'
claims. State law prohibits CIGA from reimbursing state and
federal government agencies, including Medicare.
filed this declaratory action after Medicare paid for and
demanded reimbursement from CIGA for medical expenses of
certain individuals whose workers' compensation benefits
CIGA was administering. The district court ruled in favor of
Medicare, concluding that federal law preempted California
law to the extent it prohibited CIGA from reimbursing
Medicare. We reverse.
"secondary payer," Medicare is entitled to seek
reimbursement from a beneficiary's "primary
payer," typically private insurance. But CIGA is not a
primary plan, and specifically not a "workmen's
compensation law or plan." 42 U.S.C. §
1395y(b)(2)(A)(ii). Instead, it is an insolvency insurer of
last resort. Insurance regulation is a field traditionally
occupied by the states, and we must presume that the Medicare
secondary payer provisions do not preempt state insurance
laws unless Congress clearly manifested its intent to do so.
Nothing in the Medicare statute or its implementing
regulations suggests that Congress meant to interfere with
state schemes designed to protect against insurer
insolvencies. We therefore remand for further proceedings.
California's Guarantee Act
in the 1930s, individual states experimented with insurance
guaranty funds to address the problem of insurer
insolvencies. See, e.g., Carpenter v. Pac. Mut.
Life Ins. Co. of Cal., 74 P.2d 761, 773 (Cal. 1937)
(recognizing California's "comprehensive statutory
scheme" regarding "the rehabilitation and
liquidation of insurance companies"), aff'd sub
nom. Neblett v. Carpenter, 305 U.S. 297 (1938); see
also Michael P. Duncan, The NAIC Model Property and
Casualty Post-Assessment Guaranty Funds, in
American Bar Association, Law and Practice of Insurance
Company Insolvency 460 (David M. Spector ed., 1986). At
first, these funds concerned a single type of insurance, such
as workers' compensation or taxicab liability. Duncan,
supra, at 460. Following a spate of insolvencies by
automobile insurers in the 1950s and 60s, Congress
entertained various legislative proposals that would have
created a nationwide scheme. Id. The first proposed
bill was limited to automobile insurance, but a later
proposal would have covered virtually all property and
casualty insurance. See Linda M. Lasley et al.,
Insurance Guaranty Funds: The New "Money
Pit"?, in Practicing Law Institute,
Insolvency and Solidity of Insurance Companies
the threat of federal regulation, the insurance industry in
the late 1960s successfully lobbied individual states to
enact guaranty funds, most based on the National Association
of Insurance Commissioners' model act. Id. at
116-19. Congress dropped plans to legislate in this area, and
today every state has some form of insurer insolvency scheme.
Id. at 119. California's scheme, CIGA, was
established in 1969 by the Guarantee Act, Cal. Ins. Code
§§ 1063-1063.18, to insure against "loss
arising from the failure of an insolvent insurer to discharge
its obligations under its insurance policies."
Isaacson v. CIGA, 750 P.2d 297, 303 (Cal. 1988)
(quoting Biggs v. CIGA, 179 Cal.Rptr. 16, 17 (Ct.
insurer's participation in CIGA is mandatory. See
id. (citing Cal. Ins. Code §§ 1063(a),
1063.1(a)). When a member insurer becomes insolvent, the
Guarantee Act authorizes CIGA to discharge certain of the
defunct insurer's obligations referred to as
"covered claims." Middleton v. Imperial Ins.
Co., 666 P.2d 1, 3 (Cal. 1983). CIGA funds the covered
claims in part by collecting premiums from its member
insurers in proportion to their market share. See
id. (citing Cal. Ins. Code §§ 1063.1(c),
1063.5). Policyholders of the insolvent insurer who opt to
proceed through CIGA "assign their claims against the
estate of the insolvent insurer to CIGA." Id.
(citing Cal. Ins. Code § 1063.4). CIGA then becomes a
creditor in the insolvency proceeding and "share[s] in
the assets of the insolvent company on final
distribution." Id. (citing Cal. Ins. ...