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The Eleventh Circuit dismisses a Medicare Advantage “double damages” lawsuit – court rules the MSP statute does not preempt insurer's claims-filing deadline or Florida’s no-fault pre-suit demand

In a recent Medicare Advantage recovery action, the United States Eleventh Circuit Court of Appeals[1] in  MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and Covington Specialty Insurance Company, 60 F.4th 1314 (11th Cir. February 22, 2023) had to determine, in main part, two issues: (1) whether the Medicare Secondary Payer (MSP) statute preempted the claims-filing requirement contained in an insurer’s general liability policy and (2) whether the MSP preempted Florida’s no-fault pre-suit demand requirement thereby entitling the assignee of a Medicare Advantage Plan to “double damages” under the MSP’s private cause of action statute.[2] 

On each question the Eleventh Circuit found that the MSP did not preempt either requirement. In addition, the court found that the plaintiff had “forfeited” its claim that the liability settlement established primary payer responsibility based on certain procedural pleading deficiencies.  Accordingly, the court granted summary judgment in favor of the insurers and dismissed the MAP’s double damages claim.

An overview of this recent decision, and its potential claims impact, is presented as follows:

Summary

The plaintiff was the assignee of a Medicare Advantage Plan (MAP) which filed separate lawsuits against two different carriers seeking “double damages” under the MSP’s private cause of action statute alleging that the insurers failed to reimburse the MAP for claim related treatment.  In one action, the plaintiff sued a no-fault carrier, while in another action it sued a liability carrier in relation to a liability settlement.   

Both carriers challenged the plaintiff’s actions and claimed they were not liable. Specifically, the no-fault carrier argued, in main part, that it was not liable since the plaintiff failed to satisfy Florida’s no-fault pre-suit demand requirement.  The liability carrier argued, in part, that it too was not liable on grounds that the plaintiff did not comply with the insurer’s claims filing deadline.  In response, the plaintiff argued that the MSP statute preempted both requirements.  Each party filed motions for summary judgment.

The United States District Court for the Southern District of Florida ruled in favor of the carriers in separate decisions.[3]  The plaintiff then appealed to the Eleventh Circuit which consolidated the actions. 

On appeal, the Eleventh Circuit affirmed the district court findings that the MSP did not preempt the claims-filing requirement contained in an insurer’s general liability policy or Florida’s no-fault pre-suit demand requirement based, in part, on its interpretation of established preemption principles.  Further, the court found that the plaintiff had “forfeited” its claim that the liability settlement established primary payer responsibility based on certain procedural pleading deficiencies.  Accordingly, the court granted summary judgment in favor of the insurers.

Going forward, the Eleventh Circuit’s ruling may be significant as it could provide insurers, depending on the facts, with a basis to defend against, and possibly defeat, a MAP recovery claim regarding claims arising in the Eleventh Circuit.  In this case, as outlined more fully below, the insurers were able to defeat the MAP’s recovery claim based on the plaintiff’s failure to adhere to the general insurer’s contractual claims-filing deadline in one case; and the failure to meet the no-fault pre-suit demand requirement in another action.  Further, the court found that the plaintiff had “forfeited” its claim that the liability settlement itself could serve as the basis for liability based on procedural pleading deficiencies.  However, on this latter item, it is interesting to contemplate whether the court may have reached a different conclusion in the liability case had the plaintiff pleaded its complaint differently regarding the settlement aspect. 

For those interested in a deeper review of this recent decision, the author outlines the following:

Facts

The plaintiff, an assignee of a Medicare Advantage plan (MAP), brought separate PCA lawsuits against two different insurers seeking “double damages” for the insurers’ alleged failure to reimburse MAP payments.   

One suit involved a liability claim arising from a slip and fall accident.  In relation to this case, the insurer argued, in part, that although the policy covered medical expenses, it was not liable to reimburse the MAP payments since the claimed expenses were not reported to the insurer within one year of the date of accident as required under the policy.[4]   The other suit involved a no-fault action.  In this case, the insurer argued that the plaintiff’s claim was barred since the plaintiff failed to send the insurer a pre-suit demand letter as required under Florida’s no-fault statutes.[5]   In response, the plaintiff countered that the MSP statute preempted both procedural requirements thereby entitling the plaintiff to “double damages.”  In addition, the plaintiff alleged that the liability insurer’s settlement with the claimant established the liability carrier as a primary payer making it responsible for reimbursement.  The insurers filed motions for summary judgment seeking dismissal of plaintiff’s claims.

The United States District Court for the Southern District Court of Florida ruled in the insurers’ favor and granted their motions for summary judgment.  The plaintiff then appealed to the 11th Circuit of Appeals which consolidate the actions.

Eleventh Circuit rules for the insurers – finds that the MSP statute does not preempt the insurer’s claims filing requirement or Florida’s no-fault pre-suit demand requirement

The Eleventh Circuit, in an opinion authored by Chief Judge William Pryor, affirmed the district court’s ruling in favor of the insurers finding, in main part, that the MSP statute did not preempt the insurer’s contractual claims filing deadline or Florida’s no-fault pre-suit demand requirement.  In addition, the court found that the plaintiff had “forfeited” its claim that the liability settlement established primary payer responsibility based on certain procedural pleading deficiencies.  Of note, Circuit Judge Rosenbaum, concurred with the majority’s opinion, but dissented from the majority’s ruling that the MSP did not preempt Florida’s no-fault pre-suit demand requirement.

The Eleventh Circuit’s decision is broken down as follows:

(1) Insurer’s claims-filing deadline – not preempted

As part of its claim against the liability insurer, the plaintiff argued on appeal that the one-year filing deadline contained in the insurer’s policy was preempted by the MSP’s three-year claims filing period contained at 42 U.S.C. 1395y(b)(2)(B)(vi).  As noted in the court’s decision, this section states: “Notwithstanding any other time limits that may exist for filing a claim under an employer group health plan, the United States may seek to recover conditional payments ... where the request for payment is submitted to the entity required or responsible ... under a primary plan within the 3-year period beginning on the date on which the item or service was furnished.” (court’s emphasis).[6]  While plaintiff took this position on appeal, the court’s decision indicates that the plaintiff argued at the district court level that there was no time limit for a MAP to seek reimbursement as the MSP’s claim filing provision contained at 42 U.S.C. 1395y(b)(2)(B)(vi) did not apply in relation to a claim under the private cause action statute.[7]  

Notwithstanding, the district court found that 42 U.S.C. 1395y(b)(2)(B)(vi) was inapplicable noting that, per the statutory text, this section applied in relation to an employer group health plan with respect to claims filed by the United States.  The 11th Circuit agreed with the district court noting that the “district court correctly determined that the claims-filing provision in section 1395y(b)(2)(B)(vi) is ‘irrelevant.’”[8]  Further, the 11th Circuit stated “[t]here is no basis for us to infer that the provision preempts a claims-filing deadline in a no-fault or general liability policy.”[9]

(2) Florida’s no-fault pre-suit demand requirement - not preempted

At the crux of this dispute was Fla. Stat. Ann. § 627.736(10)(a) which, as referenced by the court, states as follows: “As a condition precedent to filing any action for benefits under this section, written notice of an intent to initiate litigation must be provided to the insurer. Such notice may not be sent until the claim is overdue, including any additional time the insurer has to pay the claim ....”[10]  Further, the court noted that under Fla. Stat. Ann. § 627.736(10)(d) the insurer is provided a 30-day cure period before it can be sued.”[11]

The plaintiff argued that the MSP statute preempted Florida’s pre-suit requirement based on prior 11th Circuit precedent. Alternatively, the plaintiff argued that the 11th Circuit should reach this conclusion regardless of whether it agreed that prior precedent dictated this result. 

The 11th Circuit, however, rejected both arguments outlined as follows:

Prior 11th Circuit precedent does not support preemption   

The plaintiff first argued that the Eleventh Circuit’s ruling in MSP Recovery Claims, Series LLC v. ACE American Insurance Co., 974 F.3d 1305 (11th Cir. 2020) supported its claim that the MSP preempted Florida’s pre-suit demand requirement.  In that decision, the court noted that it rejected the primary payers’ argument that “’Plaintiffs failed to comply with the[ ] supposed pre-suit notice requirements’” Id. at 1318 finding that that “Defendants point to no law that obligated Plaintiffs to submit ‘recovery demand letters’ or otherwise provide advance notice of their intent to bring a claim.’” Id. at 1319 (emphasis added).  In this regard, the Eleventh Circuit noted that the ACE Court did not mention section 627.736(10)(a) or preemption and, instead, “’explained that the federal regulation that the defendants cited “contemplate[d] that primary payers’ liability arises not only after the primary payer receives a recovery demand letter but also in cases in which” the primary payer’s responsibility is demonstrated in another fashion.’” Id. (first emphasis added) (citing 42 C.F.R. § 411.22).  Accordingly, the Eleventh Circuit concluded that the Ace decision was not controlling stating that “MSP admits that the inference ’that a state law pre-suit demand requirement ... is impliedly preempted by federal law‘ represents a rationale that ’the [ACE] Court did not express.’ And MSP fails to explain how that rationale was necessary to our holding.”[12]

Secondly, the plaintiff argued the Eleventh Circuit’s prior decision in Humana v. Western Heritage Insurance Co., 832 F.3d 1229 (11th Cir. 2016) also supported its preemption claim.  In that case, it was noted that the court determined that the defendant primary payer, Western Heritage Insurance, had constructive knowledge that the plaintiff, Medicare Advantage Organization, had made a payment, so Western Heritage was required to reimburse the organization.[13]  Based on this ruling, the plaintiff argued that “because constructive knowledge is sufficient to obligate a primary payer to reimburse a Medicare Advantage Organization, ‘[i]mposing a[n] [additional] state-law formal demand requirement would conflict with this low federal statutory threshold to the federal right of action.”[14]  However, the Eleventh Circuit disagreed finding, instead, the court’s prior ruling in Humana “did not foreclose the possibility that state-law procedural requirements could be superimposed. And the pre-suit demand requirement of section 627.736(10)(a) was not at issue. So that decision does not control this appeal.”[15]

Thirdly, the plaintiff asserted that the court’s prior decision in MSPA Claims 1, LLC v. Kingsway Amigo Insurance Co., 950 F.3d 764 (11th Cir. 2020), supported its position. In that case, it was noted that the court had “recognized (as relevant [t]here) only two limits on the [Medicare Secondary Payer Act’s] private cause of action”: first, a Medicare Advantage Organization must “demonstrate[ ]” “the would-be primary payer’s responsibility” before suing for reimbursement; and second, “plaintiffs ... may only sue primary plans when they fail to pay, and not other entities such as medical providers.”[16] Pursuant to this decision, the plaintiff argued that “because constructive knowledge can satisfy the first criterion, [i]t would be inconsistent to require actual knowledge through a pre-suit demand requirement.”[17] The Eleventh Circuit, however, also rejected this claim stating that the plaintiff read “too much” into the Kingsway decision “where [the court] carefully cabined the statement at issue: the two limitations identified were the only ones “relevant [t]here”[18] and, as such,  that “[i]t does not necessarily follow that additional state procedural requirements, such as a demand requirement, are preempted. And again, whether the Medicare Secondary Payer Act preempts section 627.736(10)(a) was not at issue.”[19]

Court finds neither express nor conflict preemption apply

The 11th Circuit also rejected the plaintiff’s argument that it should find, as a matter of first impression, that the MSP statute preempts Florida’s no-fault pre-suit demand requirement. The 11th Circuit ruled, however, that neither the express nor conflict preemption doctrines applied in this case.[20]   

On this point, very generally, the 11th Circuit stated that the MSP statute does not expressly preempt Florida’s pre-suit demand statute stating, in part: “The Medicare Secondary Payer Act does not expressly preempt section 627.736(10)(a). We have no reason to conclude from the text of the Act that Congress’s purpose in shifting primary-payer responsibility to private insurers to ’curb the rising costs of Medicare,’ Humana, 832 F.3d at 1234, included preempting state procedural laws governing insurance liability. And there is no evidence that Congress sought to broadly preempt the insurance regulatory regimes traditionally administered by states.” See, e.g., Caldera v. Ins. Co. of the State of Pa., 716 F.3d 861, 865 (5th Cir. 2013) (“[A]n MSP claimant may not recover amounts from a purported ‘primary plan’ in excess of a carrier’s responsibility under state law or the relevant contract.”); Cal. Ins. Guarantee Ass’n v. Azar, 940 F.3d 1061, 1064 (9th Cir. 2019) (“Nothing in the Medicare statute or its implementing regulations suggests that Congress meant to interfere with state schemes designed to protect against insurer insolvencies.”), abrogation on other grounds recognized by R.J. Reynolds Tobacco Co. v. Cnty. of Los Angeles, 29 F.4th 542, 553 n.6 (9th Cir. 2022); Ocean Harbor Cas. Ins. v. MSPA Claims, 1, 261 So. 3d 637, 645 (Fla. Dist. Ct. App. 2018) (“The Secondary Payer Act was never intended to broadly preempt State insurance law.”).”[21]

Further, the 11th Circuit ruled that the MSP statute did not require conflict preemption in this case.  In this regard, the court found that the plaintiff did not contend that it was “physically impossible” to comply with the MSP statute and Florida’s pre-suit demand requirement and, as such, the pre-suit demand requirement did not create an unconstitutional obstacle for a MAP’s recovery.[22]  Accordingly, the 11th Circuit ruled that “Florida’s pre-suit demand requirement does not meet this relatively high bar. The statutory notice requirement and corresponding 30-day cure period are procedural requirement that may result in a brief delay. But the Florida law does not prevent or meaningfully impede the reimbursement of Medicare Advantage Organizations that Congress sought to facilitate. See Humana, 832 F.3d at 1234 (explaining that the purpose of the Medicare Secondary Payer Act was to shift primary-payer responsibility to private insurers to ’curb the rising costs of Medicare ‘). So, the provision does not create an unconstitutional obstacle to the purposes or operation of the Medicare Secondary Payer Act.”[23]

Of note, Judge Rosenbaum disagreed with the Majority’s ruling that the MSP did not preempt Florida’s pre-suit demand requirement. In this regard, Judge Rosenbaum, concurring in part and dissenting in part, expressed, in general, that the “Florida statute is preempted by the Act because the Florida statute frustrates the Act’s purpose—reducing Medicare’s costs—by shifting the burden of seeking reimbursement from where Congress placed it (on the private insurer) back to Medicare.”[24]

While a complete review of Judge Rosenbaum’s dissent is beyond the scope of this article, the following excerpt from Judge Rosenbaum’s dissent provides insight into his position why he felt the MSP preempted Florida’s statute: “As the statutory text and history show Congress intended things, an insurance company must affirmatively seek out secondary payments by Medicare and reimburse Medicare—or risk being sued for double damages. But Florida insurance companies are effectively exempt from this requirement. They can wait until Medicare has approached them through a demand letter for payment and then reimburse Medicare during Florida’s 30-day cure period without ever fearing double damages. Florida insurance companies can be safely passive, secure in the knowledge that if Medicare comes to them, they will have at least thirty days before being at risk of double damages. Therefore, Florida private insurers can know that they owe Medicare money but also that they need pay Medicare back if and only if Medicare comes to them. And sometimes, Medicare won’t know and will have to absorb the cost. So we are right back where we started before Congress acted: Medicare’s costs will rise. Therefore, Florida’s pre-suit demand require ’frustrates’ Congress’s purpose.”[25]  

(3) Insurer’s liability settlement did not establish primary payer liability in this case

The plaintiff also argued that the insurer’s “settlement” of the liability case made it a primary payer responsible for reimbursement.  However, the district court ruled, and the 11th Circuit agreed, that the plaintiff “forfeited” this claim by failing to allege this in its complaint.[26]  On this point, the 11th Circuit noted, in part, that while there are liberal pleading standards for civil complaints, the plaintiffs are not permitted to raise new claims at the summary judgment stage, with the proper course being for plaintiffs to amend the complaint.[27]  Applying these general rules to the facts, the 11th Circuit concluded that the plaintiff’s complaint did not give the insurer adequate notice of its claim that the insurer assumed primary-payer status based on its settlement noting, in part, that the plaintiff’s “amended complaint did not even mention the word ‘settlement’ in a relevant context.”[28] Expanding on this point, the court stated: “MSPA had the information it needed to plead the claim it now asserts. Covington alerted MSPA to the settlement agreement in March 2020 in its amended answers to MSPA’s second set of interrogatories. MSPA filed its motion for summary judgment in March 2021. Even so, MSPA did not amend its complaint in the interim. MSPA responds that ‘Covington knew full well ... that MSPA Claims had become aware’ of the settlement. But that fact, even if true, would not relieve MSPA of its obligation to follow the pleading requirement and allege in its complaint that the settlement agreement served as a basis for liability.’”[29] 

Accordingly, based on these facts, the plaintiff was unable to establish primary payer liability in this case based on the settlement.  It is interesting to contemplate, however, whether the court may have reached a different conclusion had the plaintiff pleaded its complaint differently regarding the settlement aspect.

Questions?

Please do not hesitate to contact the author if you have any questions or would like to learn how Verisk can help you address CMS conditional payment, Treasury, or Medicare Advantage/Part D claims.


[1] The 11th Circuit has jurisdiction over the U.S. District courts for Alabama, Florida, and Georgia.

[2] The MSP’s private cause of action statute is codified at 42 U.S.C. 1395y(b)(3)(A) which states, in full, as follows: “There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).”

[3] The district court ruled in favor of the liability carrier in MSPA Claims 1, LLC v. Covington Specialty Insurance, 548 F.Supp.3d 1269 (S.D. Florida, July 12, 2021) and for the no-fault carrier in MSP Recovery Claims Series, LLC v. United Automobile Insurance Co., 2021 WL 2980597 (S.D. Fla. July 14, 2021).

[4] MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and Covington Specialty Insurance Company, 60 F.4th 1314, 1317 (11th Cir. February 22, 2023).

[5] Id. at 1320.

[6] Id. at 1318.

[7] Id. at 1319.

[8] Id.

[9] Id.

[10] MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and Covington Specialty Insurance Company, 60 F.4th 1314, 1320 (11th Cir. February 22, 2023).

[11] Id. at 1320.

[12] Id. at 1321.

[13] Id. 1321, citing Humana v. Western Heritage Insurance Co., 832 F.3d 1229, 1239-40 (11th Cir. 2016)

[14] MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and Covington Specialty Insurance Company, 60 F.4th 1314, 1321 (11th Cir. February 22, 2023).

[15] Id.

[16] Id., citing MSPA Claims 1, LLC v. Kingsway Amigo Insurance Co., 950 F.3d 764, 771 (11th Cir. 2020).

[17] MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and Covington Specialty Insurance Company, 60 F.4th 1314, 1321 (11th Cir. February 22, 2023).

[18] Id., citing MSPA Claims 1, LLC v. Kingsway Amigo Insurance Co., 950 F.3d 764, 771 (11th Cir. 2020).

[19] MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and Covington Specialty Insurance Company, 60 F.4th 1314, 1321 (11th Cir. February 22, 2023).

[20] Id.

[21] Id.

[22] MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and Covington Specialty Insurance Company, 60 F.4th 1314, 1322 (11th Cir. February 22, 2023).

[23] Id.

[24]MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and Covington Specialty Insurance Company, 60 F.4th 1314, 1323 (11th Cir. February 22, 2023).

[25] MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and Covington Specialty Insurance Company, 60 F.4th 1314, 1325 (11th Cir. February 22, 2023).

[26]MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and Covington Specialty Insurance Company, 60 F.4th 1314, 1319 (11th Cir. February 22, 2023).

[27] Id.

[28] Id.

[29]MSP Recovery Claims, Series LLC v. United Automobile Insurance Company and Covington Specialty Insurance Company, 60 F.4th 1314, 1319 (11th Cir. February 22, 2023).


Mark Popolizio, J.D.

Mark Popolizio, J.D., is vice president of MSP compliance, Casualty Solutions at Verisk. You can contact Mark at mpopolizio@verisk.com.


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