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US District Court: CIGA Responsible for Reimbursing Medicare Conditional Payment Claims

In CIGA v. Burwell, 2016 U.S. Dist. LEXIS 34163 (March 16, 2016), the California Insurance Guaranty Association (CIGA) filed a declaratory and injunctive relief action asserting that it was not required to reimburse the United States for Medicare benefits paid to individuals whose losses may also be covered by CIGA. The United States filed a motion to dismiss CIGA’s claim, which the Court granted.

CIGA was created as a fund from which insureds could obtain financial and legal assistance, should their insurers become insolvent. As a result, CIGA is currently paying several workers’ compensation policies issued by now insolvent insurers. After determining that those policies met the definition of a “primary plan”, as defined by 42 U.S.C. § 1395y, the United States demanded that CIGA repay conditional payment claims asserted for benefits paid to the workers covered under the policies now handled by CIGA. Once CIGA refused, the United States initiated collection actions, which led to CIGA filing the present action requesting a judicial declaration that they are not responsible for reimbursement of the benefits paid by Medicare. CIGA first argued that the United States did not file timely proofs of claim under the California Guarantee Act. CIGA then argued that the Guarantee Act prohibits the United States from asserting claims against CIGA as either an assignee or subrogee of the insured (or insurer).

The United States responded by arguing that claims made by the United States could never be defeated by a state-imposed time limit, to which CIGA responded, relying on the McCarran-Ferguson Act, that the California Guarantee Act is a state law regulating the business of insurance, therefore superseding any general federal law allowing claims to be filed outside the Guarantee Act’s filing deadline. The United States responded by arguing that the “McCarran-Ferguson does not apply because (1) the Guarantee Act’s claims filing statute does not regulate the ‘business of insurance,’ and (2) that the Medicare Secondary Payer statute is at any rate a federal statute that specifically regulates the business of insurance.”

In the end, the Court held that the “McCarran-Ferguson Act does not subject the United States to California’s claims filing deadline because the Act was never intended to waive the federal government’s sovereign immunity.” The Court also found CIGA’s argument that the United States could not assert subrogated claims to be moot, agreeing that the United States has a direct right of recovery, which is not impeded by the Guarantee Act. As a result, CIGA’s claims against the United States were dismissed “to the extent that they were based on the United States’ failure to file timely proofs of claim under California’s Guarantee Act.”

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