A federal judge in California granted the United States’ motion to dismiss portions of CIGA’s complaint regarding Medicare payments, holding that California’s insurance codes are preempted by federal law in the case of California Insurance Guarantee Association v. Sylvia Mathews Burwell, et al., No. 15-cv-1113, C.D. Calif..

CIGA is currently paying several claims under various workers’ compensation policies issued by now-insolvent insurers. Some of these claimants also received payments from Medicare for items and services that were otherwise covered by these policies. Where Medicare pays benefits for a loss that is also covered by another insurer, the Medicare Secondary Payer statute, 42 U.S.C. § 1395y, designates Medicare as the “secondary payer” and generally requires those other insurance plans (called “primary plans”) to reimburse Medicare for all benefits it paid. Concluding that the workers’ compensation policies were “primary plans” within the meaning of the statute, the United States demanded that CIGA reimburse it for the Medicare benefits paid to these claimants. CIGA refused, prompting the United States to commence collection proceedings.

CIGA filed a declaratory and injunctive relief action against Defendants Sylvia Mathews Burwell, United States Department of Health and Human Services, and the Centers for Medicare and Medicaid Services contending 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 argued that claims made by the United States could never be defeated by a state-imposed time limit, CIGA argued that the California Guarantee Act is a state law that regulates the business of insurance, and thus supersedes any general federal law allowing claims to be filed outside the Guarantee Act’s filing deadline. In reply, the United States argued that 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.

Ultimately, the California District Court for the Central District of California held that the McCarran-Ferguson Act did 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. 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.

The Court cited the familiar rule that “[w]hen the United States becomes entitled to a claim, acting in its governmental capacity and asserts its claim in that right, it cannot be deemed to have abdicated its governmental authority so as to become subject to a state statute putting a time limit upon enforcement.” United States v. Summerlin, 310 U.S. 414, 417 (1940); see also Bresson v. C.I.R., 213 F.3d 1173, 1176 (9th Cir. 2000). This common law rule has its origins in the concept of sovereign immunity; just as the states cannot sue the federal government without its consent, the states cannot enact laws that purport to bind the federal government without its consent.