Empire Healthchoice Assurance, Inc. v. McVeigh

Supreme Court of the United States · 2006 · Federal Courts

547 U.S. 677 (2006)

Updated August 1, 2026

Federal Courtsfederal question limits28 U.S.C. § 1331FEHBAfederal questionarising underpreemptionreimbursement

Facts

FEHBA authorizes OPM to contract with private carriers to provide health plans for federal employees, and the Blue Cross Blue Shield Service Benefit Plan required enrollees to reimburse the Plan from recoveries obtained from third parties. Joseph McVeigh, a Plan enrollee, was injured in an accident, and the Plan paid $157,309 for his medical care. His estate pursued a state-court tort action against alleged tortfeasors and settled for $3,175,000, with $100,000 placed in escrow in response to Empire's reimbursement demand. Empire, which had not participated in the tort suit, then sued in federal court to recover the full amount it had paid.

Issue

Does a FEHBA carrier's suit in federal court against a beneficiary's estate seeking reimbursement from the proceeds of a state-court tort settlement arise under federal law within the meaning of 28 U.S.C. § 1331? More specifically, do FEHBA, its preemption clause, federal common law, or Grable-style embedded federal issue jurisdiction supply federal-question jurisdiction for that claim?

Rule

A case arises under federal law under § 1331 when the well-pleaded complaint shows either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial federal question. For a FEHBA carrier's reimbursement claim, federal jurisdiction does not exist where FEHBA creates no cause of action for the carrier, the preemption clause does not clearly confer jurisdiction or completely displace state law, and the claim is not the kind of substantial, nearly pure federal issue described in Grable.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Olive Harbor Health Plan administers a health plan for civilian employees under a federal benefits statute. After paying $48,000 for Lena Ortiz's treatment in Phoenix, the plan sued Ortiz in federal district court for reimbursement from her later Arizona negligence settlement, relying solely on a reimbursement clause in the plan brochure approved by a federal agency.

Does the federal district court have federal-question jurisdiction under 28 U.S.C. § 1331?

Explanation. Section 1331 is not satisfied merely because a federal agency negotiated or approved the plan. The governing majority rule is that a carrier's reimbursement suit does not arise under federal law when the statute creates no cause of action for the carrier and the asserted right stems from contract language in the plan documents. Amount in controversy is irrelevant to federal-question jurisdiction, and federal regulation alone does not transform the claim into one created by federal law. (Derived from Empire Healthchoice Assurance, Inc. v. McVeigh (2006).)