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Aybar v. New Jersey Transit Bus Operations

October 14, 1997


On appeal from Superior Court of New Jersey, Law Division, Hudson County.

Approved for Publication October 17, 1997.

Before Judges Pressler, Conley and Wallace. The opinion of the court was delivered by Conley, J.A.D.

The opinion of the court was delivered by: Conley

The opinion of the court was delivered by


As posed to us, the State in this appeal urges us to determine that "the anti-subrogation provision of the New Jersey Tort Claims Act . . ., N.J.S.A. 59:9-2e *fn1, does not 'relate to' health insurance or plans . . . within the meaning of [the Federal Employees Health Benefit Act] 5 U.S.C. § 8902 (m)(1), and, thus, is not preempted thereby." The issue, potentially, is much broader and that is whether the Legislature's "collateral source" rule, applicable not only to tort claims against the State and State employees, N.J.S.A. 59:9-2(e), but all other litigation as well, N.J.S.A. 2A:15-97, is preempted by the Federal Employees Health Benefits Act (FEHBA). Moreover, preemption under FEHBA would, we think, mean preemption under FEHBA's counterpart in the private sector, the Employee Retirement Income and Social Security Act (ERISA). *fn2 In a well-reasoned oral decision, the trial Judge concluded that N.J.S.A. 59:9-2e's "anti-subrogation" clause was preempted. While we affirm that decision, we caution that our opinion is narrow in scope and limited solely to what the parties have presented.


On November 15, 1990, plaintiff, a federal employee, was a passenger on a bus owned by appellant New Jersey Transit Bus Operations, Inc. (NJTBO). While exiting it, she tripped and fell, sustaining injuries for which she obtained treatment and incurred lost wages. Plaintiff sued NJTBO and the driver of the bus whose negligence, she claimed, was the direct and proximate cause of her injuries. At the time of the accident, plaintiff was insured under the health benefits plan of respondent Government Employees Hospital Association, Inc. (GEHA). That plan paid benefits in the amount of $39,818 for medical expenses.

Plaintiff settled with NJTBO for $150,000. The settlement agreement expressly stated that the $150,000 was for reimbursement of lost wages, compensation for pain and suffering and did not include medical costs. The State's release mandated that plaintiff commence a declaratory judgment action to determine whether GEHA is entitled to a "lien against the proceeds of the settlement." The agreement also provided that if it is judicially determined that GEHA is entitled to a "lien" NJTBO will indemnify plaintiff for the full amount of the "lien."

GEHA's plan is established pursuant to and governed by FEHBA and the regulations promulgated by the U.S. Office of Personnel Management (OPM). See 5 C.F.R. § 890 (1997); 48 C.F.R. Ch. 16. The plan, in accordance with the FEHBA, provides health benefits coverage to eligible individuals pursuant to a federal government procurement contract entered into between OPM and GEHA. The FEHBA authorizes OPM to determine eligibility coverage, 5 U.S.C. §§ 8902(f), 8905, and 8908, and set standards for the termination of coverage, 5 U.S.C. § 8902(g), (h). It establishes qualifications for carriers, 5 U.S.C. § 8902(e). It establishes benefit levels and prescribes the method for setting plan rates, 5 U.S.C. §§ 8902(d), (i) and 8904. It provides for government contribution toward the cost of coverage, 5 U.S.C. § 8906, for the establishment of a dedicated fund in the United States Treasury for handling all FEHB Program funds, and OPM control of plan contingency reserves and program administrative expenses, 5 U.S.C. § 8909.

Thus, FEHBA vests in OPM sole authority and responsibility to enter into contracts with qualified carriers to provide health benefits coverage, 5 U.S.C. § 8902(a), sole discretion to determine which benefits are appropriate for inclusion in FEHB plans, and it requires OPM to include in each such contract an annual "detailed statement of benefits offered" for distribution to plan members which "includes such maximums, limitations, exclusions, and other definitions of benefits as considers necessary or desirable." 5 U.S.C. § 8902(d). Accordingly, that "detailed statement of benefits," or brochure, is expressly incorporated into and thus forms a part of the federal government procurement contract establishing the GEHA benefit plan.

At least as presented to us, that brochure contains the following provision addressing GEHA's right to be reimbursed to the extent of health benefits paid from third-party recoveries obtained by its beneficiaries.


Subrogation means the Plan's right to recover any of its payments (1) made because of any injury to you or your dependent caused by a third party and (2) which you or your dependent later recover ...

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