
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                                                                      ____________________        No. 95-1964                              UNITED STATES OF AMERICA,                                 Plaintiff, Appellee,                                          v.                        RHODE ISLAND INSURERS' INSOLVENCY FUND                                Defendant, Appellant.                                                                                      ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF RHODE ISLAND                 [Hon. Francis J. Boyle, Senior U.S. District Judge]                                         __________________________                                                                                      ____________________                               Torruella, Chief Judge,                                          ___________                            Cyr and Stahl, Circuit Judges.                                           ______________                                                                                      ____________________             Margaret  A. Robbins,  with whom Joseph  C. Tanski  and Hutchins,             ____________________             _________________      _________        Wheeler & Dittmar were on brief for appellant.        _________________             Clifford M.  Pierce, Assistant  Regional  Counsel, Department  of             ___________________        Health and Human Services, with whom Sheldon Whitehouse, United States                                             __________________        Attorney, and  Michael P. Iannotti, Assistant  United States Attorney,                       ___________________        were on brief for appellee.                                                                                      ____________________                                    April 5, 1996                                                                                      ____________________                    CYR,  Circuit Judge.   The question  in this  appeal is                    CYR,  Circuit Judge.                          _____________          whether  section 1395y(b)(2)(a)  of the  Medicare Secondary-Payer          Act, 42  U.S.C.   1395y(b)(2)(a) (the  "MSP provision"), preempts          various sections  of the  Rhode Island Insurers'  Insolvency Fund          Act  (the "RIIIFA")  which purport  to shift  financial responsi-          bility  for "primary"  insurance coverage  from the  Rhode Island          Insurers' Insolvency  Fund (the  "Fund") to the  federal Medicare          program.   The district  court held the  challenged RIIIFA provi-          sions preempted, the Fund appealed, and we now affirm.                                          I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________                    Enacted by  the Rhode  Island Legislature in  1988, the          RIIIFA requires all insurers licensed in Rhode Island to make pro                                                                        ___          rata  monetary contributions to the Fund to meet certain types of          ____          insurance claims  lodged against licensed  Rhode Island  insurers          which have  become insolvent, R.I.  Gen. Laws    27-34-3 (listing          excluded classes  of insurance  claims).   Upon a declaration  of          insolvency  by  a  licensed  Rhode Island  insurer,  the  Fund is          "deemed  [to be]  the insurer  to the  extent of  the obligations          [under the policy] on  the covered claims," id.    27-34-8(a)(2),                                                      ___          subject  to specified limitations on the amount of coverage, see,                                                                       ___          e.g., id.   27-34-8(a)(1)(iii)  (setting $300,000 cap per claim).          ____  ___          The RIIIFA  defines the  term  "covered claim"  as "an[y]  unpaid          [insurance] claim  . . . submitted  by a claimant," id.    27-34-                                                              ___          5(8), but excludes  any amount "due any . .  . [other] insurer as          subrogation recoveries or otherwise," id.   27-34-5(8)(ii)(C).  A                                                ___                                          2          "nonduplication of  recovery" provision requires all  Fund claim-          ants  to exhaust in the first instance  any "claim or legal right          of recovery under any  governmental insurance or guaranty program          which  is also a covered  claim," and permits  the Fund to reduce          its  payments on covered  claims by the  amount thus recoverable.          Id.   27-34-12(b).          ___                    In  1989-90, the  federal  Medicare  program  disbursed          approximately  $14,000  in  medical benefits  to  three  Medicare          beneficiaries who had sustained injuries in automobile accidents.          When  their Rhode  Island-licensed automobile  insurance carrier,          the  American Universal Insurance  Company ("AUIC"), was declared          insolvent, the three Medicare beneficiaries filed claims  against          the Fund.  The Fund allowed their claims but deducted the $14,000          previously disbursed to them  under the federal Medicare program,          citing RIIIFA     27-34-5(8)(ii)(C) and 27-34-12(b).   The United          States  promptly challenged  the  deductions on  the ground  that          RIIIFA      27-34-5(8)(ii)(C) and  27-34-12(b), which  purport to          shift "primary" insurance coverage from the Fund to Medicare, are          inconsistent with federal law, and thus preempted.                    The pertinent  MSP provision,  found in Title  XVIII of          the Social  Security Act, 42  U.S.C.    1395y(b) (Omnibus  Budget          Reconciliation  Act of  1980), was  enacted by  Congress  for the          express purpose  of lowering  overall federal  Medicare disburse-          ments by  requiring Medicare beneficiaries to  exhaust all avail-          able  private automobile insurance  coverage before  resorting to          their  Medicare coverage.  See H.R. Rep. No. 1167, 96th Cong., 2d                                     ___                                          3          Sess. 389, reprinted in 1980 U.S.C.C.A.N. 5526; infra note 3.  To                     _________ __                         _____          that  end, the  MSP provision  prohibits Medicare  payments to  a          beneficiary for  medical expenses if  "payment has been  made, or          can  reasonably be expected to be made promptly (as determined in          accordance with regulations) under . . . an automobile or liabil-          ity insurance policy or  plan (including a self-insured plan)  or          under no-fault insurance."  42 U.S.C.    1395y(b)(2)(A); see also                                                                   ___ ____          42  C.F.R.     411.32(a)  ("Medicare benefits  are  secondary  to          benefits payable by a third party  payer even if the State law or                                                   ____ __ ___ _____ ___          the third party payer  states that its benefits are  secondary to                                 ______ ____ ___ ________ ___  _________          Medicare benefits  or otherwise  limits its payments  to Medicare                             __ _________  ______ ___ ________  __ ________          beneficiaries.") (emphasis added).1  Moreover, once the  Medicare          _____________          program  makes a payment on a claim covered by private insurance,          the United States  becomes subrogated  to the rights  of the  in-          sured,  id.    1395y(b)(2)  (B)(iii), and  may  sue the  "primary                  ___          [insurance] plan" for reimbursement in the  form of double damag-          es, id.   1395y(b)(2)(B) (ii) & (b)(3)(A).               ___                    When  the Fund balked  at voluntary  reimbursement, the          United States  filed suit in federal district  court for $28,000,          see id.   The United States  alleged that the MSP  provision does          ___ ___          not  permit the 1989-90 Medicare payments  to be characterized as          "primary"  liability payments,  since the  injuries to  the three          Medicare  beneficiaries were  covered under  a "primary  plan"                                           ____________________               1The Medicare  regulations define a "plan"  as "any arrange-          ment, oral or written, by one or more entities, to provide health          benefits  or medical care or assume legal liability for injury or          illness."  42 C.F.R.   411.21.                                          4          their  AUIC automobile  insurance policies     and  therefore the          Fund, as  the "deemed"  insurer, must  meet the  maximum $300,000          primary  AUIC  insurance coverage  cap  under  each beneficiary's          policy  before Medicare could be held liable.  See R.I. Gen. Laws                                                         ___            27-34-8(a)(2).   The United  States moved for  judgment on  the          pleadings,  based  on its  preemption claim.    The Fund  filed a          cross-motion for judgment on  the pleadings, arguing, among other          things,  that the first  clause of the  McCarran-Ferguson Act, 15          U.S.C.    1012(b), see  infra note  2, forecloses  the preemption                             ___  _____          claim.                     The district  court  granted judgment  for  the  United          States.  United States v. Rhode Island Insurers' Insolvency Fund,                   _____________    ______________________________________          892  F. Supp.  370 (D.R.I.  1995).   First, the  court  ruled the          McCarran-Ferguson Act's  anti-preemption presumption inapplicable          because  the MSP  provision  is a  federal statute  "specifically          relat[ing] to the business  of insurance," thus coming  within an          express  exception to  the anti-preemption  presumption.   Id. at                                                                     ___          374-79.  Employing conventional preemption analysis, the district          court  went on to conclude that the MSP provision, ordaining that          Medicare  provides  "secondary"  medical  coverage  only,  cannot          coexist  with RIIIFA's shift of primary  liability to the federal          Medicare program as a subrogee-insurer.  Id. at 379-80.                                                   ___                                          II                                          II                                      DISCUSSION                                      DISCUSSION                                      __________          A.   Standard of Review          A.   Standard of Review               __________________                                          5                    We review judgments on the pleadings de novo, accepting                                                         __ ____          all  allegations  and  reasonable  inferences  favorable  to  the          appellant.   See Santiago de  Castro v. Morales  Medina, 943 F.2d                       ___ ___________________    _______________          129, 130 (1st Cir. 1991).  Similarly, a federal preemption ruling          presents a pure  question of law subject to plenary  review.  See                                                                        ___          New  Hampshire Motor Transp. Ass'n  v. Town of  Plaistow, 67 F.3d          __________________________________     _________________          326, 329 (1st Cir. 1995).           B.  The McCarran-Ferguson Act          B.  The McCarran-Ferguson Act              _________________________                    As  this court  has  recognized, "[f]ederal  preemption          under the Supremacy  Clause, see U.S. Const. art. VI, cl. 2, will                                       ___          be found only  if there  is `clear' evidence  of a  congressional          intent to preempt state law, or we are persuaded that the federal          and state statutes, by their very terms, cannot coexist."  Summit                                                                     ______          Inv. and  Dev. Corp. v. Leroux, 69 F.3d 608, 610 (1st Cir. 1995);          ____________________    ______          see  also Louisiana Pub. Servs. Comm'n v. FCC, 476 U.S. 355, 368-          ___  ____ ____________________________    ___          69  (1986).  In the  field of insurance  regulation, however, the          McCarran-Ferguson Act,  15 U.S.C.    1011-1015,  may preclude the          application  of  normal  federal preemption  principles  provided          three conditions are met.2                                          ____________________               2 The McCarran-Ferguson Act provides, in pertinent part:                    (a)  The business of  insurance, and  every person               engaged therein, shall  be subject to  the laws of  the               several States which relate  to the regulation or taxa-               tion of such business.                    (b)  No  Act of  Congress  shall  be construed  to               invalidate, impair, or supersede any law enacted by any               State  for the  purpose of  regulating the  business of               insurance,  or which  imposes  a fee  or tax  upon such               business, unless  such Act specifically  relates to the               business of insurance:  Provided, That . . . [the Sher-                                          6                    First, the  federal statute    here,  the MSP provision          in Title XVIII    must not "specifically relat[e] to the business          of insurance."  Second, the state law    here, the RIIIFA    must          have  been enacted "for the purpose of regulating the business of          insurance."   Third, the MSP provision  must "invalidate, impair,          or  supersede" the  RIIIFA provisions  which purport to  make the          United  States the "primary" insurer.  See United States Dep't of                                                 ___ ______________________          the  Treasury v. Fabe, 113  S. Ct. 2202,  2208 (1993); Villafane-          _____________    ____                                  __________          Nerez v. FDIC, 75 F.3d 727, 735 (1st Cir. 1996).          _____    ____                    The  district court  ruled  the  McCarran-Ferguson  Act          inapplicable because the first precondition recited above was not          met;  that is, it found that the MSP provision does "specifically          relat[e]  to the  business of  insurance."   See Barnett  Bank of                                                       ___ ________________          Marion  County v. Nelson,  1996 WL 130728, at  *12 (U.S. Mar. 26,          ______________    ______          1996)  (holding that  a federal  statute, 12  U.S.C.    92, which          expressly  permits  national banks  to  sell  insurance in  small          towns, is a  statute which "specifically relates to  the business          of insurance," and preempts a state statute which prohibits banks          from selling   insurance).  On  appeal, the Fund argues  that the          MSP provision does  not come  within the definition  of the  term          "business of insurance" set  forth in United Labor Life  Ins. Co.                                                ___________________________          v. Pireno, 458 U.S. 119 (1982).   The United States responds that             ______          Pireno,  a case decided under the second or "antitrust" clause of          ______                            ______                                        ____________________               man, Clayton, and FTC antitrust acts] shall be applica-               ble to the  business of  insurance to  the extent  that               such business is not regulated by State law.          15 U.S.C.   1012.                                           7          15  U.S.C.   1012(b), see supra note  2, is not applicable in the                                ___ _____          present case.  Because  we conclude that the  MSP provision is  a          statute  "specifically  relating to  the business  of insurance,"          irrespective of any  formal application of  the Pireno test,  see                                                          ______        ___          Pireno, 458  U.S. at 129 (noting  that no one factor  is disposi-          ______          tive, and  that the three-part standard  contemplates a balancing          test),  we need not reach this issue.   See Barnett Bank, 1996 WL                                                  ___ ____________          130728,  at  *9  (citing  Pireno as  "context[],"  but  foregoing                                    ______          extended three-factor  analysis); Owensboro Nat'l Bank  v. Steph-                                            ____________________     ______          ens, 44 F.3d  388, 391 (6th Cir. 1994), petition for cert. filed,          ___                                     ________ ___ _____ _____          64 U.S.L.W. 3069 (U.S. July 13, 1995)  (No. 95-74); infra note 5.                                                              _____          The relevant inquiry under the first clause of section 1012(b) of          the  McCarran-Ferguson Act focuses on  two basic elements:  "spe-          cific relation" and "business of insurance."               1.   "Specific Relation"               1.   "Specific Relation"                     _________________                      The  import of  the  "specific  relation" element  is          readily discernible from its pre-enactment history.  Before 1944,          the United  States Supreme Court  consistently had held  that the          Dormant Commerce Clause of the United States Constitution did not          _______          invalidate  state  insurance  laws  which  imposed  impermissible          burdens on  interstate commerce.  However,  when first confronted          with an  affirmative congressional enactment purporting  to regu-                   ___________          late  the interstate  business of  insurance directly,  the Court          ruled  that the  business  of insurance  is  part of  "interstate          commerce" and  subject  to regulation  (hence, preemption)  under                                          8          Congress's commerce-clause  powers.  See United  States v. South-                                               ___ ______________    ______          Eastern Underwriters Ass'n, 322 U.S. 533, 544 (1944).            __________________________                    Congress  promptly  repudiated  the holding  in  South-                                                                     ______          Eastern  Underwriters, by  enacting the  first clause  of section          _____________________          1012(b), see supra note 2,  which restored immunity from  dormant                   ___ _____          commerce-clause challenges to State  insurance laws.  See Pruden-                                                                ___ _______          tial Ins. Co. v. Benjamin, 328 U.S. 408, 429-30 (1946); Silver v.          _____________    ________                               ______          Garcia,  760 F.2d  33,  36-37 (1st  Cir.  1985).   Congress  went          ______          further, however, by providing  that even statutes enacted pursu-          ant to Congress's commerce-clause powers, for general application          to interstate  commerce, would  not preempt state  insurance laws          unless the federal statute expressly announced Congress's specif-          ic  intention to inject itself  into the area  of state insurance          law.  See Barnett Bank, 1996 WL 130728, at *10 ("[T]he [McCarran]                ___ ____________          Act does not seek to insulate state insurance regulation from the          reach of  all federal  law.   Rather, it  seeks to  protect state          regulation primarily  against  inadvertent federal  intrusion  --          say, through  enactment of  a federal  statute that  describes an          affected activity in broad, general terms, of which the insurance          business happens  to comprise  one part.").   Thus, McCarran-Fer-          guson  Act   1012 imposes  no substantive constraint  on the con-          gressional power  to regulate  insurance, but simply  "creates `a          form  of  inverse  preemption,  letting state  law  prevail  over          general federal rules    those that do not "specifically relate[]          to the business of insurance."'"  Villafane-Nerez, 75 F.3d at 735                                            _______________          (quoting  NAACP v. American Family  Mut. Ins. Co.,  978 F.2d 287,                    _____    ______________________________                                          9          293 (7th Cir.1992), cert. denied, 113 S. Ct. 2335 (1993)).   That                              _____ ______          is to say, section 1012 "`impos[es] what is, in effect, a clear--          statement  rule.'"  Id.  (quoting Fabe, 113 S.  Ct. at 2211); see                              ___           ____                        ___          Barnett Bank,  1996 WL  130728, at  *12 (rejecting argument  that          ____________          Fabe's "clear-statement" rule imposed any  heightened requirement          ____          that a  federal statute referring  to "insurance" must  also "use          the words 'state law is pre-empted,' or the like").                    The parties dispute whether the Medicare program itself                                                             _______          specifically relates to insurance,  since it was established long          after  the  1945 enactment  of  the  McCarran-Ferguson Act,  and,          arguably at  least, is  not the  typical insurer  contemplated by          section  1012 (i.e., a private insurance  carrier).  For example,          the  Fund points  to the  recent decision  in Kachanis  v. United                                                        ________     ______          States, 844 F. Supp. 877 (D.R.I. 1994), which held that a Federal          ______          Employees' Compensation Act ("FECA")  provision, which allows the          United States to  recover in subrogation  from any "third  party"          liable to  an injured  employee, is not  a statute  "specifically          relating to the  business of  insurance."  Id.  at 882  ("[W]hile                                                     ___          FECA does provide insurance-like  benefits to employees, there is          no specific  mention of  insurance in  the statute.").   However,          unlike  the  plainly generic  "third  party"  reference in  FECA,          connoting a regulation of  general application which might encom-          pass both insurers and  non-insurers (e.g., tortfeasors), the MSP          provision  in the  Medicare Act  specifically adverts  to "insur-          ance,"  see  42  U.S.C.     1395y(b)(2)(A)  (precluding  Medicare                  ___          coverage if "payment has been made, or can reasonably be expected                                          10          to be made promptly . . . under . . . an automobile  or liability          insurance policy or plan") (emphasis added), as does its legisla-          _________          tive history.3  Whether the Medicare program or any other govern-                                        ____________________               3The House Report provides, in relevant part:                    Under Title VIII, Medicare will have residual                    rather than primary liability for the payment                    of services required  by a  beneficiary as  a                    result of an injury  or illness sustained  in                    an auto accident where payment for the provi-                    sion of such services  can also be made under                    an automobile insurance  policy.  Under  this                                  _________  ______                    provision, it is  expected that Medicare will                    ordinarily pay for the beneficiary's  care in                    the  usual manner and then seek reimbursement                    from the private insurance carrier after, and                                     _________ _______                    to the extent that, such  carrier's liability                    under the private policy for the services has                    been determined.  Under present law, Medicare                    is the  primary payor  (except where  a work-                    men's compensation program  is determined  to                    be responsible for payment for needed medical                    services) for hospital  and medical  services                    received by beneficiaries.  This is true even                    in cases  in which  a beneficiary's  need for                    services is  related to an  injury or illness                    sustained in an auto accident and the servic-                    es  could have  been  paid for  by a  private                    insurance carrier under the terms of an auto-                    _________ _______                       _____                    mobile insurance  policy.  As a result, Medi-                    ______ _________  ______                    care has  served to relieve  private insurers                                                 _______ ________                    of obligations  to pay  the costs  of medical                    care in cases where there would otherwise  be                    liability  under  the private  insurance con-                                          _______  _________ ____                    tract.   The original  concerns that prompted                    _____                    inclusion of this  program policy in the  law                        the administrative  difficulties involved                    in  ascertaining private  insurance liability                                     _______  _________ _________                    and  the attendant  delays in  payment     no                    longer justify retaining the policy, particu-                    larly  if  it  is  understood  that immediate                    payment may be made by Medicare with recovery                    attempts  undertaken  only subsequently  when                    liability is  established.  In order to avoid                    excessive administrative costs and efforts in                    pursuing  minor   recoveries,  the  committee                    expects the Secretary of HHS to establish  in                    regulations   rules  regarding   the  minimum                                          11          mental "insurer" technically is  considered part of the "business          of insurance" is not  material. Barnett Bank, 1996 WL  130728, at                                          ____________          *9 ("The word  'relates' is  highly general, and  this Court  has          interpreted it  broadly in other pre-emption  contexts.").  Thus,          for  example, the  Internal Revenue  Service is  not part  of the          "business of insurance,"  and yet  we have held  that a  Treasury          Regulation,  which  resulted in  a  tax  on insurance  companies,          rendered  the  McCarran-Ferguson  Act "inapplicable  by  its  own          terms."  See  Hanover Ins.  Co. v. Commissioner,  598 F.2d  1211,                   ___  _________________    ____________          1219  (1st Cir.),  cert. denied,  444 U.S.  915 (1979);  see also                             _____ ______                          ___ ____          Texas Employers'  Ins. Ass'n v.  Jackson, 820 F.2d  1406, 1414-15          ____________________________     _______          (5th Cir. 1987), cert. denied, 490 U.S. 1035 (1989) (holding that                           _____ ______          the Longshore and  Harbor Workers' Compensation  Act specifically          relates to "business of insurance").  Therefore  we conclude that          Congress expressly and deliberately injected itself into the area          of state insurance law  with its enactment of the  MSP provision.          See Barnett  Bank, 1996 WL  130728, at *11 ("The  language of the          ___ _____________          Federal Statute before us is not general.  It refers specifically          to insurance.  Its state regulatory implications are not surpris-          ing, nor do we believe them inadvertent.").               2.   "Business of Insurance"               2.   "Business of Insurance"                     _____________________                                        ____________________                    amounts  estimated  as  recoverable  and  the                    procedures for seeking recovery  from private                                                          _______                    carriers.   Such procedures are to be similar                    ________                    to  those currently  employed by  Medicare in                    seeking  recovery  in workmen's  compensation                    cases.            H.R. Rep. No. 1167,  96th Cong., 2d Sess. 389,  reprinted in 1980                                                          _________ __          U.S.C.C.A.N. 5526 (emphasis added).                                          12                    The second element    that the federal statute actually          pertain  to activities that are  part of the  "business of insur-          ance"    is satisfied as  well.  The MSP provision regulates  the          core  relationship between  a  private insurer  and its  insured.          "`Statutes aimed  at protecting or  regulating th[e] relationship          [between insurer  and insured], directly or  indirectly, are laws          regulating  the "business of insurance."'"   Fabe, 113  S. Ct. at                                                       ____          2208  (quoting  SEC v.  National Sec.,  Inc.,  393 U.S.  453, 460                          ___     ____________________          (1969)).  The  "core" matters encompassed within  the term "busi-          ness of insurance"  may include "the  type of [insurance]  policy          that  could  be  issued,  its  reliability,  interpretation,  and          enforcement,"  cf. id. at 2211,4 as well as the standards govern-                         ___ ___          ing performance under insurance contracts, cf. id. at 2212.  See,                                                     ___ ___           ___          e.g., Barnett Bank, 1996 WL 130728, at *9  (noting that 12 U.S.C.          ____  ____________            12 "specifically relates to the business of insurance" because,          inter  alia, it  "sets forth  certain specific  rules prohibiting          _____  ____          banks  from guaranteeing the 'payment of any premium on insurance          policies issued  through its agency'").   The MSP  provision, and          its  implementing regulations, explicitly prohibit private insur-          ers from  negotiating or  enforcing  any insurance-contract  term                                        ____________________               4Fabe  defines the  activities encompassed  within the  term                ____          "business of  insurance," albeit in  the process of  applying the          second prong of   1012(b), i.e., whether a state priority statute          is a law enacted "for  the purpose of regulating the  business of          insurance."   Nonetheless,  Fabe is  apposite to the  extent that                                      ____          "business of  insurance" is a term  common to both the  first and          second prongs under   1012(b).  See Atlantic  Cleaners & Dyers v.                                          ___ __________________________          United States, 286 U.S. 427, 433 (1932) (same word or phrase used          _____________          repeatedly in statute  is presumed to have same  meaning); Fortin                                                                     ______          v. Marshall, 608 F.2d 525, 528 (1st Cir. 1979).                ________                                          13          which purports to make  Medicare the primary-insurance obligor in          lieu of  a private insurance  carrier, even though  authorized by          state law.   See 42  C.F.R.   411.32(a)  ("Medicare benefits  are                       ___          secondary  to benefits payable by a third party payer even if the                                                                ____ __ ___          State law or the third party payer  states [otherwise].") (empha-          _____ ___                           ______  _________          sis added).  This overt federal intervention    directly control-          ling the core contract  relationship at both the  negotiation and          performance stages      establishes that the MSP  provision "spe-          cifically  relat[es] to  the  business of  insurance," and  fully          explains the litany  of unanimous decisions  that reach the  same          conclusion      many  without  extended analysis  of  the  Pireno                                                                     ______          factors.5  See Colonial Penn. Ins. Co. v. Heckler, 721 F.2d  431,                     ___ _______________________    _______                                        ____________________               5The more specific challenges made by the Fund, based on the          three-factor Pireno  test,  gain it  nothing.   First,  the  Fund                       ______          contends that the MSP provision does not involve a practice which          has  the effect  of  transferring or  spreading a  policyholders'          risk,  see Pireno,  458 U.S.  at 129,  because the  MSP provision                 ___ ______          merely shifts risk between the Medicare program and the Fund, not          between the insured and the Fund.   We do not think Pireno is  to                      _______                                 ______          be read so narrowly.  It held only that  purely peripheral insur-          ance  company activities, such as  an insurer's use  of a medical          peer review  committee  to consider  whether  claimants'  medical          bills were "reasonable," are  not part of the rough and tumble of          risk  allocation in  insurance  contracts.   Id.  at 130-31.    A                                                       __          federal statute  prohibiting a private insurer  from imposing the          primary insurance obligation on  the Medicare program clearly and          directly affects the allocation of risk  to the policyholder, who          is likely to  have to pay higher premiums to offset the insurer's          increased liability exposure.   The same consideration attends to          the  second Pireno factor as well.   Id. at 129 (second factor is                      ______                   ___          "whether  the [regulated]  practice is  an integral  part of  the          policy  relationship between  the [private]  insurer and  the in-          sured").   Finally, despite  the  MSP provision  that the  United          States can  pursue "any entity" for reimbursement, see id. (third                                                             ___ __          factor is "whether  the [regulated] practice is  limited to enti-          ties within  the insurance  industry"), the MSP  provision limits          reimbursement to  recoveries from "primary plans,"  whose defini-          tion lists only entities which are clearly "within" the insurance          industry.   See 42 U.S.C.    1395y(b)(2)(A) ("primary plan" means                      ___                                          14          442 n.6 (3d  Cir. 1983); Varacalli v. State  Farm Mut. Auto. Ins.                                   _________    ___________________________          Co., 763  F. Supp.  205, 209   (E.D.  Mich. 1990) (citing  United          ___                                                        ______          States  v. Blue Cross  and Blue Shield of  Michigan, 726 F. Supp.          ______     ________________________________________          1517,  1523 (E.D. Mich. 1989));  Abrams v. Heckler,  582 F. Supp.                                           ______    _______          1155, 1165 n.8 (S.D.N.Y. 1984).  As  the Medicare Secondary-Payer          Statute  is a  federal  statute "specifically  relat[ing] to  the          business of insurance," the McCarran-Ferguson Act is inapplicable          and the  preemptive effect of   the MSP provision upon  the Rhode          Island Insurers'  Insolvency Fund Act therefore  must be reviewed          under conventional preemption principles.          C.   Conventional Preemption Analysis          C.   Conventional Preemption Analysis               ________________________________                    Notwithstanding  the  inapplicability of  the McCarran-          Ferguson Act, the Fund  argues that the priority mandated  by the          MSP provision does not trump the RIIIFA,  even under conventional          preemption analysis,  because the priority provisions  in the two          statutes  are compatible. See Summit Inv. and Dev. Corp., 69 F.3d                                    ___ __________________________          at  610.   First,  the Fund  points  out that  the MSP  provision          permits the United  States to seek reimbursement  only if another          insurer has made  a payment  to the Medicare  beneficiary, or  if          such payment can  "reasonably be  expected to be  made."   Conse-          quently, it  argues, it would  be unreasonable  for any  Medicare                                            ____________          beneficiary to  expect reimbursement  from the Fund,  because the                                        ____________________          "a group health plan  or large group health plan,  . . . a  work-          men's  compensation  law  or  plan, an  automobile  or  liability          insurance  policy  or plan  . .  .  or no-fault  insurance"); cf.                                                                        ___          Kachanis, 844 F. Supp. 877 (D.R.I. 1994) (holding   1012 applica-          ________          ble  to FECA provision allowing United States to recover from any          "third party").                                           15          RIIIFA  exhaustion provision  explicitly  requires  claimants  to          exhaust  all governmental  insurance before  receiving Fund  pay-          ments.    This argument  altogether  disregards  the function  of          federal preemption,  however,  by implicitly  assuming  that  the          RIIIFA  exhaustion provision  continues in  force notwithstanding          the  mutually  inconsistent   allocations  of  primary  insurance          liability as  denoted in the MSP provision and the RIIIFA.  Thus,          the Fund's argument is fatally circular: the Medicare beneficiary          could "reasonably expect" the Fund  to take the primary insurance          risk if and because the MSP provision preempts the Fund's exhaus-               __     _______          tion provisions.                    Second, the  Fund contends that  it is  not a  "primary          plan,"  as  defined  by  the  MSP  provision,  see  42  U.S.C.                                                            ___          1395y(b)(2)(B)(ii),  (b)(3)(A)  ("an   automobile  or   liability          insurance  policy  or  plan"), because  it  is  not  the Medicare          beneficiaries' private insurance carrier, but rather a non-profit          governmental agency.   The Fund  further argues that it  is not a          "plan," as defined by  Medicare regulations, because an insurance          insolvency-guarantor statute like the  RIIIFA is not an insurance          "policy," and therefore is not  an "arrangement, oral or written,          by  one or more entities,  to provide health  benefits or medical          care or assume legal liability for injury of illness."  42 C.F.R.            411.21; see supra note 1.  Neither contention is tenable.                      ___ _____                    The RIIIFA itself provides  that, upon a declaration of          insolvency, the Fund is "deemed the insurer to  the extent of the                                   ______          obligations  [under the policy] on the covered claims," see R. I.                                                                  ___                                          16          Gen.  Laws    27-34-8(a)(2) (emphasis  added), subject  solely to          specified  limitations on the amount of coverage.  Thus, the Fund          is deemed the private  insurer, and hence a "primary  plan" under          the MSP provision and its regulations.6                                            III                                         III                                      CONCLUSION                                      CONCLUSION                                      __________                    For the foregoing reasons,  the district court judgment                                                ___ ________ _____ ________          is affirmed, with costs to plaintiff-appellee.          __ ________  ____ _____ __ __________________                                        ____________________               6Finally,  the  Fund  raises  a puzzling  challenge  to  the          implicit district court ruling that RIIIFA's preempted provisions          are severable from its non-preempted  provisions.  It argues that          no part of  RIIIFA can  be struck down  because the Rhode  Island          Legislature  envisioned  the Fund  only  as a  "last  resort" for          insolvent  insurers' policyholders,  and that  it would  not have          enacted RIIIFA at all had it known that its core  "covered claim"          definition was going to be so severely restricted with respect to          Medicare  benefits.   Aside  from  its  conjectural nature,  this          contention  seems counterproductive  from the  Fund's standpoint.          If the preempted  RIIIFA provision is  not severable, of  course,          the  proper  relief is  not, as  the  Fund apparently  assumes, a          holding that the entire RIIIFA stands as enacted, but the invali-                                                                    _______          dation of the  entire RIIIFA, which  would result in  appellant's          ______         ______          extinction.  See, e.g., Hooper v. Bernalillo County Assessor, 472                       ___  ____  ______    __________________________          U.S. 612,  624 (1985).  Beyond this, no more need be said, howev-          er,  as  any nonseverability  decision  is for  the  Rhode Island                       ___          courts.  See Zobel v. Williams, 457 U.S. 55, 65  (1982) (striking                   ___ _____    ________          down  portion of  state statute,  but  leaving ultimate  issue of          nonseverability for state-court resolution).          ___                                          17
