A decade-long legal battle over whether government retirees were harmed when North Carolina stopped offering them a more generous level of premium-free health insurance remained unresolved after Friday’s Supreme Court decision to the state.
A majority of justices agreed that former state employees and teachers had a “constitutionally protected grandfathered right” to remain in a government insurance plan in which retirees paid 20% of their coinsurance without paying a premium – or an equivalent diet. This no-premium “80/20” option was no longer offered in September 2011, as state lawmakers and plan leaders sought to fill spending shortfalls.
“These retirees reasonably relied on the promise of this benefit in choosing to accept government employment. They are entitled to the benefit of their bargain,” Associate Justice Anita Earls wrote in the majority opinion.
But Earls said it was unclear whether that right had been impaired to the point that monetary damages were needed for former workers. And that could be balanced against whether the damages served a “legitimate public purpose,” such as lawmakers or the state health plan seeking to curb rising health care costs paid for with taxpayers’ money. taxpayers, she wrote.
The case will now be sent back to a trial judge who initially sided with a retired legal class of 220,000 former state employees and teachers, but who the judges say went too far. far.
Earls acknowledged that litigants may now have to present complicated and competing health care and monetary calculations to the judge, who will gather facts to decide whether retirees were truly harmed and should receive compensation. This could include assessing whether the options available to retirees after 2011 were materially more or less than what retirees might get when they qualify for health benefits, and if so by how much. The state health plan could win the case by proving that the plans offered now are more valuable.
Although retirees today must pay relatively low monthly premiums for individual coverage under the “80/20” plan, non-premium benefits remain under the 30% coinsurance and Medicare Advantage plans. State Treasurer Dale Folwell, whose office oversees the state health plan, said in 2017 that premium refunds of more than $100 million were possible if the courts sided with retirees. .
The dispute “raises questions of paramount importance to the hundreds of thousands of dedicated public employees who have dedicated their lives to serving their fellow North Carolina citizens, often for less immediate compensation than would have been offered to them. in the private sector,” Earls wrote.
Three other judges sided with Earls to overturn parts of a 2019 ruling by a state Court of Appeals panel that found there was no contractual obligation to offer this level of benefits without a premium. The judges had opposed them to public pension benefits, which the courts ruled contractual. Although participation in the pension system is compulsory, the health insurance program is voluntary.
But decisions in other cases show that the treatment of a social benefit as a contractual right does not depend on its resemblance to a pension, Earls wrote. The General Assembly first authorized premium-free benefits in 1981. Testimonials from retirees, including plan books for workers, led them to believe they could rely on health insurance coverage at retirement for life, according to the majority opinion.
Associate Judge Tamara Barringer, writing a separate opinion also accepted by Associate Judge Phil Berger Jr., said a trial judge should also have been tasked with deciding whether a contractual obligation to retirees is present.
“There is still work to be done in the trial court to close the case, but this is a major victory for the constitutional and contractual rights of state pensioners,” said Michael Carpenter and Sam McGee, attorneys for the plaintiffs, in a press release. Attorney General Josh Stein’s office, whose attorneys are representing the state and state agencies in the case, did not respond to the ruling on Friday, a spokesperson said.
Retired employees led by retired Chief Justice Beverly Lake Jr. sued the state’s health care and pension plans in 2012. Lake died about six months after the court ruling. call.
Chief Justice Paul Newby did not participate in Friday’s ruling or oral arguments in October. No reason was given for his recusal. But he was one of five judges listed in a January 2021 order as having living or deceased family members who were once civil servants or teachers, leading to conflict of interest issues that have been resolved months later.