Appelate Division Overrules Unilateral Increase of Retirees Prescription Co-pays

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In a published opinion December 31, a three-judge Appellate Division panel vacated the state Division of Pensions and Benefits’ decision to increase the prescription copayments for thousands of retired public employees, saying the action was in violation of pension & benefit reform legislation enacted in 2011 – commonly known as c.78.

 “The status quo should have been maintained” until the process approved by the legislature and Christie had run its course, wrote Appellate Division Judge Clarkson Fisher Jr. for the appeals court in Rosenstein v. New Jersey (A-0945-12). 


When the legislature enacted Chapter 78 four years ago, it gave the State Health Benefits Plan Design Committee (SHBPDC) the sole authority to design benefit plans and to set prescription copayment rates. That role previously had been the province of the State Health Benefits Commission (SHBC).  The SHBPDC is made up of 12 members—six union representatives and six administration representatives. According to the statute, no measures can be passed without the votes of at least seven members of the design committee.

In 2012, the administration members on the committee moved to increase retiree prescription copayments, but could not garner more than six votes, according to the appeals court’s opinion. When there is such an impasse, the statute calls for the appointment of a “super-conciliator” to be named from a list by the state Public Employment Relations Commission.

Despite demands from the unions—chiefly the Communications Workers of America and the AFL-CIO—for conciliation, the SHBC voted to approve, and the Division of Pensions and Benefits increased retirees’ prescription copayments effective Jan. 1, 2013.

The Suit

The CWA then filed suit directly to the Appellate Division asking the Court to overturn the SHBC’s ruling and reinstating the prior copayment schedule.  The State argued that the CWA had no standing since they were not retired public employees and because the conciliation process had not run its course.  The appeals court rejected both of those arguments.

“Here, the question of standing might begin and end with an assumption that appellants are taxpayers,” Fisher said. “But appellants are also union representative members of the SHBPDC.”

Fisher also said there was no reason not to consider the appeal during the pendency of the conciliation process.

“Although sound judicial principles may at times counsel otherwise, there is no doubt that courts are empowered to intervene in a dispute pending in some other form for the purposes of preserving the thing in dispute in that other forum,” he said. “The interests of justice preclude the exhaustion doctrine’s use as a bar to the relief sought by appellants here.”

On the central issue, Fisher said it was clear that the division acted outside the scope of its authority as outlined in Chapter 78.

“The division lacked the authority to increase retiree prescription copayments because the SHBC lacked the authority to change the state health benefits plan absent a final determination by the SHBPDC or through the super-conciliatory process,” he said. “Because those levels have not been set due to the SHBPDC impasse, and cannot be resolved … until the impasse is broken through the conciliation process or otherwise, the SHBC acted without authority when it unilaterally decided to increase retiree copayments.”

Source: NJCourtsonline; NJ Law Journal