In a ruling issued late Monday afternoon, Judge Mary Jacobson dismissed with prejudice a lawsuit brought by the State that sought to compel union representatives on the School Employees’ Health Benefits Commission (SEHBC) to attend a SEHBC meeting in order to force a vote to change the medical benefits of a majority of retirees.
In her ruling from the bench, Judge Jacobson rejected the State’s arguments and expressed concern with the attempted manipulation of the Commission by the State. She agreed that the union representatives had a legitimate cause for concern about how the Division of Pensions had managed the meeting schedule. She also agreed that the union representatives on the commission had reason to be concerned that attending a meeting where they believed a vote was likely to be taken would be a violation of their fiduciary duty.
P.L. 2011 Chapter 78 made significant changes to school employees’ pensions and health benefits. One of the protections for members under this law was the creation of the School Employees’ Health Benefit Plan Design Committee. The Committee took over the role of benefit review for ALL plans offered in the SEHBP from the School Employees Health Benefits Commission. The law included a requirement of equal representation of labor and management on the committee (3 union representatives and 3 state/management representatives).
After the passage of Chapter 78, any benefit modification would have to be approved by the Committee. The six members of the Committee meet approximately once a month to discuss proposals. The role of the Committee, according to P.L. 2011 Chapter 78, is as follows:
“The committee shall have the responsibility for and authority over the various plans and components of those plans, including for medical benefits, prescription benefits, dental, vision, and any other health care benefits, offered and administered by the program. The committee shall have the authority to create, modify, or terminate any plan or component, at its sole discretion. Any reference in law to the School Employees’ Health Benefits Commission in the context of the creation, modification, or termination of a plan or plan component shall be deemed to apply to the committee.”
Recently, State representatives on the Committee proposed moving eligible retired members receiving healthcare from the SEHBP from their current retiree health benefit program to a Medicare Advantage program. Currently 12% of retired members already selected a Medicare Advantage program through Aetna so they would see little to no change in their benefit. But the 88% that chose Medicare as their primary insurance (with Horizon supplementing that coverage) would be forced into a Medicare Advantage program.
The modification stemmed the Administration’s plan to garner $250 million in savings in health benefit costs within the State Health Benefits Plan and School Employees’ Health Benefits Plan. A consultant hired by the state had identified switching Medicare-eligible retirees across both plans into Medicare Advantage as an area of potential cost savings of around $74 million.
The three NJEA representatives hadn’t attended recent commission meetings, preventing a quorum, as they believed the state was trying to force a vote on the Medicare Advantage plan without providing enough information. Additionally, one of the four union seats on the commission has been vacant since last year, meaning the commission has four executive branch representatives and three union representatives. The chair position is also vacant.
The state Attorney General filed an order to show cause last week to compel the NJEA to attend meetings. In response to that order, Mercer Assignment Judge Jacobsen ordered all members to attend a meeting September 14 “for information purposes only.” The order further ordered that ‘the Commission shall not conduct or take any vote with regard to any retiree medical plan.”
Since the Plan Design Committee needs a majority of its members to implement any change, at least one union representative would have to vote with the state representatives to mandate this change. In light of this, the Governor called on the Commission to decide the matter.
The Commission is composed of nine members: four union representatives and five executive branch representatives, but a spot on the panel for an AFL-CIO member has been vacant since last year. The chair position is also vacant because the current members have not been able to agree on who they would like to recommend. The only way to fill the union representative seat is through the Office of Appointments in the Governor’s office. Names have been provided but no action has been forthcoming from the Administration.
The Administration’s position is that the Medicare Advantage change is a contractual change, so the authority rests with the Commission. The Governor also argues that the union representatives haven’t shown up because they don’t want to trim $250 million from the health care costs of teachers and state workers that he has demanded. The Christie administration said that shifting retired members of the state plan into Medicare Advantage plans could save the state around $47 million. The union argues that he is attempting to effectuate the change through the commission because he currently holds a majority there.
NJPSA has expressed concern with the process, urging the appointments be made as soon as possible and that the Committee, not the Commission, review the proposal first.