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Local Governments and School Districts Blog

What's in Your Wallet? Vested Rights and Employee Health Insurance

Authored by Ruder Ware Attorneys
Posted on February 19, 2015
Filed under Local Governments and School Districts

Does anyone remember a TV credit card commercial where a medieval Viking turns directly toward the camera and asks the rhetorical question: “What’s in your wallet?” An analogous question may come into focus when reviewing a collective bargaining agreement’s language, specifically those provisions dealing with employee health insurance and retiree benefits. Earlier this month, the Wisconsin Court of Appeals, District 2, decided a case over alleged vested rights of a retiree in Monreal v. City of New Berlin, 2015 WL 442469 (Ct. App., Feb 4, 2015). In short, the court found that whether or not there are vested rights depends upon the language found within the collective bargaining agreement. The case decision did “rise and fall” upon the contractual language used in the collective bargaining agreement.

The City of New Berlin changed its health insurance plan for police officers so that it no longer provided active officers with 100% reimbursement for their in-network deductibles. Beginning in 2013, the new plan deductible became $6,000, with zero reimbursement. (It is unclear to this writer whether this change was the result of bargaining or an interest arbitration award). A police officer, who retired a few years prior to the effective date of the 2013 collective bargaining agreement, sued and claimed that the city was obligated to reimburse him at 100% for his post-2013 deductibles since the collective bargaining agreement language in effect at the time of his retirement provided a complete reimbursement of deductibles for life. The city countered that this was an improper interpretation as the only vesting was the retired officer’s access to city-provided health insurance. Further, the city pointed out another provision in the former collective bargaining agreement which allowed for the city to change health insurance plans. Thus, the city maintained, there was no retiree right to 100% reimbursement for deductibles for life, only the right to city-provided health insurance; when the city changed plans, the city was no longer required to fully reimburse the retired officer’s deductibles.

In finding for the city, the appellate court carefully reviewed the language in the collective bargaining agreement in effect at the time of the officer’s retirement. That language gave coverage under a city-provided health insurance plan. That plan included 100% reimbursement on the plan’s deductibles. However, the language did not lock in a plan indefinitely or offer indefinite 100% reimbursement: “[N]othing in the CBA indicates that the contracting parties meant for the rights [of 100% reimbursement on deductibles] to endure beyond the contract’s expiration. No law or policy in Wisconsin freezes a contract of limited duration in time unless its language calls for that result.” Therefore, the court found that the city did not improperly take anything away.

The case underscores the importance of good language in a collective bargaining agreement. Good language provides for a good “wallet” in a labor relations setting and a collectively bargained labor agreement. This case also underscores that when bargaining over changes to the collective bargaining agreement to review the contract in its entirety and to be certain not to change words that a party might assert as ever-lasting or that provide a lifetime benefit. This is especially true where municipalities are considering, or are changing, their health insurance plans either mid-contract or at the end of a labor agreement. This includes where municipalities are making changes to only a few of their departments’ health insurance plans due to a union’s inflexibility in bargaining or due to the high cost of maintaining the same level of health insurance benefits for a particular municipal unit.