Supreme Court to rule on employee benefit case with big taxpayer impact

2/11/2015

By M.D. Kittle | Wisconsin Reporter

MADISON, Wis. — The Wisconsin Supreme Court this week is expected to issue a ruling on a case that could have significant impact on Milwaukee County taxpayers and, ultimately, taxpayers around the state.

Wisconsin Federation of Nurses and Health Professionals v. Milwaukee County will attempt to answer whether union members can demand the county reimburse their Medicare Part B premiums when they retire, even though they had not retired when the county eliminated the long-standing benefit. The Supreme Court is expected to issue its decision on Thursday.

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WHO PAYS? The Wisconsin Supreme Court this week will rule on whether Milwaukee County employees should have their Medicare Part B premiums paid for by taxpayers, even if they have not retired before the benefit lapsed.

A state appeals court reversed an earlier decision by the Milwaukee County Circuit Court that ruled in favor of the labor unions, represented by the Wisconsin Federation of Nurses and Health Professionals, Local 5001,AFT, AFL-CIO and Association of Milwaukee County Attorneys.

The Circuit Court agreed with the unions, ruling that ending the benefit was a breach of contract.

But the !st District Court of Appeals, in overturning the ruling, pointed to earlier rulings that uphold the government employer’s right to change its benefits plan.

Wisconsin Act 10, which reformed the state’s public-employee collective bargaining law, also changed those expectations. Act 10, signed into law by Gov. Scott Walker in 2011, limits bargaining to wages, up to the rate of inflation, and ends negotiating over benefits such as health insurance.

Citing Loth v. City of Milwaukee, a 2008 case, the Appeals Court ruled that eligibility for the health care benefit for retirees does not “become an entitlement until all prerequisites are met.” In essence, the employee has to actually retire.

The county did provide county employees a window of opportunity to retire in order to be eligible for the benefit. But the unions argued that employees, even those who had not reached retirement eligibility, were promised the county would cover the cost of their Medicare Part B premiums. Not doing so would sever that trust.

Milwaukee County has, since at least 1972, provided coverage under its employee group health insurance program to retired county employees who had been hired prior to specified dates and who retired with 15 or more years of service credits in the Milwaukee County Employees Retirement System. Eligible county employees and their spouses would receive health insurance coverage at no premium cost. The insurance coverage included the county’s reimbursement of the premium cost of coverage under Part B of Medicare.

Those guarantees have changed in recent years as Milwaukee County found itself buried in debt, driven in large part by a county pension scandal.

If the Supreme Court overturns the Appeals Court decision, Milwaukee County taxpayers could be on the hook for a growing health care bill.

“Over time it’s going to be several millions of dollars, depending on a couple of different variables. It’s a multi-million dollar impact,” said Alan M. Levy of Lindner and Marsack, S.C., the Milwaukee law firm representing the county.

Ultimately, if the Circuit Court decision is upheld and the county is obligated to honor the old contracts, such precedent could be used by labor unions and government employees across the state to hold onto benefits no longer provided.

“Lots of counties have variations on retirement health benefits,” Levy said. “Others are looking at the same kinds of issues. This would apply to municipalities as well.”

The attorney said he believes the Supreme Court will uphold the precedent of eligibility attainment. A decision by the U.S. Court of Appeals for the 7th Circuit found that a government employee had to pay the same rising deductibles and co-pays that active employees were obligated to pay under a government benefits plan. The employee had argued that she should have received full reimbursement of her health insurance benefit.

“The same issues are going on in several states, not just Wisconsin. There is a lot of litigation in this area,” Levy said. “Wisconsin is a little more pro-employer than other states.

“I think this is a general trend to support the county position,” he said. “I’d be surprised if the Supreme Court of Wisconsin goes a different direction.”

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