Retiree Health Care Benefits for Public Employees Can Change Says Michigan Supreme Court

[XLFD]

A group of Macomb County public retirees filed suit against the County of Macomb claiming that the county could not reduce or change their health care benefits.  The Court of Appeals agreed with them, but a supreme court divided along party lines (the two court Democrats voting for the union-inspired lawsuit) found for the County.  

This appears to be a good ruling for fiscal sanity as some extra-generous retirement health care packages that have been enacted by some public agencies have not taken into account the hyperinflated health care market of recent times and other monetary realities.  Budget flexibility is a good thing, that's why many public bodies were behind the county's position.  One can believe that there likely won't be a lot of changes, even in Macomb County, to unfairly reduce these benefits without compelling reasons.  Recall, both sides and their lawyers are funded by you.

In a Detroit Free Press article by Bill Laitner he reports:

In a class-action case involving health care benefits for 1,600 retired Macomb County workers — roughly 400 of whom have died since they filed the lawsuit in 2010 — the Michigan Supreme Court ruled Thursday that the union contracts for the retirees don't specifically promise “a vested right to lifetime and unalterable retirement health care benefits.”

The ruling reverses a decision by the Michigan Court of Appeals, which sided with the retirees. The split decision fell strictly on party lines, as four Republican justices sided with Macomb County while two Democrats took the side of the retirees.

The case has attracted statewide attention because of its potential impact on the budgets of county and municipal governments, which are now more free to alter retiree benefit levels. Key statewide organizations that represent cities and counties submitted briefs in support of Macomb County’s position.

According to Macomb County's lawyers, no matter which way the lawsuit was decided there would always be health care coverage for retired county workers. As evidence, they point to the major bond sale in 2015 that the county is using to fund its retiree benefit costs.

The ruling simply means that the county can make minor changes in that coverage without negotiating with unions, officials said. The retirees' argument is that nothing now stops the county from making major changes.

The 25-page majority opinion was signed by four Republican justices including Justice Stephen Markman, who wrote it. The ruling concludes that retiree health benefits expire at the expiration date of each union contract, freeing the county to make changes.

In a 15-page dissent, written by Chief Justice Bridget McCormack and also signed by Justice Richard Bernstein — both Democrats — McCormack stated that, notwithstanding the words in the county’s union contracts, the retirees’ view “has commonsense appeal: they thought retirement health care was a promise that they would have health care for the period of their retirement.”

After Thursday’s ruling was announced, Macomb County’s top lawyer said the county had “no plan or intention” of reducing retiree health care coverage.

“The court's ruling simply allows the county the flexibility to go to the insurance marketplace to secure the best rates possible while delivering the same retiree health care services well into the future,” Macomb County Corporation Counsel John Schapka said.

The county appealed last year's court of appeals ruling that said the retirees were entitled to the same level of benefits they’d been receiving under more than 30 union contracts they'd voted to ratify. County officials have said that, if the decision had gone against them, it could burden local governments across Michigan with huge unfunded liabilities, as they’d be forced to maintain costly benefit levels and be precluded from negotiating changes in insurance carriers.

The current level of Macomb County retirees’ health care coverage “is, honestly, really quite good,” said Donna Cangemi, president of American Federation of State, County and Municipal Employees (AFSCME) Local 41, which has hundreds of members who work for Macomb County government.

“I thought the county’s changes were pretty minor. But I think these people who fought this believe it was a principle they wanted to defend,” Cangemi said, adding: “I was pretty skeptical that the Supreme Court would rule in their favor” because “they just don’t go the way of labor anymore.”

Cangemi said the retirees failed in their effort to have Justice David Viviano recuse himself because he had served for years as a Macomb County circuit judge.

During oral arguments for the case in November, Justice Bernstein queried the county's lawyer about whether, hypothetically, the county could simply cut all retiree health care benefits, should it prevail in the case.

"If this court were to hold that this (coverage) is not in fact vested, is there anything to preclude the county from taking away all health benefits, if it so chooses?"

Macomb County counsel Susan Zitterman replied: "Other than its moral commitment and the commitment it's made to the electorate — the people that elect the county officials — there is no contractual requirement that they vest in these retirees the benefits in this contract for the rest of their lives."

Bernstein continued: "The point being … the county could strip all benefits if it chose to, and there would be nothing to prevent that legally. Is that correct?"

Zittterman responded, "Under the contract, I believe that to be the case. But as has happened in every contract that has been negotiated since the 1980s, the benefits will be provided.  "The county has gone to great expenses to get a bond passed to ensure it is fiscally able to do so." [End]

[shinblind]

There once was a time when, if you worked for the government, you traded off high wages for better retirement benefits, health care, and job security. Somewhere along the way the wages increased until they became higher than the pay in private sector, all the while maintaining  the other benefits.  This lead the way to an uneven wage and benefit playing field. This is no more than a small swing closer to where things should be. If public sector workers were required to pay an increasing amount for their own health care benefits over time it would be even better, say a 5 -10 year adjustment period paying in an increasing amount each year until they pulled their own weight. 

“It is impossible to bargain collectively with the government.” While may have been an economic imbecile, on this FDR was absolutely correct and for all the right reasons. The government has no issues giving public sectors workers all they ask for. What is the sense of negotiating when it isn't your money you are spending.

[Willy]

Though I'm not pleased with these large pensions given to Government workers, they took the job with the implied intent of having a fixed pension as a benefit. If any employer or Government agency wants to change things they should start with newly hired people and not punish the workers who have already put in their time. The real responsibility lay with the voters who elect officials that do not stay within budget constraints and think that the only way to provide services is to keep expanding the cost of Government, especially through employee benefits that sometimes equal the salaries they receive.  People just don't keep tabs on what is going on or complain and organize when things start getting out of control. So  here we are. Ludington is another City sitting on that debt bubble. 

[shinblind]

Willy I said nothing about reducing public sector worker's pensions. It is their Cadillac health care, especially since the advent of Obama care, that needs adjusting.

It should be phased in over the years so they have adequate time to adjust. Those past a certain age should remain untouched, they never received the fat wages to go with their fat benefits. And current workers who are expected to cover their own retirement and health care benefits I am fine with. But there is this bubble of current and soon to be retires that need adjusting. The best means to do this is through their health care.

[Willy]

I know. I was just referring to the health care plan as part of the pension benefit.

[shinblind]

The problem is two fold.

One is that that the officials that determine public sector compensation are often former public sector employees or have ties to the public sector. Even if they recluse themselves from voting they influence other members of the board.

The other is that the people sitting at the table representing government employees are professional negotiators. This is their full time job. They are going against people who are either rank amateurs or as mentioned previously have had ties to public unions.

Gone are the days when voters elected fiscally responsible adults who spent the public's money as if it was coming out of their own pockets.

Elected public officials nowadays are more concerned with maintaining power, reelection, and seeing that certain pockets are lined than in serving the public's interest.  

I see no way of forcing the public to vote smarter or forcing better candidates to run.

The only option is to call in professional negotiators to represent the public's best fiscal interest regarding union contracts.

And to have term limits that would severely limit elected officials time in office, even if it means  reducing it to a single term of office.