Michigan Education Retirees Lose Health Cost Increase Challenge

June 29, 2005 (PLANSPONSOR.com) - A group of Michigan public school retirees has come away empty-handed in its legal battle challenging increases in health care deductibles and copays as unconstitutional.

>The group’s setback came with a Michigan Supreme Court decision rejecting the retirees’ contention that the deductible and copay hikes illegally shifted the burden of health care costs from employers to retirees.

>In a split 5 to 2 decision, the state’s high court asserted that the Michigan constitution protected an “accrued financial benefit” from being decreased and that, unlike pension payments, health care coverage doesn’t fit into that category. Employer health care coverage benefits are “nonmonetary” and don’t increase over time as the worker progresses through his or her worklife, justices told the six retirees.

>Chief Justice Clifford Taylor, writing for the majority, said that the state legislature never intended to be bound by a contract when it began providing health care for public school retirees.  To hold otherwise would “swallow the right of the people to change the court of their governance,” Taylor wrote. “Deprived of this right, self-government is not just hollow, it is nonexistent,” he said.

>The state-run Public School Employees Retirement System handles retirement benefits for 145,000 retirees and beneficiaries from 557 school districts statewide, 59 charter schools, 57 intermediate school districts, seven universities, 28 community colleges and 11 libraries. In 2000, the plan modified retirees’ deductibles and copays by hiking the annual deductible from $145 to $165 for an individual and $290 to $330 for a family, prompting the lawsuit.

>The case is Studier v. Michigan Public School Employees’ Retirement System.