Massachusetts Employment Law Letter

Firefighters extinguish town’s insurance changes

Like their private-sector counterparts, Massachusetts public employers are striving to maintain affordable health insurance plans. Plan design changes, including copay and deductible modifications, are two effective ways to manage health insurance premium increases. However, copay increases aren’t popular with employees, and when employees are represented by unions, plan design changes are more difficult to make, as the following case illustrates.

Background

The town of Athol increased the copayment amounts that unionized firefighters pay for services under its health insurance plans without first bargaining over the increases. The union filed a grievance under the parties’ collective bargaining agreement (CBA) alleging that health insurance benefits are mandatory subjects of collective bargaining and any changes must be negotiated in the next round of contract bargaining.

An arbitrator sided with the union and concluded that the town had violated the CBA by making unilateral changes to the healthcare plan. The arbitrator ordered the town to restore the old copayments and reimburse union members for higher copays they had paid. The town appealed to the superior court, asking it to overturn the arbitrator’s award.

Decisions on appeal

It is hard to overturn an arbitrator’s award. It can be done only in limited circumstances, such as when “the arbitrator [has] awarded relief in excess of [her] authority.” That was the town’s approach in this case, which meant that the town had to demonstrate both a factual and a legal basis for its claim that the award exceeded the arbitrator’s authority.

The superior court concluded that the arbitrator had exceeded her authority in two respects – by ordering the restoration of the past rates of contribution and by requiring restitution – because compliance with those portions of the award would require the town to violate a state law that mandates uniformity of contribution rates for indemnity healthcare plans among employees of a governmental unit. Under the arbitrator’s decision, firefighters would pay one copay, and other town employees would pay a different copay amount for the same service, so the court overturned the arbitrator’s decision.

The union appealed to the Massachusetts Appeals Court, which agreed with the trial court. The union then carried its appeal to our state’s highest court, the Supreme Judicial Court (“SJC”).

The SJC disagreed with both the trial court’s and the appeals court’s rulings on the basis that the state law cited applies only to indemnity health insurance plans and there was no evidence that the plans at issue in this case – identified as Blue Cross Blue Choice and HMO Blue – were indemnity plans. (A different law applies to HMOs, and it does not require uniformity of rates.)

The SJC reasoned that without evidence that the plans were indemnity plans, there was no basis to conclude that reinstating past rates of contribution or making restitution to the union for the firefighters’ economic losses required the town to engage in an act prohibited by statute. As such, it was wrong to overturn those provisions of the arbitrator’s award. Town of Athol v. Professional Firefighters of Athol, Local 1751, I.A.F.F. (Supreme Judicial Court 2014).

Bottom line

Unionized employers that don’t have the right under a union contract to make insurance plan design changes unilaterally must negotiate those changes to resolution or impasse. This case illustrates what happens when that doesn’t occur. Unionized employers are advised to work with their unions to obtain the contractual authority to make plan design changes prospectively, which can be a winning formula for keeping insurance premium increases low for everyone.