Studier v. MPSERB

• Decision Date: 04 May 2004
• Docket Number: Docket No. 243796.
• Citation: 260 Mich. App. 460,679 N.W.2d 88
• Parties: Alberta STUDIER, Patricia M. Sanocki, Mary A. Nichols, Laviva M. Cabay, Mary L. Woodring, and Mildred E. Wedell, Plaintiffs-Appellants, v. MICHIGAN PUBLIC SCHOOL EMPLOYEES' RETIREMENT BOARD, Michigan Public School Employees' Retirement System, Department of Management and Budget, and Treasurer of Michigan, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

679 N.W.2d 88

260 Mich. App. 460

Alberta STUDIER, Patricia M. Sanocki, Mary A. Nichols, Laviva M. Cabay, Mary L. Woodring, and Mildred E. Wedell, Plaintiffs-Appellants, v. MICHIGAN PUBLIC SCHOOL EMPLOYEES' RETIREMENT BOARD, Michigan Public School Employees' Retirement System, Department of Management and Budget, and Treasurer of Michigan, Defendants-Appellees.

Docket No. 243796.

Court of Appeals of Michigan.

Submitted January 20, 2004, at Lansing.

Decided February 3, 2004, at 9:10 a.m.

Released for Publication May 4, 2004.

White, Schneider, Young & Chiodini, P.C. (by Karen Bush Schneider, James A. White, and J. Matthew Serra), Okemos, for the plaintiffs.

Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, and Larry F. Brya, Tonatzin M. Alfaro Maiz, and Marie Shamraj, Assistant Attorneys General, for the defendants.

Before: FITZGERALD, P.J., and NEFF and WHITE, JJ.

FITZGERALD, P.J.

Plaintiffs appeal as of right an order granting summary disposition pursuant to MCR 2.116(C)(10) in favor of defendants. We affirm.

I

A. Facts and Procedural History

In October 2000, plaintiffs, who are six public school employee retirees, filed an amended three-count "Complaint for Declaratory Judgment, Injunctive and Other Relief" against the Michigan Public School Employees' Retirement Board (the board), the Michigan Public School Employees' Retirement System (MPSERS), the Michigan Department of Management and Budget (DMB), and the Treasurer of the state of Michigan (collectively referred to as defendants). Count I of the amended complaint alleged that defendants violated Const. 1963, art. 9, § 24 by increasing plaintiffs' prescription drug copayments and the deductibles under the Master Health Care Plan. Count II of the amended complaint alleged that the board and the DMB violated Const 1963, art. 1, § 10 and U.S. Const, art. I, § 10 by increasing plaintiffs' prescription drug copayments and the deductibles under the Master Health Care Plan. Count III of the amended complaint alleged that all named defendants violated their trust and fiduciary duties owed to plaintiffs by virtue of implementing a plan to increase prescription drug copayments and the deductible under the Master Health Care Plan.

With respect to plaintiffs' claim that plaintiffs' health care benefits are "accrued financial benefits" as that phrase is defined in Const 1963, art 9,§ 24, the trial court held:

Since both the Michigan Court of Appeals and Michigan Supreme Court have been squarely faced with the opportunity to rule on this question and have declined to do so, this Court cannot rule that health benefits constitute "accrued financial benefits" under Article IX, section 24.

With respect to plaintiffs' claims that defendants' actions impaired a valid contract for health benefits and diminished those benefits, the trial court concluded that

the MPSERS retirees are still receiving the essentials of their bargain. Their portion of total costs of the plan is essentially unchanged, though the plan's total dollar costs (and therefore the retirees' total dollar costs) have increased. Their benefits are well within the range of benefits enjoyed by retirees in other State-wide plans of comparable states.

On August 29, 2003, the trial court issued its final opinion and order granting defendants' motion for summary disposition and dismissing plaintiffs' action.

B. Legislative History of the MPSERS Health Plan

Under the Public School Employees' Retirement Act, MCL 38.201 et seq.,¹ the MPSERS first began paying a portion of the premium for health care benefits for its members pursuant to 1974 PA 244:

On or after January 1, 1995, hospitalization and medical coverage insurance premium payable by any retirant or his beneficiary and his dependents, not to exceed $25.00 per month, under any group health plan authorized by the retirement commission created under this chapter and the department of management and budget shall be paid by the retirement commission from appropriations for this purpose made to the pension accumulation fund created under section 42(1). The payment shall not be made unless the retirant or beneficiary elects coverage under a group plan authorized under this section. [MCL 38.325b(1).]

The amount of the premium paid by the MPSERS gradually increased.² The Public School Employees' Retirement Act, 1945 PA 136, was repealed by 1980 PA 300 and replaced with the Public School Employees Retirement Act of 1979, MCL 38.1301 et seq. (the act). The amount of the premium paid by the MPSERS pursuant to MCL 38.1391(1) continued to increase.³ 1983 PA 143 significantly modified the language in subsection 91(1):

The retirement system shall pay the entire monthly premium, in the amount authorized by the legislature, for hospital, medical-surgical, and sick care benefits for the benefit of a retirant or retirement allowance beneficiary who elects coverage in the group health insurance or prepaid service plan authorized by the retirement board and the department; and may pay up to the maximum of that amount toward the monthly premium for hospital, medicalsurgical, and sick care benefits for the benefit of a retirant or retirement allowance beneficiary enrolled in another group health insurance or prepaid service plan, if enrolled prior to June 1, 1975 and for whom the retirement system on the effective date of this 1983 amendatory act was making a payment towards his or her monthly premium. A retirant or retirement allowance beneficiary until eligible for medicare shall have an amount equal to the cost chargeable to a medicare recipient for part B of medicare deducted from his or her retirement allowance. [Emphasis added.]⁴

1985 PA 91 amended MCL 38.1391(1) again:

The retirement system shall pay the entire monthly premium or membership or subscription fee for hospital, medicalsurgical, and sick care benefits for the benefit of a retirant or retirement allowance beneficiary who elects coverage in a group health benefits plan authorized by the retirement board and the department. The retirement board and the department shall authorize membership in a health maintenance organization licensed under article 17 of the public health code, Act No. 368 of the Public Acts of 1978, being sections 333.20101 to 333.22181 of the Michigan Compiled Laws. [Emphasis added.]

1989 PA 193 also amended MCL 38.1391(1) to read as follows:

The retirement system shall pay the entire monthly premium or membership or subscription fee for hospital, medicalsurgical, and sick care benefits for the benefit of a retirant or retirement allowance beneficiary who elects coverage in the plan authorized by the retirement board and the department.

Section 91 was amended again by 1996 PA 488 and 1997 PA 143. Section 91 now provides that the MPSERS shall pay the entire monthly premium of a retiree but a retiree must pay a portion of the premium if he or she is a deferred member, does not qualify for Medicare, or has a dependent for which coverage is provided.

C. The MPSERS Health Care Plan from 1975-1999

The MPSERS provides a health care plan for retirees. Cost-sharing features have been a part of the health plan since its inception in 1975. The individual and family deductible component of the health care plan has gradually increased from 1982 to 1999, beginning with a deductible of $50 for each person and $100 for each family in 1982, and gradually rising to a deductible of $145 for each person and $290 for each family in 1999. Cost sharing for the prescription drug program also had gradual increases, ranging from a copay of ten percent in 1975 to a copay of $4 for generic drugs and $8 for brand name drugs in 1997 through March 31, 2000. There is no dispute that the MPSERS health care plan also gradually increased the benefits available under the plan.

D. The changes pertinent to the present lawsuit

On January 21, 2000, the board amended the MPSERS health care plan. The amendments modified the plan's prescription drug copayment structure and out-ofpocket maximum for prescription drugs effective April 1, 2000, and also implemented a formulary effective January 1, 2001. A formulary is a preferred list of drugs approved by the federal Food and Drug Administration that is designed to give preference to those competing drugs that offer the greatest therapeutic benefit at the most favorable cost. Existing maintenance prescriptions outside the formulary were grandfathered in and subject only to the standard copayment of twenty percent of the drug's cost, with a $4 minimum and a $20 maximum.

The prescription drug copayment was changed to a twenty percent copay, with a $4 minimum and $20 maximum for up to a one-month supply. The copay maximum for mail-order prescription copayment was set at $50 for a three-month supply. A $750 maximum out-of-pocket copay for each calendar year was also established.⁵ Under the formulary, eligible persons pay an additional twenty percent of a new nonformulary drug's approved cost only when use of the nonformulary drug is not preapproved by the drug plan administrator.

The board also adopted a resolution to increase health insurance deductibles from $145 for an individual to $165, and from $290 to $330 for a family, effective January 1, 2000. The deductibles do not apply to prescription drugs. Plaintiffs are challenging the deductible increase of $20 for each individual and $40 for each family.

II

Plaintiffs first argue that the trial court erroneously concluded that health benefits do not constitute "accrued financial benefits" as that phrase is used in Const 1963, art 9, § 24. Constitutional issues and construction are questions of law and are reviewed de novo on appeal. Mahaffey v. Attorney General, 222 Mich.App. 325, 334, 564 N.W.2d 104 (1997); Wilkins v. Gagliardi, 219 Mich.App. 260, 266, 556 N.W.2d 171 (1996).

Const. 1963, art. 9, § 24 provides:

The accrued financial benefits of each pension plan and retirement system of the state

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