Hampton v. Haley

• Decision Date: 08 May 2013
• Docket Number: No. 27244.,27244.
• Citation: 743 S.E.2d 258,403 S.C. 395
• Parties: Bernadette R. HAMPTON, Jackie B. Hicks and Carlton B. Washington, Petitioner, v. The Honorable Nikki HALEY, in her official capacity as Governor of South Carolina, The Honorable Richard Eckstrom, in his official capacity as Comptroller General for the State of South Carolina, The Honorable Curtis Loftis, in his official capacity as Treasurer of the State of South Carolina, and The South Carolina Budget and Control Board, Respondents. Appellate Case No. 2012–212723.
• Court: South Carolina Supreme Court

403 S.C. 395

743 S.E.2d 258

Bernadette R. HAMPTON, Jackie B. Hicks and Carlton B. Washington, Petitioner,

v. The Honorable Nikki HALEY, in her official capacity as Governor of South Carolina, The Honorable Richard Eckstrom, in his official capacity as Comptroller General for the State of South Carolina, The Honorable Curtis Loftis, in his official capacity as Treasurer of the State of South Carolina, and The South Carolina Budget and Control Board, Respondents.Appellate Case No. 2012–212723.

No. 27244.

Supreme Court of South Carolina.

Heard Jan. 23, 2013.

Refiled May 8, 2013.

W. Allen Nickles, III, of Nickles Law Firm, LLC, of Columbia, for Petitioners.

C. Mitchell Brown, William C. Wood, Jr., and Michael J. Anzelmo, of Nelson, Mullins, Riley, & Scarborough, LLP, of Columbia, for Respondents.

John S. Nichols, of Bluestein, Nichols, Thompson and Delgado, of Columbia, for Amicus Curiae, State Retirees Association of South Carolina.

Justice HEARN.

At its most basic level, this case presents a policy dispute: whose policy choice concerning health insurance premiums for State employees controls—the General Assembly's or the Budget and Control Board's? While policy decisions are matters left to the political branches, this Court is tasked with maintainingand enforcing the constitutional and statutory framework through which such issues must be resolved. We find that under the South Carolina Constitution, the General Assembly had and exercised the power to determine the contribution rates of enrollees for the State's health insurance plan in 2013. We hold the Budget and Control Board violated the separation of powers provision by substituting its own policy for that of the General Assembly, enter judgment for the petitioners, and direct the Board to use the appropriated funds for premium increases.

FACTUAL/PROCEDURAL BACKGROUND

I. THE STATE HEALTH PLAN

The State provides its employees and certain other persons with health insurance through a statewide, group health insurance plan (the Plan). The persons eligible for participation in the Plan, as set forth in Section 1–11–720 of the South Carolina Code (2005 & Supp.2012), consist of State employees and retirees, their spouses and dependents, and employees of numerous statutorily specified entities, including for example, counties, municipalities, and private organizations.

Prior to 1992, the Budget and Control Board received authority yearly to administer the Plan through the annual appropriations act. In 1992, the General Assembly enacted Section 1–11–710 of the South Carolina Code, codifying the Board's authority to administer the plan. As it existed prior to 2012, section 1–11–710 provided in relevant parts:

(A) The State Budget and Control Board shall:

(1) make available to active and retired employees of this State and its public school districts and their eligible dependents group health, dental, life, accidental death and dismemberment, and disability insurance plans and benefits in an equitable manner and of maximum benefit to those covered within the available resources.

(2) approve by August fifteenth of each year a plan of benefits, eligibility, and employer, employee, retiree, and dependent contributions for the next calendar year. The board shall devise a plan for the method and schedule of payment for the employer and employee share of contributions....

The amounts appropriated in this section shall constitute the State's pro rata contributions to these programs....

(3) adjust the plan, benefits, or contributions, at any time to insure the fiscal stability of the system.

(4) set aside in separate continuing accounts in the State Treasury, appropriately identified, all funds, state-appropriated and other, received for actual health and dental insurance premiums due. Funds credited to these accounts may be used to pay the costs of administering the health and dental insurance programs and may not be used for purposes of other than providing insurance benefits for employees and retirees. A reserve equal to not less than an average of one and one-half months' claims must be maintained in the accounts and all funds in excess of the reserve must be used to reduce premium rates or improve or expand benefits and funding permits.

....

On June 26, 2012, Act No. 278 was enacted, creating the South Carolina Public Employee Benefit Authority (PEBA) as codified at Section 9–4–10, et seq. of the South Carolina Code (Supp.2012), and amending section 1–11–710 by transferring the Board's powers and duties under that statute to PEBA.¹ Additionally, the Act made PEBA's decisions subject to approval by a majority vote of the Board as set forth in Section 9–4–45 of the South Carolina Code (Supp.2012). The Act took effect July 1, 2012, and thus, as of that date, PEBA exercises the powers formerly exercised by the Board in relation to the Plan, and the Board has a veto power over PEBA's decisions.

Although nine of PEBA's eleven members had been appointed on or before the August 15th deadline for setting the yearly terms of the Plan as specified in section 1–11–710, only two members had taken the oath of office and only one member had filed his statement of economic interests on or before that deadline.

II. THE 2012 BUDGET PROCESS AND THE PLAN

The State's budget and the Plan's budget operate on different timetables because the State's fiscal year runs from July 1 to June 30, whereas the Plan's fiscal year runs from January 1 to December 31. For that reason, in addition to any premium increases the General Assembly decides the State must cover in the upcoming Plan year, the State's budget each year must also cover the last six months of the insurance premium increases set by the Board on August 15th of the previous year, an amount known as the “annualization.”

Employees covered by the Plan are split into “general fund employees” and “non-general fund employees.” General fund employees consist of State and school district employees, and the premiums borne by the State through general fund appropriations cover these employees. SeeS.C.Code Ann. § 1–11–710. For fiscal year 2012–2013, general fund employees constituted 51.6% of the Plan's enrollees. Non-general fund employees work for those entities specified in section 1–11–720, and if an employer entity chooses to provide insurance to its employees through the Plan, the employer is responsible for paying the employer portion of the premiums—the portion borne by the State for general fund employees. S.C.Code Ann. § 1–11–720.

In November 2011, the Board produced a memorandum informing the General Assembly of the Plan's needs in relation to the State's budget for fiscal year 2012–2013. The memorandum stated the Plan required an annualization of $14.264 million and $15.767 million to cover new, general fund retirees. Also, the Plan's insurance premiums had increased over the past year by $79,705,991. Thus, to cover the premium increases for the first six months of the Plan's fiscal year, the Plan required $39,852,996. Removing the portion attributable to non-general fund employees, the Plan required a premium increase of $20,564,146 for general fund employees.

The memorandum presented the General Assembly with three options for dividing the premium increases between the State and enrollees. First, the General Assembly could split the premium increases evenly between the State and enrollees which would require an appropriation of $14.487 million for premium increases, and when combined with the annualization and new retiree costs would necessitate a total appropriation of $44.878 million. Second, the General Assembly could place the entire premium increase on the State which would require an appropriation of $20.564 million, and when combined with the annualization and new retiree costs would necessitate a total appropriation of $50.595 million. Third, the General Assembly could place the entire premium increase on the enrollees which would only require appropriations for the annualization and new retiree costs, for a total appropriation of $30.031 million.

On August 3, 2012, the 2012–2013 Appropriations Act was enacted. ² In Section 80C under a heading for State employee benefits, and a subheading for rate increases, the General Assembly appropriated $51,528,219 for health insurance employer contributions.

On August 8, 2012, the Board convened and considered the Plan's benefits and contribution rates for 2013. First, the Board discussed what powers it possessed after the creation of PEBA and concluded the Board served in a de facto capacity for PEBA because it did not yet exist. In the discussion of contribution rates that followed, all of the members of the Board acknowledged the General Assembly fully funded the premium increases such that enrollees would not bear any of the increases. However, by a three-to-two vote, the Board decided to split the premium increase equally between the State and enrollees.

III. PROCEDURAL HISTORY

Petitioners Bernadette Hampton, Jackie Hicks, and Carlton Washington filed a petition for original jurisdiction and a complaint with this Court challenging the Board's decision. Hampton is Vice–President of the South Carolina Education Association, Hicks is President of the South Carolina Education Association, and Washington is Executive Director of the South Carolina State Employees Association. The petitioners all participate in the Plan's health insurance by virtue of their employment.

ISSUES PRESENTED

I. Did respondents violate the separation of powers required by the South Carolina Constitution?

II. Did the General Assembly unconstitutionally delegate legislative authority to the Board to unilaterally increase Plan premiums?

III. Is the challenged conduct subject to an injunction and mandatory reimbursement of premium increases to enrollees?

LAW/ANALYSIS

I. SEPARATION OF POWERS

The petitioners argue the Board did not have the power, except in limited circumstances not applicable here, to...