The Massachusetts Supreme Judicial Court proved once again that it is increasingly
unsympathetic to the interests of public employees with a recent decision that lets municipalities
deprive certain retirees of basic health care coverage.  In the case of Cioch v. Treasurer of Ludlow,
the SJC handed municipalities a big pair of scissors to cut health care costs – by letting them
deny coverage to retirees not enrolled in a municipal plan at the time of retirement.  While this
decision is an immediate setback for public employees, it ultimately may be a case of “be
careful what you wish for.”  In the long-term, the Cioch decision likely will increase health care
costs for public employers.

 

The SJC supported Ludlow’s position and ruled that municipalities may ban post-retirement
enrollment in their health insurance programs.  Ironically, while Massachusetts has earned
international coverage for its universal health care efforts, the SJC is letting municipal employers
go in the opposite direction.  This decision is particularly cruel to an unknown number of public
employee retirees who politely declined coverage from their employer throughout their career
in an effort to save money for all parties. 

 

Massachusetts law on municipal health insurance, Chapter 32B, §§9, 16, requires
employers to provide health insurance to all employees working at least 20 hours a week and
to continue providing such coverage after retirement.  More than a decade ago, the Appeals
Court and the SJC ruled in McDonald v. Town of Sturbridge, 39 Mass. App. Ct. 479 (1995),
S.C., 423 Mass. 1018 (1996), that Chapter 32B does not forbid coverage of retirees who were
not covered while active employees.  The SJC’s cryptic one-paragraph decision in McDonald
was unclear whether and to what extent municipal employers may ban post-retirement
enrollment via regulation.  The issue faced by the SJC in Cioch is to resolve the issue left open
to debate by McDonald: whether cities and towns can deny coverage to retirees who were not
enrolled in a municipal plan at retirement.  Cioch puts this query to rest by ruling that
municipalities may adopt regulations that ban post-retirement enrollment, despite the
considerable savings reaped by employers when these employees declined coverage
during their employment.  

 

The Cioch case involved the plight of 68-year old retired teacher Joanne Cioch. During
her 22 years of employment with the Town of Ludlow, Ms. Cioch was insured by her husband’s
 employer.  This step resulted in savings to Ludlow that totaled in low-6 figures over her employment. 
Sometime after Ms. Cioch and her husband retired, they lost access to health coverage by her
husband’s former employer.  Ms. Cioch then sought such benefits from her Ludlow, which denied
the request.  With the assistance of the Massachusetts Teachers Association, she sued.  Sandulli
Grace, PC, on behalf of the Boston Police Patrolmen’s Association, Inc., filed a “friend of the
court” brief in support of the Cioch and the MTA.

 

The SJC supported Ludlow’s position and ruled that municipalities may ban post-retirement
enrollment in their health insurance programs.  Ironically, while Massachusetts has earned international
coverage for its universal health care efforts, the SJC is letting municipal employers go in the opposite
direction.  This decision is particularly cruel to an unknown number of public employee retirees who
politely declined coverage from their employer throughout their career in an effort to save money for all parties. 

 

Cioch spares public employers of the expense of retirees not previously enrolled in health insurance
plans.  But it’s a case of municipal managers being penny-wise and pound foolish as the SJC decision
likely will result in increased health care costs for cities and towns.  The Cioch decision encourages police
officers and other public employees who currently are not covered by municipal plans to now enroll in
City plans – even if the employees have more affordable or more comprehensive options through
their spouses.  Instead of saving $10-15,000 in health care costs per employee per year for their
employers, public employees now have every incentive to enroll in costly municipal health care plans,
thereby increasing the employer’s financial burden.  In other words, the SJC’s Cioch decision arguably
accelerates the health care budgetary crisis faced by municipal employers.

 

In light of this decision, employees and labor unions should consider several steps to guarantee
health insurance to retirees: (1) enroll in a municipal health care plan prior to retirement; (2) negotiate
a provision in the collective bargaining agreement that entitles active employees to enroll in a municipal
health plan anytime during retirement (or to switch insurance plans), regardless of whether the employee
previously was enrolled in a municipal plan; (3) negotiate a provision to require employers to individually
notify employees who decline coverage of the possibility that they may lack access to post-retirement
enrollment; and/or (4) require the employer to notify employees and labor organizations if it ever considers
placing restrictions or exclusions on post-retirement enrollment.

 

In a footnote, the SJC signaled another potential problem area for a certain class of public
employees: “deferred retirees,” also known as employees who quit or are fired from employment
prior to being eligible for retirement benefits (or prior to employee retiring).  If, under Cioch, a municipality
is permitted to restrict retiree insurance coverage to persons on the health care rolls at the time of retirement,
these deferred retirees arguably are, by definition, ineligible for retirement coverage even if they were
enrolled in a municipal plan at the time they left the job.