Battle over Big Apple retiree health benefits goes to NY high court

ALBANY, N.Y. (CN) — Facing a staggering $98 billion unfunded liability for retiree health benefits — by far the largest of any city in the country — New York City’s lawyers asked the state’s high court on Thursday to approve a plan to reduce its expenses, despite the objections of retirees who claim they were promised that their benefits would never change.

And while a group representing some 250,000 former city workers pressed its case hard at oral argument, the judges seemed skeptical that the city had painted itself into a legal corner by making binding assurances to them.

The city currently pays its retirees’ premiums for Medicare and also provides a free “Medigap” policy that covers the 20% of expenses that Medicare doesn’t pay. To save money, the city wants to enroll retirees instead in a Medicare Advantage plan, a less expensive private alternative administered by Aetna.

A group of retirees objected, claiming the plan wouldn’t cover out-of-network doctors. They also said it would subject them to Aetna’s “astronomic coverage-denial rate.”

Mayor Eric Adams had criticized the Medicare Advantage proposal when he ran for office, calling it a “bait and switch,” but he changed his mind once he took power. The Adams administration shelled out $7.4 billion in overall health care expenses last year, including $519 million for basic retiree Medicare premiums that the city will continue to owe each year even if it wins this case.

A state appellate court sided with the retirees, finding that the city had promised them the Medigap plan and couldn’t go back on its word. But the city argued that the “promises” cited by the retirees were really just “summary plan descriptions,” or SPDs, legal documents that described employees’ current benefits and didn’t guarantee future ones.

“SPDs are a descriptive document, not a promissory document — it’s in the title,” argued the city’s lawyer, Richard Dearing. “They’re issued every year, and sometimes more frequently, and are always subject to being superseded by the next year’s SPD.”

The retirees’ lawyer, Jacob Gardener of Walden Macht in New York, read to the judges a snippet from an SPD that said “when you retire, you will” get certain benefits. But the judges didn’t seem impressed.

“If that’s a promise, what would be a description?” asked Judge Anthony Cannataro. “It’s hard for me to imagine what other less committal language would communicate what the coverage is.”

“That to me sounds very descriptive,” he went on. “There’s nothing about ‘you will have this’ or ‘this will last this long.’ There are none of those words that we traditionally associate with” a legally binding promise.

The language in the SPDs “isn’t as strong as you’re making it out to be,” commented Judge Madeline Singas.

Some of the SPDs specifically noted that rising costs could affect future benefits, noted Judge Shirley Troutman.

Gardener pivoted and pointed to some 130 affidavits from retirees who said they were orally promised the Medigap benefits by city H.R. staff or in recruitment or training sessions. But he faced an immediate fusillade of objections.

“How can those be relevant to anyone other than the person? The oral representations were to one person,” complained Judge Caitlin Halligan.

“Why wouldn’t you have to establish who attended and whether the representations were the same? You’re asking us to infer that every retiree received an oral representation, and that seems like quite a leap.”

“I was a city employee for a few years,” added Cannataro, and “I don’t remember that speech.”

Halligan also suggested that Gardener would have to show that all 250,000 employees relied on the promises to their detriment, but many employees might not have cared because they were covered by a spouse’s retirement benefits.

And then she dug further: “If employees made promises that were different from the SPD, would the SPD control, or the oral representations?”

“It would be unreasonable to rely on a promise that conflicted with a statute or an SPD,” Gardener conceded.

“Is there any evidence that these individuals had the authority to make the promise?” Halligan pressed. “Could you ever have a government entity promise to do something forever and bind every future legislature or administration?”

Dearing suggested that it didn’t make sense to think that the city had made a binding promise when retiree health benefits were always subject to change through collective bargaining. But Gardener responded that the fact that the city’s collective bargaining agreements didn’t mention the benefits suggested an understanding that they wouldn’t change.

“You have 102 municipal unions and they didn’t mention health care for 59 years,” he said. “And those agreements addressed some ridiculously small things, like the type of stationery used in correspondence.”

Judge Michael Garcia was concerned about how the court’s ruling could affect other cases involving other municipalities, and Dearing suggested that there could be enormous ramifications if ambiguous language in an SPD could be interpreted as a lifetime promise.

And Singas picked up on this point. “What’s bothering us is, shouldn’t a government be allowed to have information sessions for employees without being chilled by the possibility that it will somehow say something that will bind the city indefinitely?”

Editor’s note: One of the retirees’ attorneys took issue with Courthouse News’ coverage of the oral arguments, namely the focus on the judges’ questions directed at the retirees’ claims rather than the probing of the city’s defenses. A copy of the attorney’s letter to Courthouse News can be read here.