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Appellate Court Affirms Reinstatement of Retiree Medical Benefits for Rehired Employees



River City Fraternal Order of Police Lodge 614, Inc. v. Ky. Retirement Sys., 2021 WL 2328082 (6th Cir. 2021)

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An appellate court has affirmed an order reinstating retiree medical insurance for several police officers who retired from their positions with a county police department but were later rehired by different county agencies. Upon retirement, each officer had received free health insurance through the county retirement system, which was administered by the state. The insurance initially covered all of their health care costs, but after the officers turned 65, Medicare became the primary payer, with the insurance covering secondary expenses. When the officers were rehired, they were eligible for health benefits as active employees. As a result, the state terminated their retiree health insurance for the duration of their reemployment, stating that the Medicare secondary payer (MSP) rules prohibited the state from offering them coverage that was secondary to Medicare. The officers sued, arguing that the state’s termination of their retiree coverage violated the MSP rules because it was predicated on their eligibility for Medicare. The trial court ordered reinstatement of the retiree coverage as a contractual obligation but dismissed the MSP rules as “wholly inapplicable” because they apply only to individuals who are covered under a plan by reason of current employment status (see our Checkpoint article).

The appellate court agreed, concluding that the state’s retiree medical plan did not illegally discriminate against the officers on the basis of Medicare eligibility because they were not covered under that plan by virtue of their current employment status. Rather, they received it by virtue of being retired. The court further elaborated that, while reemployed retirees may again attain current employment status, they do not receive their retiree medical coverage by virtue of that status. Finding the MSP rules inapplicable, the court concluded that the state violated its obligation under state law not to reduce or impair the officers’ retirement benefits.

EBIA Comment: Although the court concluded that the MSP rules were inapplicable to these officers, their case reminds us that the rules are complex and not always well understood. The MSP rules may, in fact, apply to rehired retirees under certain circumstances, and other legal issues may arise for retiree plans that allow participation by rehired (i.e., active) employees (see our Checkpoint article). For more information, see EBIA’s Group Health Plan Mandates manual at Sections XXIV.A (“What Are the Medicare Secondary Payer (MSP) Requirements and Who Must Comply?”) and XXIV.C (“Overview of Medicare”). See also EBIA’s COBRA manual at Section XXX.D (“Medicare Secondary Payer (MSP) Rules”) and EBIA’s Self-Insured Health Plans manual at Section XXV.C (“Coordination of Benefits With Medicare, TRICARE, and Medicaid”).

Contributing Editors: EBIA Staff.

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