Treasurer: Judge’s ruling may cost NC more than $100 million

May 22, 2017 GMT

RALEIGH, N.C. (AP) — North Carolina government could soon have to pay damages to retired workers and teachers after a judge ruled it was wrong to require them to begin paying health insurance premiums six years ago — a cost that one state official says could exceed $100 million.

Retirees, including former Chief Justice I. Beverly Lake, sued in 2012 after the legislature directed the state employee health insurance plan to mandate that they make monthly contributions to receive what had been standard insurance coverage for decades.


The 2011 law was approved to rein in hemorrhaging expenses at the State Health Plan, which covers more than 700,000 employees, retirees and their dependents. A retiree who still wanted to avoid premiums could get covered under a plan with less-generous benefits.

A trial judge last week ruled for the retirees, saying they had a contractual right as part of their work agreement to receive the standard coverage without a premium.

“The defendants substantially impaired the contracts with the class members,” Superior Court Judge Edwin Wilson wrote in his order, filed last Friday in Gaston County court. “The impairment was neither reasonable nor necessary to serve an important public purpose.”

Wilson ordered the state reimburse retirees for premium payments they made to retain the “80/20” plan and offer that plan as it existed in 2011 premium-free for the rest of their lives. It is possible individual repayments could reach into thousands of dollars, as monthly premiums grew from $21.62 in 2011 to more than $100 today in some situations.

State Treasurer Dale Folwell, whose office includes the State Health Plan, told lawmakers in a letter last week — before Wilson’s ruling became public — that a decision favoring the retirees was anticipated. Folwell said more than 220,000 people are part of the class. They also include people who are also enrolled in Medicare and pay lower State Health Plan premiums.

“If this ruling stands, the costs to the state of North Carolina may exceed $100 million, which does not include the cost to the plan of complying with the plaintiffs’ demands going forward,” Folwell wrote.

Wilson wrote that the ruling’s enforcement would be delayed if there’s an appeal. Folwell’s office referred questions Monday to a spokeswoman for the state Department of Justice, which represent the state defendants. Spokeswoman Laura Brewer said the department was reviewing the order.


Michael Carpenter, a Gastonia attorney for the retirees who sued, said late Monday that the reimbursed premiums could reach $200 million.

“It’s been a long time coming,” Carpenter said in a phone interview, adding that class members are “looking forward to receiving what they were promised for their long tenures of service with the state.”

Separate damages for class members enrolled in the less-generous “70/30” plan will be determined at a later date, Wilson wrote.

The ruling says the damages would cover those who retired before Jan. 1, 1988, or those who retired after that date and had been hired before Oct. 1, 2006 and worked for five years. The ruling doesn’t appear to apply to the premiums workers and retirees have been paying for years to cover spouses and children.

Folwell wrote an unfavorable ruling for the state also could add billions of dollars to the estimated $43 billion in unfunded future health care expenses of retirees. “Our current liability could increase dramatically, reaching an unsustainable level in the very near future.” Folwell has recommended the legislature set aside cash annually to address the shortfall.

Sen. Andy Wells, a Catawba County Republican and co-chairman of the Senate’s retirement committee, said Monday he’s worried the upfront costs to the state could be exponentially more than the $100 million. He said the ruling could ultimately prevent the State Health Plan from charging small premiums to current workers designed to keep family premium costs down.

“We’ve been saying ‘stop digging the hole’ and the hole just got deeper,” Wells said. The Senate budget contains a provision that would end health care coverage for state retirees that are hired starting July 1, 2018.