Arbitrating health insurance claims

Arbitrating health insurance claims
Correction Officers Benevolent Asso. v Westchester County, Supreme Court, Westchester County, [Not selected for publication in the Official Reports]

Not every grievance concerning health insurance benefits provided pursuant to a collective bargaining agreement is subject to the contract arbitration provisions set out in the Taylor Law contract as the Correction Officers Benevolent Association case demonstrates.

The collective bargaining agreement [CBA] between the Correction Officers Benevolent Association [COBA] and Westchester County provided for the arbitration of contract disputes.

The county’s self-insured health plan, administered by a third party, POMCO, included an appeal procedure allowing COBA members to challenge the denial of a claim.

CBA disputes were subject to binding arbitration. In contrast, the denial of a health insurance claim could be appealed to the plan administrator and, if the individual was not satisfied, he or she could sue in court.

The health insurance plan’s procedure, however, provided that [n]o lawsuit may be started to obtain benefits until after 60 days after written proof of claim or loss is given. No lawsuit may be started more than two years after the time written proof of loss or claim is required to be given and a claims appeal has been requested.

A claim for benefits filed by a COBA member was denied, as was his appeal to the plan administrator. He then sued the county and POMCO.

The employee’s claim for coverage for immunization for chicken pox for his three children under a Well Child Care provision was denied as not covered by the Plan.

Westchester, claiming that the employee had not exhausted his administrative remedies because he failed to file a grievance under the contract grievance procedure, asked a State Supreme Court justice to dismiss the petition.

Justice J. Emmett Murphy denied Westchester’s motion, summarizing the relevant case law as follows:

1. In cases where the collective bargaining agreement contains a broad arbitration agreement which provides that any alleged violation of the Agreement or any dispute with respect to its meaning or application was arbitrable and ... provisions relating to health insurance benefits and a percentage breakdown for premium costs allocable to the parties ... [or] a dispute regarding a substantive change in the health insurance plan, resulting in either an increase in the employee’s contributions and/or a reduction in benefits was arbitrable as an alleged violation of employee’s obligations under the CBA, citing Matter of Watertown City School District, 93 NY2d 132.

2. The fact the changes to the health plan were made by an entity that is not a party to the CBA is not determinative of whether the grievance/dispute is arbitrable.

Here, said Justice Murphy, there was no change in the benefits nor was there any change in the contributions to be made for the plan by participants. Rather, the issue concerned the rejection of a claim for certain medical procedures by the Plan Administrator. The employee claimed he should receive the benefit while the Plan administrator said the benefit demanded was not available to the employee under the Plan.

If the employee’s claim concerned a dispute involving a change to the health plan that would increase an employee’s contributions or reduce benefits, it would constitute an arbitrable issue as to whether or not the County breached its promise in the CBA to retain the current insurance plan.

In contrast, here the disputed did not involve any claim of a substantive change in the existing health plan’s benefits or employee contributions to the plan but, rather, concerned whether a certain service administered by a participating provider is covered within the meaning of the terms of the current health plan, which have not been altered by the County.

This, according to the court, was simply not an issue that was subject to contract arbitration. In other words, the Plan administrator’s determination did not affect any of the terms and conditions set out in the CAB.

The court said that the county’s position that arbitration under the CBA was required is belied by the fact the Plan provides its own dispute resolution mechanism for claims of this nature, i.e., an internal appeal and, thereafter, the commencement by an aggrieved enrollee of the lawsuit to he governed by the laws of New York.

Justice Murphy’s conclusion:

The CBA’s grievance procedure, culminating in arbitration, is not applicable to the dispute that is the subject of this litigation and the Plan itself sets out the procedures available to an individual to resolve disputes concerning the denial of a claimed benefit or coverage.

The county also argued that the issue was subject to PERB’s jurisdiction and the court should dismiss the action and defer to PERB. Justice Murphy disagreed, holding that the case does not involve a refusal to negotiate medical coverage to which a corrections officer is entitled.

Clearly PERB has jurisdiction in cases involving alleged improper labor practices. Here, however, there was no allegation that Westchester violated its agreement with an employee association, which would constitute an improper employee practice under the Taylor Law.

The issue involved the interpretation or the enforcement of a provision in the health insurance plan. In Matter of Kinsella [198 AD2d 824], the Appellate Division said that PERB does not have jurisdiction to resolve such issues or authority to enforce the provisions of a collective bargaining agreement.

Justice Murphy said that the dispute over whether or not a chicken pox vaccine is a covered service involves no improper employer practice, but is merely a question of the meaning and enforcement of the Plan and, thus, is outside the scope of PERB’s jurisdiction.

Essentially the court held that because the plan itself provided for a procedure for resolving disputes concerning the plan, that procedure had to be followed in this instance.