A federal judge has agreed that certain retired Maryland employees have a contractual right to prescription drug benefits, but also found in a ruling issued Thursday that current employees have no such right.
The ruling from U.S. District Judge Peter Messitte splits state retirees and employees into four groups: active employees; employees who have retired since Dec. 31, 2018; employees who retired between July 1, 2011 and Dec. 31. 2018; and employees who retired before June 30, 2011.
Only the latter two groups have a contractual right to state-subsidized prescription benefits, Messitte ruled. Current employees and those who have retired since the beginning of 2019 do not have the same rights, the judge found.
The legal dispute stems back to 2011, when the General Assembly sought to transition all Medicare-eligible retired state employees to Medicare Part D. That change was set to begin in 2020, and would have ended Medicare-eligible retirees’ ability to participate in a state prescription drug program.
A group of plaintiffs led by retired state employee Kenneth Fitch filed suit in 2018. Fitch claimed in the complaint that his prescription drug expenses would explode from $930 per year to more than $11,600 if the change took place.
“As a result of the change in coverage, the Fitch Plaintiffs allege, their out-of-pocket prescription drug costs would drastically increase, despite their belief that their ‘right’ to more favorable state subsidies had already ‘vested,'” Messitte wrote.
Messitte in 2018 granted a preliminary injunction that stopped the transition to Medicare Part D from taking place while the lawsuit was pending.
In a 25-page memorandum opinion, Messitte agreed that certain retired employees have a contractual right to the state prescription drug benefits.
“As an employer, Maryland made a clear and definite promise to certain of its retirees that if they fulfilled certain conditions, they would enjoy prescription drug benefits coextensive or pro-rated with those provided to active employees,” the judge wrote.
That promise does not apply to current employees, Messitte ruled. AFSCME Maryland Council 3, the state’s largest employees union, intervened in the lawsuit in late 2019 on behalf of active employees who began their state service in 2011 or earlier, before the General Assembly moved to change retirees’ prescription drug benefits.
Messitte dismissed all of AFSCME’s claims on behalf of current employees, finding that the contractual agreement for prescription benefits only applied to retirees.
“By virtue of their current employment status, active state employees have no vested entitlement to the prescription drug benefits promised (in Maryland law),” the judge wrote.
A spokesperson for the union did not return an email requesting comment.
The same applies to employees who retired on or after Jan. 1, 2019, Messitte wrote, because the General Assembly withdrew its offer of prescription drug benefits for any Medicare-eligible state employees after that point.
But for employees who retired on or before June 30, 2011, and who had met other service requirements before retiring, a breach of contract claim can proceed. That is also true for employees who retired between July 1, 2011, and Dec. 31, 2018, according to the decision.
Messitte also ruled that the retired plaintiffs do not have a legal basis to challenge the state’s management of a trust fund that was established to help the state finance health insurance subsidies for retirees.
A spokesperson for the Maryland Attorney General’s Office, which is handling the case, declined to comment.
“Our office cannot comment at this time as it has not had the opportunity to thoroughly review the decision,” said the spokesperson, Raquel Coombs.
A phone call to the lawyer for the state retirees, Deborah Holloway Hill, was not returned Thursday.
Messitte gave the lawyers in the case 30 days to file a joint submission on how to handle the preliminary injunction, which remains in place. The judge also gave the parties permission to file a motion to stay enforcement of his order to allow adequate time to transition to alternative prescription drug benefit programs.