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Atlantic City Educ. Ass'n v. Board of Educ. of the City of Atlantic City

April 17, 1997

ATLANTIC CITY EDUCATION ASSOCIATION AND ATLANTIC CITY HEAD CUSTODIANS' ASSOCIATION, PETITIONERS-RESPONDENTS,
v.
BOARD OF EDUCATION OF THE CITY OF ATLANTIC CITY, RESPONDENT-APPELLANT. KEYPORT TEACHERS' ASSOCIATION, PETITIONER-RESPONDENT, V. BOARD OF EDUCATION OF THE BOROUGH OF KEYPORT, RESPONDENT-APPELLANT.



On appeal from the State Board of Education.

Approved for Publication April 17, 1997.

Before Judges Stern, Humphreys and Wecker. The opinion of the court was delivered by Humphreys, J.A.D. Wecker, J.s.c. (temporarily assigned) Concurring.

The opinion of the court was delivered by: Humphreys

The opinion of the court was delivered by HUMPHREYS, J.A.D.

The State Board of Education decided that the health benefits plans established by the Atlantic City and Keyport Boards of Education constituted self-insurance, contrary to N.J.S.A. 18A:16-13. This statute requires boards of education to contract with an insurance company for such benefits. The Atlantic City and Keyport Boards appeal the Commissioner's decision. They contend that the statute permits such plans and that the State Board's decision amounts to illegal rule making in violation of the Administrative Procedure Act, N.J.S.A. 52:14B-1 to 14B-15. We hereby consolidate both appeals.

The Atlantic City Board has since contracted with an insurance company and has advised us that their appeal is now moot. Consequently, we dismiss their appeal.

As to the Keyport Board, we have thoroughly reviewed the record and arguments presented. We affirm. We find that the Keyport plan is basically self-insurance and not authorized by statute.

I

The Keyport Board contracted with an insurance agency to administer its program "by providing claims processing, claims investigation and adjustment, statistical reports and a variety of other management and administrative services." The Keyport Board would make periodic contributions to the agency. From these contributions the agency would pay employees directly for their claims. The Keyport Board also purchased excess insurance from a licensed New Jersey insurance company. The insurance company would reimburse the Board for any claim over a stipulated amount or for any excess over the annual total cap for all claims.

The Keyport Board contends that substantial savings have resulted. The Teachers Association disagrees and the issue was not resolved below. The Keyport Board also asserts that the benefits provided by the new plans are identical to those provided by predecessor plans. The Association again disagrees and has filed a grievance on this issue. The grievance is before an arbitrator and is in abeyance pending the resolution of this case.

II

The central issue is the meaning of N.J.S.A. 18A:16-13, enacted initially in 1979. The statute provides:

Any local board of education may directly or indirectly through a trust fund or otherwise enter into contracts of group life, accidental death and dismemberment, hospitalization, medical, surgical, major medical expense, minimum premium insurance policy or health and accident insurance with any insurance company or companies authorized to do business in this State, or may contract with a nonprofit hospital service, medical service or health service corporation with respect to the benefits which they are authorized to provide respectively. Such contract or contracts shall provide any one or more of such coverages for the employees of the local board of education and may include their dependents. A local board of education may enter into a contract or contracts to provide drug prescription and other health care benefits, or enter into a contract or contracts to provide drug prescription and other health care benefits as may be required to implement a duly executed collective negotiations agreement, or as may be required to implement a determination by a local board of education to provide such benefit or benefits to employees not included in collective ...


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