On appeal from a Final Decision of the New Jersey Department of Treasury, State Health Benefits Commission.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Cuff, Lisa and Simonelli.
In these consolidated appeals, the Communications Workers of America (CWA), the New Jersey Education Association (NJEA) and several named appellants challenge a December 20, 2005 amendment made by the State Health Benefits Commission (SHBC) to the retiree prescription drug card pilot plan. The amendment increased the maximum out-of-pocket prescription drug expenditures paid by retirees and their eligible dependents in the State Health Benefits Program (SHBP) from a projected $626 in calendar year 2006 to $1000. On September 5, 2006, the SHBC adopted another subsequent resolution increasing the cap on outof-pocket prescription drug expenditures to $1082. Appellants argue that the rule is invalid and unenforceable because it reduces post-retirement health care benefits, and that retirees are entitled to be restored to the status quo ante and to reimbursement of out-of-pocket prescription drug expenditures that exceed the cap in effect as of calendar year 2005. We hold that the rule allowing adjustment of the cap on out-of-pocket expenditures is consistent with statutory authority governing the prescription drug benefit plan and that the pilot plan, as adopted, is reasonable and necessary to preserve the fiscal integrity of the plan.
The SHBP was significantly modified by recent legislation.
L. 2007, c. 103, effective June 28, 2007. The plans discussed in this opinion, the Traditional Plan and NJ Plus, are no longer offered to SHBP participants. The retiree prescription drug pilot program that is the subject of this appeal is governed by statutes in effect at the time of adoption and implementation of the program, and all statutory references are to the statutes in effect prior to the 2007 amendments.
All retirees who participate in the SHBP administered by the SHBC receive prescription drug coverage under the medical plans in which they enroll upon retirement. Effective March 20, 2000, the SHBC implemented the retiree prescription drug plan (the Drug Plan) as a pilot program for retired members enrolled in the Traditional Plan and the NJ Plus Plan. N.J.A.C. 17:9-6.10. Prior to the adoption of the Drug Plan, retirees who chose the Traditional or the NJ Plus plans were required to pay the full cost of prescriptions at a retail pharmacy and then would receive reimbursement from the plan administrator subject to an annual deductible and co-insurance amounts.
Most retirees were enrolled in the Traditional Plan in which they paid an annual major deductible of $100 per participant and co-insurance of twenty percent on their next $2000 of eligible medical and prescription drug costs. When a participant satisfied the deductible and co-insurance amounts, the Traditional Plan reimbursed the retiree in full for eligible medical and prescription drug expenditures. The out-of-pocket maximum for medical and prescription drug expenditures per participant at that time was $500.
The Drug Plan adopted in March 2000 was designed "to improve retiree access to prescription drugs by making them more affordable by reducing the up-front cost to retirees" and "to provide more cost-effective management of future costs." The Drug Plan contained a three-tiered cost-sharing requirement that provided participants with financial inducements to use lower cost generic drugs and mail order pharmacy options, and an annual maximum cap on cost-sharing expenditures by the Drug Plan participants. Once a Drug Plan participant reached an annual dollar amount of out-of-pocket cost-sharing expenses on covered drug prescriptions, all further prescriptions filled by the Drug Plan participant for the remainder of the calendar year would be free.
When the Drug Plan was first implemented in 2000, the annual cap on out-of-pocket co-payments for prescription drugs was $300. At the time, this represented a significant reduction in the annual out-of-pocket costs for the majority of participants. Pursuant to the terms of the Drug Plan, beginning in the third year and every year thereafter, the annual cap would be recalculated according to an inflation/Consumer Price Index adjustment formula specified at N.J.A.C. 17:9-6.10(h). By 2005, and consistent with this annual adjustment formula, the maximum out-of-pocket co-payment for calendar year 2006 was set to increase from $552 to $626.
On June 20, 2005, the SHBC issued a proposed amendment to the Drug Plan which would have eliminated entirely the annual cap on out-of-pocket co-payments for Drug Plan participants, as well as remove the reference to it as a "pilot program." After a public hearing, the SHBC issued a re-proposed amendment to N.J.A.C. 17:9-6.10.
The revised proposal retained the annual cap on out-of-pocket costs, but increased the ceiling to $1000 for calendar year 2006. Thereafter, the cap would rise annually pursuant to the inflation/index adjustment formula set forth in N.J.A.C. 17:9-6.10(h). The re-proposed amendment also proposed extending the pilot program status of the Drug Plan until December 31, 2007, in order to "provide staff and consultants with time to study the impact on the purchasing behavior of retirees enrolled in the [Drug] Plan."
The re-proposed amendment was enacted on December 20, 2005. N.J.A.C. 17:9-6.10 provided that:
(b) As a pilot program from March 20, 2000 to December 31, 2007, payment for eligible prescription drug expenses of retired members of the State Health Benefits Program and their eligible dependents who participate in the Traditional Plan or NJ PLUS shall be provided under the prescription drug plan. Payment for prescription drug expenses or the co-payments required under the prescription drug plan shall not be made under the major medical portion of the Traditional Plan or NJ PLUS. There shall be no annual deductible amount that retired members or their eligible dependents shall satisfy before eligibility for payment of prescription drug expenses under the prescription drug plan.
(l) For calendar year 2006 (January 1, 2006 through December 31, 2006), the out-of-pocket maximum expense limit shall be equivalent to $1,000. For each calendar year thereafter the out-of-pocket maximum expense limit shall be recalculated pursuant to the provisions of (h) above.
The CWA, NJEA and several named individuals filed separate timely appeals challenging the validity of the rule amendment. On September 5, 2006, the SHBC adopted a subsequent resolution increasing ...