On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County, Docket No. C-72-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Payne, C.L. Miniman, and Waugh.
Defendant City of South Amboy (the City) appeals from a September 12, 2008, final order confirming an arbitration award in favor of plaintiff South Amboy PBA Local 63 (Local 63) concerning medical benefits for retired City police officers. The New Jersey State Policemen's Benevolent Association (PBA) filed an amicus curiae brief. We affirm.
This case arises from actions undertaken by the City in March 2002 and June 2003. On the earlier date, the City notified current and retired police officers that the existing $1 co-pay for prescriptions would be increased retroactively to March 1, 2001, to $5 for generic drugs and $10 for brand-name drugs. On the latter date, the City changed health insurance providers from its self-insured South Amboy Group Benefits Plan (SAGBP) to the State Health Benefits Plan (SHBP). Under the SAGBP and the Collective Negotiation Agreement (CNA) between Local 63 and the City, retirees received all medical coverage without cost. Under the SHBP, retirees were required to use Medicare as their primary insurance provider and incur Medicare Part B premiums at their own expense. As a result of these changes, the PBA filed a grievance.
The City and Local 63 were parties to a series of CNAs, which were renegotiated every three years. The CNA that expired on June 30, 1999, provided that the City would "continue to pay the cost of all medical coverage" provided by the CNA,*fn1 for a "retiree, retiree's/decedent's spouse and retiree's/decedent's dependent children." The CNA also provided "that the City may exercise its right to change insurance carriers so long as the coverages enumerated in this agreement are maintained at their equivalent levels."
The prescription drug plan provisions in the CNA covering the period July 1, 1999, to June 30, 2002, were amended to provide as follows:
D. 1. Prescription plan with a one ($1.00) Dollar deductible at a local pharmacy. Effective March 1, 2001 the public employer shall have the right to modify the prescription plan so as to provide for a $5.00 co-payment for generic medication and a $10.00 co-payment for brand name medication.
No other relevant change was made at that time to the medical-benefits provisions in the 1999-2002 CNA or in the CNA for the period July 1, 2002, to June 30, 2005.
Local 63 opposed the March 2002 and June 2003 changes to medical benefits and filed a grievance*fn2 in accordance with procedures set forth in the CNA. The grievance was not resolved by the two-step grievance procedure and the issue went to binding arbitration. The question posed by Local 63 was: "Did the [C]ity violate the contract and derivative interest of retirees when it changed health plans? If so, what shall be the remedy?" The City, on the other hand, posed the question as whether it violated the CNAs "when it changed health insurance carriers from the [SAGBP] to the [SHBP] effective July 1, 2003? If so, what shall be the remedy?" After opening arguments, the arbitrator found that "the question is actually a narrowly focused one specifically dealing with two aspects of the health insurance afforded to retirees: the prescription co-pay and the payment of the premium for Medicare Part B."
During arbitration, Local 63 contended that retirees have vested rights in continued health coverage, which are frozen and vested for life upon retirement. It further argued that the City was required to continue to pay the cost of all medical coverage for retirees and that requiring retirees to pay the Medicare Part B premiums was contrary to law and the express language of the CNA.
The City argued that retirees are not entitled to $1 prescription co-payments for life, because health benefits are not vested for life unless expressly stated in the CNA. The City further contended that it was in compliance with the CNA when it changed healthcare providers because it provided retirees with the same options it provided current employees.
After considering both arguments, the arbitrator made the following award ...