Deviating from our usual fare of ocean and land related cases, we wade into a constitutional thicket and report on Dannenberg v. State of Hawaii. The opinion from the Supreme Court is here.
Judge James Dannenberg (retired) is the lead plaintiff in a class action brought on behalf of:
All employees (and their dependent-beneficiaries) who began working for the Territory of Hawai’i, the State of Hawai’i or the political subdivisions thereof, before July 1, 2003, and
who have accrued or will accrue a right to post-retirement health benefits as a retiree or dependent-beneficiary of such a retiree. This includes: (a) those who have not yet
received any post-retirement health benefits from Defendants as a retiree or dependent beneficiary of such a retiree; and (b) those. who have received any post-retirement health
benefits from Defendants since July 1, 2003 as a retiree or dependent-beneficiary of such a retiree. For purposes of damages only, if any, the class shall also include the estates and heirs of any deceased retiree or deceased dependent-beneficiary of a retiree who is or was a member of the class.
So, basically, every retired state or county worker. [Side note: Judge Dannenberg was an adjunct professor teaching Evidence to a certain blogger]. At issue was whether the State and Counties have impaired the “accrued retirement health benefits” in violation of article XVI, section 2 of the Hawaii Constitution which provides:
Membership in any employees’ retirement system of the State or any political subdivision thereof shall be a contractual relationship, the accrued benefits of which shall not be diminished or impaired.
The class action plaintiffs argued that the State had to maintain parity with current health benefits, lest they impair the benefits of retirees. The State had changed copays, coverages, deductibles and maximums for the retirees leading to this lawsuit.
The State argued that there was no diminishment of benefits, as a matter of fact. The case went to the Hawaii Supreme Court by way of summary judgment granted in favor of the State.
The Hawaii Supreme Court (not the usual court, since all justices recused themselves) found that parity with current employees was not the constitutionally required but what the impairment clause protected was “accrued health benefits”. So, a trial was necessary to determine what each employees accrued health benefits actually were:
Instead, we hold that the starting place for a determination of Appellants’ accrued health benefits is the retiree health benefits, included in a Health Fund benefits plan,
that were promised to Appellants at the time of their enrollment in the ERS, as these are the benefits that, in the first instance, arise from their membership in the ERS.
Noting that benefits change from time to time, both positively and negatively, the Court stated:
Offsetting advantages and disadvantages must take into account how changes to health benefits impact retirees, as well as the government fisc. See Duncan, 71 P.3d at 891-92. In other words, considering the health benefits included in the health benefits plan offered by the Health Fund as the starting place, the “equivalent value” of accrued retirement health benefits must be viewed from the beneficiaries’ viewpoint, and not simply in consideration of the cost to the State. As explained in Duncan, “equivalent value must be proven by a comparison of benefits provided-merely comparing old and new premium costs does not establish equivalency.” Duncan, 71 P.3d at 892.
The court remanded the case to circuit court for trial. Stand by for that one.