4/25/14 REUTERS LEGAL 10:00:01
Copyright © 2014 Thomson Reuters
April 25, 2014
Amanda Becker
(Reuters) – TRW Automotive cannot move retirees of a company it purchased into a health reimbursement system from a group health insurance plan, a federal appeals court has found.
The 6th U.S. Circuit Court of Appeals in Cincinnati on Tuesday said that TRW must honor the health insurance coverage negotiated by the Kelsey-Hayes Company and the union representing 400 of its retirees.
“Kelsey-Hayes agreed to pay the ‘full premium or subscription charge,'” the 6th Circuit said. “We find this language unambiguous.”
The plaintiffs are 400 workers who retired from the Kelsey-Hayes Company auto plant in Jackson, Mich., which closed in July 2006. They were covered by collective bargaining agreements negotiated in 1995, 1999 and 2003.
Each of the collective bargaining agreements said that Kelsey-Hayes would either self-insure or buy a group health policy for retirees, their eligible dependents and spouses.
Kelsey-Hayes provided health insurance for retirees before and after the Jackson plant closed. But after TRW purchased Kelsey-Hayes, the Livonia, Mich., automotive company sent a letter to plaintiffs saying it would discontinue healthcare coverage in 2012.
Instead, TRW would make a one-time contribution of $15,000 per retiree into a Health Reimbursement Account (HRA) in 2012, with an additional $4,800 deposit in 2013, the letter stated.
The retired workers sued, saying the change violated the Labor Management Relations Act (LMRA) and the Employee Retirement Income Security Act (ERISA).
The U.S. District Court for the Eastern District of Michigan at Flint granted the workers summary judgment and ordered TRW to reinstate the “status quo” and provide group health coverage.
TRW appealed to the 6th Circuit.
“The HRAs differed from the prior group coverages in that they shifted risk – and potentially costs – off of defendants and on to plaintiffs,” the 6th Circuit noted.
The appellate panel analyzed what the parties – Kelsey-Hayes and the union – intended when they signed the collective bargaining agreements (CBAs).
The parties had not bargained over HRAs, which are not “company-provided group insurance” but “health care vouchers – essentially cash,” the panel said.
TRW had also refused to fund the HRAs past 2013 or state that the accounts were vested and could not be terminated at their disposal. Whether HRAs are “better” or “worse” than group coverage does not matter, the 6th Circuit said.
“In sum, we conclude that the CBAs established a vested right to lifetime health care benefits, and that the unilateral implementation of the HRAs breached the CBAs,” the 6th Circuit said.
Attorneys for neither the plaintiffs’ union nor TRW could be reached for comment.
United Steel, Paper, Forestry, et al v. Kelsey-Hayes Company, et al, 6th U.S. Circuit Court of Appeals, No. 13-1717.
For United Steel: Stuart Israel and John Adam of Legghio & Israel
For Kelsey-Hayes, TRW: Gregory Mersol, Gilbert Brosky, Todd Dawson and Jeffrey Vlasek of Baker & Hostetler
—- Index References —-
News Subject: (Labor Relations (1LA21); Business Management (1BU42); Employee Healthcare Benefits (1EM44); HR & Labor Management (1HR87); Benefits (1BE71))
Industry: (Financial Services (1FI37); Health Insurance (1HE18); Group Insurance (1GR98); Healthcare (1HE06); Insurance (1IN97))
Region: (North America (1NO39); Michigan (1MI45); USA (1US73); U.S. Midwest Region (1MI19); Americas (1AM92))
Language: EN
Other Indexing: (Gregory Mersol; John Adam; Stuart Israel; Todd Dawson; Gilbert Brosky; Jeffrey Vlasek; Lucas Jackson; Circuit Court)
Keywords: employment; health (MCC:OEC); (N2:US); (N2:AMERS); (N2:USA); (MCCL:OVR)
Word Count: 522