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AlaskaCare Retiree Health Plan Settlement Agreement with RPEA

Posted March 2, 2022

The Division of Retirement and Benefits is pleased to announce a settlement agreement with the Retired Public Employees of Alaska, Inc. (RPEA) in two lawsuits involving the AlaskaCare Retiree Medical and Dental, Vision, and Audio (DVA) plans. Nothing in the settlement agreement impacts the constitutional protections against diminishment of retiree benefits afforded by the Alaska State Constitution.

The terms of the settlement are agreeable to the State and both parties agree that the terms are more favorable to retirees than the likely outcome had either case continued to trial.

Some of the settlement terms fall outside the scope of what RPEA could have achieved at trial and enhance the process the Division uses to consider changes to the health plan and provide retirees with additional, meaningful opportunities to engage with the Division.

DVA-Specific Settlement Terms

  • Continued Access to the Legacy DVA Plan: The Division has agreed to continue to offer retirees the option to participate in the Legacy DVA plan (the plan in place prior to 2014) so long as the Legacy plan remains financially viable for the retirees who fully fund it through their monthly premiums.
  • DVA Plan Premium Development: Premiums for each DVA plan offered by the Division will be determined based on the cost of each plan. The Division will continue to share publicly the process used to determine premiums for each plan and will provide members with advance notice if premiums increase (or decrease), and an opportunity to elect their plan of choice during an open enrollment period.

Medical-Specific Settlement Terms

  • Plan Amendment to Clarify Medical Necessity Terms: The Division will propose a Plan Amendment to clarify certain terms, detail the Plan’s procedures for determining whether services are medically necessary, and to affirm the Plan Administrator’s (Commissioner of Administration) ultimate authority to make medical necessity determinations. The public will have at least 60 days to comment on this proposed amendment before it takes effect.
  • Rehabilitative Care Coverage Clarification: The Division will issue a benefit clarification to specify that when treatment is being provided for musculoskeletal disorders, a medical necessity review will be performed after 25 visits in a year for a specific episode of care. If the review determines the course of treatment is necessary for maintenance care, 10 additional visits will be allowed in that year for that episode of care.

General Settlement Terms

  • Expansion and Continuation of RHPAB: The Division will recommend the Retiree Health Plan Advisory Board (RHPAB, or the Board) be expanded to include an additional seat for an RPEA member, to be selected from a list of candidates proposed by RPEA. The Division will further recommend the continuation of the Board and the removal of the current sunset clause.
  • Expansion of RHPAB Subcommittees: The Division will recommend that the Board expand membership of the Retiree Health Plan Modernization Subcommittee to include a member of RPEA. This subcommittee is the working group where potential changes to the Retiree Health Plan are discussed and analyzed in detail. The Division will further recommend that the Board establish a Regulations Subcommittee to review proposed updates to regulations impacting the retiree health plan, and that the Board include a member of RPEA on this newly created subcommittee.
  • Regulations Related to Plan Changes: The Division will draft administrative regulations to formalize the process currently employed to review proposed changes to the retiree health plans. These regulations will be reviewed with the appropriate RHPAB subcommittee, and the public will have at least 60 days to comment on any resulting proposed regulations.

Background Information

You may have heard about two lawsuits related to the AlaskaCare Retiree Health plans. In 2014, after a competitive procurement process, the State of Alaska selected Aetna to serve as the AlaskaCare medical third-party administrator, and selected Delta Dental of Alaska (Moda) to serve as the dental third-party administrator. Also, in 2014, the Division adopted an amendment intended to eliminate areas of ambiguity in the plan, provide clarity to members, confirm prior practices, and align with best industry practices while maintaining affordable, valuable, and sustainable benefits for retirees. The 2014 plan amendment and changes applied to both the AlaskaCare Retiree Health Plan and the AlaskaCare Retiree Dental-Vision-Audio (DVA) Plan.

AlaskaCare Retiree DVA Plan Suit

In 2016, RPEA filed suit against the Division, alleging the optional retiree DVA plan was diminished through changes made to the plan in 2014. A trial was held in 2018 and the Alaska Superior Court ruled in RPEA’s favor. The Division appealed the decision to the Alaska Supreme Court. In January 2022, the Supreme Court ruled that the option to buy dental insurance is an accrued protected benefit for retiree members. However, the Supreme Court found that the trial court erred by failing to consider the reduction in premiums paid by retirees when evaluating the impact of the 2014 changes. Therefore, the Supreme Court vacated the judgment and sent the case back to the superior court for a new diminishment analysis using the correct legal standard.

AlaskaCare Retiree Medical Plan Suit

In 2018, RPEA filed a second lawsuit against the Division alleging the AlaskaCare retiree defined benefit medical plan was diminished as a result of the 2014 plan amendment. After multi-year litigation, trial was set to begin at the end of January 2022. However, rather than incur the significant expense of a two-week trial, continued motion practice, and a likely appeal to the Supreme Court, the parties agreed to explore the possibility of settling the claims remaining in the case through mediation.

Mediation

The parties mediated the outstanding issues in both the DVA and medical plan cases on February 11, 2022, and a final agreement was signed on February 28, 2022.

Retiree FAQs: RPEA Settlement Agreement

Will my DVA benefit options change as a result of the settlement agreement?

  • No. The Division will continue to offer eligible retirees a choice between the Standard and Legacy DVA plans for as long as the Legacy DVA plan remains financially viable.

Will my medical benefits change as a result of the settlement agreement?

  • Some retirees seeking care for musculoskeletal conditions may receive coverage for additional visits if their individual medical circumstances allow. Otherwise, your medical benefits will not change as a result of the settlement agreement.

Page Last Modified: 05/12/22 18:53:49

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