Can a Minnesota county and its bargaining units, in a new collective bargaining agreement, add or raise co-pays on the health insurance plan in a way that also applies to retirees who are continuing under the county plan?

Plain-English summary

Itasca County and its unions agreed in 2000-2002 labor contracts to move active employees and retirees who had stayed on the County plan to a new health insurance product called Arrowhead Pro Care Option V. The new plan raised the prescription drug premium and added an office-call co-pay. The County had a long-standing practice of applying any coverage change (statutorily mandated or otherwise) to all retirees who had stayed under the County plan. There was no documentation of a promise to retirees that they would receive a particular level of coverage, only the implied promise (based on past parallel changes) that retirees would get the same coverage as active employees.

Itasca County Attorney John Muhar asked the AG two questions: could the County and the bargaining reps agree by contract to add or increase co-pays for retirees, and did the answer differ based on whether the retiree retired before or after the effective date of 1988 Minn. Laws ch. 605 (the law that opened up retiree insurance to collective bargaining).

The AG answered yes to question 1 (subject to applying the same changes to active employees) and qualifiedly no to question 2 (same rule regardless of when retiree retired, with an important exception for retirees who can prove an enforceable promise of specific coverage levels from a pre-1988 contract).

Question 1. Counties have explicit authority under Minn. Stat. § 471.61, subd. 2a to provide group health insurance for retired officers, employees, and dependents, and to pay all or part of the premium. Subdivision 2b lets retirees continue indefinitely in the employer-sponsored plan they were in immediately before retirement, with the retiree paying the entire premium "except as otherwise provided in a collective bargaining agreement or personnel policy." Pre-65 retirees and their dependents must be pooled in the same group as active employees for premium and coverage purposes. After 65, premium and coverage levels can differ from those for active employees and younger retirees (per the prior Op. Atty. Gen. 161b-7, December 15, 1998).

Nothing in § 471.61 stops a county from bargaining co-pays. The catch: any co-pay change has to apply to active employees as well as retirees, because the statute requires pre-65 retirees be pooled with active employees for premium and coverage purposes. If the County and union agreed to raise co-pays only for retirees while keeping actives at the old co-pays, that would split the pool in a way the statute does not permit.

There's also a duration limit. Collective bargaining agreements may expressly provide for employer payment for retiree coverage, but Minn. Stat. § 179A.20, subd. 2a limits employer obligations to the duration of the contract. A CBA cannot create a permanent commitment to fund retiree health coverage; the commitment expires when the contract expires. That implies coverage levels and any employer contribution amounts for retirees are subject to change in the next round of bargaining.

Question 2. Before 1988, retirement benefits (including retiree insurance) were not a permissible subject of collective bargaining (Minn. Stat. § 179A.03, subd. 19 (1986); Minnesota Teamsters Local 320 v. County of Washington (1987)). The 1988 amendment (1988 Minn. Laws ch. 605, § 4) removed employer payment of retiree insurance premiums from the list of non-bargainable subjects. Chapter 605 also enacted the § 179A.20, subd. 2a duration limit.

In Law Enforcement Labor Services v. County of Mower (469 N.W.2d 496 (Minn. Ct. App. 1991), aff'd, 483 N.W.2d 696 (Minn. 1992)), the courts held that the 1988 amendment did not let a county walk away from a pre-1988 contract that had promised lifetime employer-paid health coverage. Where the employee had retired in reliance on such a promise, the county was estopped from depriving the retiree of "the fruit of their legitimate expectations." The Supreme Court held that "the right to such benefits is vested for the life of the retiree and cannot be altered absent the retiree's express consent."

So a retiree who retired before 1988 and can establish an enforceable promise of a specific coverage level has vested rights to that coverage. The county cannot use a 2001 CBA to take that away.

But Itasca County said there was no documentation of any promise of any particular coverage level. Assuming that's accurate (and the AG's answer is conditional on that assumption), no pre-1988 retiree had vested rights to a specific coverage level. The same co-pay change applied to actives could be applied to retirees regardless of retirement date.

Bottom line: yes, Itasca County could bargain new co-pays that affected retirees, as long as the changes also applied to active employees, and as long as no individual retiree had an enforceable pre-1988 promise of a specific coverage level. The conditions matter.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The retiree health insurance statutes (Minn. Stat. §§ 179A.03, 179A.20, 471.61, 471.6161) have been revisited by the legislature since 2001, and the Affordable Care Act and Medicare changes since then have significantly altered the public-employer retiree health benefit landscape. The Mower County vested-rights rule for pre-1988 enforceable promises remains binding Minnesota Supreme Court precedent, but specific applications should be confirmed against current case law.

Historical context: what the AG concluded

The opinion has two questions and uses a tidy statutory analysis for each.

Question 1 analysis: Can co-pays be raised by CBA?

Section 471.61, subd. 2a gives counties express authority to provide retiree health insurance and pay all or part of the premium. Section 471.61, subd. 2b lets retirees continue indefinitely in the employer-sponsored plan, with specific conditions. Subdivision 2b(b) requires that pre-65 retirees be "pooled in the same group as active employees for purposes of establishing premiums and coverage for hospital, medical, and dental insurance." Subdivision 2b(e) says the retiree "must pay the entire premium for continuation coverage, except as otherwise provided in a collective bargaining agreement or personnel policy."

The pooling requirement means coverage features (including co-pays, deductibles, drug formulary) must be the same for pre-65 retirees as for active employees. A unilateral co-pay increase that hits only retirees would violate the pooling rule. But a co-pay increase that hits both active employees and pre-65 retirees would not.

The prior opinion 161b-7 (Dec. 15, 1998) had established that post-65 retirees can have different premium and coverage levels from active employees and pre-65 retirees. So the pooling rule applies only to pre-65 retirees.

Collective bargaining agreements may also expressly provide for employer payment of retiree coverage premiums (Minn. Stat. § 179A.03, subd. 19). But § 179A.20, subd. 2a limits the duration of such commitments to the term of the CBA. The implication: coverage levels and employer payment amounts for retirees can be changed in subsequent rounds of bargaining.

For Itasca County, the conclusion: yes, co-pay changes are bargainable. The catch: same changes must apply to active employees as well as pre-65 retirees.

Question 2 analysis: Does the answer differ for pre-1988 retirees?

Before 1988, retiree insurance was not a permissible subject of collective bargaining. Section 179A.03, subd. 19 (1986) listed retirement benefits (including insurance) as non-bargainable. Minnesota Teamsters Local 320 v. County of Washington, 413 N.W.2d 245 (Minn. Ct. App. 1987), review granted, December 18, 1987, appeal dismissed April 29, 1988, confirmed that classification.

The 1988 amendment (1988 Minn. Laws ch. 605, § 4) removed employer payment of retiree insurance premiums from the non-bargainable list. Chapter 605, § 7 also enacted § 179A.20, subd. 2a, the duration limit on employer health-care funding obligations.

The Mower County case (Law Enf. Labor Services v. County of Mower, 469 N.W.2d 496 (Minn. Ct. App. 1991), aff'd 483 N.W.2d 696 (Minn. 1992)) addressed retirees who had retired pre-1988 under contracts that promised lifetime employer-paid coverage. The county tried to use the 1988 amendment to walk back those obligations. The courts said no. The Court of Appeals held the 1988 amendment did not authorize the county to abandon prior contractual obligations. The Supreme Court affirmed on a promissory estoppel theory, drawing on Christensen v. Minneapolis Municipal Employees Retirement Board, 331 N.W.2d 740 (Minn. 1983) (promises regarding retirement benefits binding under promissory estoppel). "The right to such benefits is vested for the life of the retiree and cannot be altered absent the retiree's express consent."

For Itasca County, the AG's answer: the rule is the same for pre-1988 retirees and post-1988 retirees as long as no enforceable pre-1988 promise of a specific coverage level can be established. The County represented that no such promise existed and that the only "implied promise" came from a consistent past practice of treating retirees and actives the same. Past practice of parallel treatment does not, by itself, create an enforceable promise of a specific level of coverage; it's merely consistent with a parallel-treatment policy that can be changed. So no individual Itasca County retiree had vested rights to the old co-pay levels. The new bargained co-pays could apply to all retirees.

But the AG flagged the caveat: any specific Itasca retiree who could show a written or oral promise of a specific coverage level (a personal letter at retirement, a clause in the CBA in effect when they retired, etc.) would have vested rights under Mower. That's a fact-specific determination.

Common questions

Q: I'm a county retiree. The new CBA just raised my prescription drug co-pay. Can I challenge that?
A: Under the 2001 opinion, probably not, unless you can show an enforceable promise of a specific level of coverage that predates the change. The general rule is that co-pay levels can be changed by CBA as long as the same change applies to active employees. If your county tells you the new co-pay applies to active employees too, then bargaining it for retirees was permissible under § 471.61. The Mower County exception (vested lifetime coverage from a pre-1988 promise) is narrow and fact-specific.

Q: I'm a county HR director. Our union wants to raise co-pays just for retirees while keeping active employees at the old co-pay level. Can we do that?
A: Not for pre-65 retirees. Section 471.61, subd. 2b(b) requires that pre-65 retirees be pooled in the same group as active employees for premium and coverage purposes. Splitting the pool by raising co-pays only for retirees would violate that requirement. For post-65 retirees, the prior opinion 161b-7 allows different premium and coverage levels, so a Medicare-eligible retiree group could potentially be treated differently. Pull the current statute to confirm; the statute has been amended since 2001.

Q: Can the county promise its current employees that their retiree health coverage will be guaranteed for life?
A: Under § 179A.20, subd. 2a, the CBA cannot bind the employer beyond the term of the contract. The employer can include language about retiree health coverage in the current CBA, and that language will govern for the term of that CBA, but it cannot create a permanent commitment that survives expiration. Whether some form of personnel policy or individual letter could be enforceable as a separate promissory estoppel theory (à la Mower) would require careful drafting and is a fact-specific question for counsel.

Q: Do retirees have any voice in the CBA negotiations that affect their coverage?
A: They typically do not have direct representation. The union bargains for the active employees, not for retirees. The 2001 opinion does not address this directly. Retirees who want input often have to lobby the union or county officials informally; their direct bargaining representation rights, if any, depend on the specific provisions of the CBA and county personnel policies.

Q: How do I prove a pre-1988 enforceable promise of specific coverage?
A: The Mower County case suggests that documentation matters: a letter from the county at retirement, a clause in the CBA in effect when the employee retired, county personnel policies that the employee relied on. The 2001 opinion to Itasca County noted that the county had "no documentation of any promise." If you're a retiree who has such documentation, consult counsel about the Mower-style promissory estoppel theory. Outcomes are fact-specific.

Q: What about the new co-pay being "statutorily mandated"? Does that matter?
A: The 2001 opinion mentions that Itasca County had a practice of applying both statutorily mandated and other coverage changes to retirees. The opinion does not suggest that the source of the change (statute vs. bargaining) matters to the analysis. The pooling rule, the pre-1988 vested rights, and the CBA-duration limit all apply regardless.

Background and statutory framework

Minnesota's public employer retiree health insurance framework consists of several interlocking pieces:

Section 471.61 (county/local government insurance authority): Subdivision 2a authorizes counties to provide retiree health insurance and pay all or part of the premium. Subdivision 2b sets the indefinite-continuation right for retirees, the pre-65 pooling requirement, and the post-65 carve-out.

Section 179A.03, subd. 19 (PERLA bargaining definition): Defines the scope of negotiations under the Public Employment Labor Relations Act. The 1988 amendment removed retiree insurance from the non-bargainable list, opening it up to CBA.

Section 179A.20, subd. 2a (PERLA duration limit): Limits the duration of an employer's obligation to fund retiree health benefits to the term of the CBA. No permanent commitments by CBA.

Section 471.6161: Address other aspects of group insurance for public employees (cross-referenced in the opinion's headnote).

The pre-1988 vested-rights doctrine from Mower County is a Minnesota common-law overlay. Where an employee retires in reliance on a contract or other enforceable promise of a specific coverage level, that promise is treated as vested. Subsequent statutory changes (including the 1988 opening of retiree benefits to bargaining) cannot strip those vested rights.

Mike Hatch was AG in 2001. Kenneth E. Raschke, Jr. was the Assistant AG of record.

Citations and references

Statutes:
- Minn. Stat. § 13.43, subd. 2(4) (data classification, referenced in companion 852 (Aug. 2000) opinion)
- Minn. Stat. § 179A.03, subd. 19 (2000) (definition of negotiable subjects)
- Minn. Stat. § 179A.20, subd. 2a (2000) (CBA duration limit for retiree health funding)
- Minn. Stat. § 471.61, subd. 2a, subd. 2b (2000) (county insurance authority and retiree continuation)
- Minn. Stat. § 471.6161 (related local-government group insurance)

Session laws:
- 1988 Minn. Laws ch. 605, §§ 4, 7 (opening retiree insurance to bargaining; CBA duration limit)

Cases:
- Minnesota Teamsters Public and Law Enf. Employees Union Local No. 320 v. County of Washington, 413 N.W.2d 245 (Minn. Ct. App. 1987), review granted Dec. 18, 1987, appeal dismissed Apr. 29, 1988
- Law Enf. Labor Services, Inc. v. County of Mower, 469 N.W.2d 496 (Minn. Ct. App. 1991), review granted July 24, 1991
- Law Enf. Labor Services v. County of Mower, 483 N.W.2d 696 (Minn. 1992) (vested-rights rule for pre-1988 enforceable promises)
- Christensen v. Minneapolis Municipal Employees Retirement Board, 331 N.W.2d 740 (Minn. 1983) (promissory estoppel applied to retirement benefits)

Prior AG opinion:
- Op. Atty. Gen. 161b-7, December 15, 1998 (retiree continuation rights and post-65 separate treatment)

Source

• Landing page: https://www.ag.state.mn.us/Office/Opinions/
• Original PDF: https://www.ag.state.mn.us/Office/Opinions/125a28-20010430.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

COUNTIES: INSURANCE: RETIRED EMPLOYEES: Health insurance coverage for retired employees may be modified in connection with a new collective bargaining agreement. Minn. Stat. §§ 179A.03 subd. 19, 179A.20, 471.61, 471.6161.

125a-28
(Cr. Ref. 59a-25; 161b-7)
April 30, 2001

John J. Muhar, Esq.
Itasca County Attorney
123 N.E. Fourth Street
Grand Rapids, MN 55744

Dear Mr. Muhar:

Thank you for your letter of March 30, 2001 requesting the opinion of the Attorney General regarding health insurance for retired county employees under the facts described below.

FACTS

As part of the settlement of its 2000-2002 labor agreements, Itasca County and the respective collective bargaining representatives of its employees agreed to change to a new health insurance coverage which raised the prescription drug premium and added a new office call co-pay. The collective bargaining agreements provided that the new coverage, known as Arrowhead Pro Care Option V, would apply to all active employees and all retirees who continue to maintain coverage under the Itasca County plan. Itasca County has consistently applied to all retirees any coverage changes, statutorily mandated or otherwise, that may have been applied to active employees in prior years. There is no documentation of any promise by Itasca County to provide a certain level of health insurance coverage for retirees other than the implied promise, based on changes in retirees' coverage over the years that mirrored changes in active employees' coverage, that retirees would receive the same coverage as active employees.

You then ask substantially the following questions:

QUESTION ONE

May Itasca County and the collective bargaining representatives of its employees agree by labor contract to add or increase co-pays for retirees?

OPINION

We answer your question in the affirmative. Pursuant to Minn. Stat. § 471.61 subd. 2a (2000), a county is authorized to provide group health insurance benefits for its retired officers and employees and dependents and may elect to pay all or part of the premiums for such coverage. Section 471.61 subd. 2b (2000) further provides in part:

Subd. 2b. Insurance continuation. A unit of local government must allow a former employee and the employee's dependents to continue to participate indefinitely in the employer-sponsored hospital, medical, and dental insurance group that the employee participated in immediately before retirement, under the following conditions:

(a) The continuation requirement of this subdivision applies only to a former employee who is receiving a disability benefit or an annuity from a Minnesota public pension plan other than a volunteer firefighter plan, or who has met age and service requirements necessary to receive an annuity from such a plan.

(b) Until the former employee reaches age 65, the former employee and dependents must be pooled in the same group as active employees for purposes of establishing premiums and coverage for hospital, medical, and dental insurance.

. . .

(e) The former employee must pay the entire premium for continuation coverage, except as otherwise provided in a collective bargaining agreement or personnel policy. A unit of local government may discontinue coverage if a former employee fails to pay the premium within the deadline provided for payment of premiums under federal law governing insurance continuation.

. . .

The Attorney General's Office has previously interpreted this subdivision to entitle retired employees to continue participation in the insurance "group" in which they previously participated. See Op. Atty. Gen. 161b-7, December 15, 1998. Further, this Office has previously opined that premium and coverage levels for employees 65 years of age and older may differ from those for active employees and younger retirees. Id.

However, there is nothing contained in Section 471.61 that would restrict a county and the collective bargaining representative of employees from agreeing by labor contract to add or increase co-pays for retirees generally, as long as such co-pays apply to active employees as well.

As you likely know, collective bargaining agreements may also expressly provide for employer payment for retiree insurance coverage. See Minn. Stat. § 179A.03 subd. 19 (2000). However, Minn. Stat. § 179A.20 subd. 2a (2000) limits the duration of the employer's obligation under such contracts as follows:

A contract may not obligate an employer to fund all or part of the cost of health care benefits for a former employee beyond the duration of the contract, subject to section 179A.20, subdivision 6. A personnel policy may not obligate an employer to fund all or part of health care benefits for a former employee beyond the duration of the policy. A policy may not extend beyond the termination of the contract of longest duration covering other employees of the employer or, if none, the termination of the budgetary cycle during which the policy is adopted.

Consequently, neither the level of coverage for retirees nor the amount of employer contribution may be assured beyond the term of a collective bargaining agreement. This provision also implies that levels of coverage for a group that includes retirees, as well as the amount of any employer payment for retiree coverage, are subject to change. For the above reasons, it is our opinion that Itasca County and the collective bargaining representative of its employees may, by labor contract, add or increase co-pays for retirees, so long as such increased co-pays apply to active employees as well.

QUESTION TWO

Is the answer different depending on whether the retiree retired before or after the effective date of Minn. laws 1988, Ch. 605?

OPINION

Subject to the qualifications discussed below, we answer your question in the negative.

Prior to 1988, retirement contributions and benefits, including retiree insurance benefits, were not a permissible subject for collective bargaining agreements. See Minn. Stat. § 179A.03 subd. 19 (1986); Minnesota Teamsters Public and Law Enf. Employees Union Local No. 320 v. County of Washington, 413 N.W.2d 245 (Minn. Ct. App. 1987), review granted, December 18, 1987; appeal dismissed April 29, 1988. In the Act of April 24, 1988, Ch. 605 1988 Minn. Laws 671, the legislature amended section 179A.03, subd. 19 to remove employer payment of, or contribution to, premiums for group insurance coverage of retired employees from the list of non-bargainable subjects. Minn. Laws 1988, Ch. 605 § 4. That chapter also enacted section 179A.20 subd. 2a (quoted above) which limits the term of employer obligations to fund retiree health insurance. Id., § 7.

In Law Enf. Labor Services, Inc., v. County of Mower, 469 N.W.2d 496 (Minn. Ct. App. 1991), review granted, July 24, 1991, the court held that the effect of chapter 605 was, inter alia, to require continuing employer health insurance payments for employees who retired prior to the effective date of Chapter 605 under a contract that guaranteed lifetime employer-paid health coverage. That holding was affirmed by the Minnesota Supreme Court which said:

Having represented to [a retiree] that he had satisfied the eligibility conditions for retirement benefits, including payment by the county of health care insurance premiums for the retiree and his dependents, the county is estopped from depriving [the retiree] and other similarly situated retirees of the fruit of their legitimate expectations. See Christensen v. Minneapolis Municipal Employees Retirement Board, 331 N.W.2d 740 (Minn. 1983) (promises regarding retirement benefits held binding pursuant to doctrine of promissory estoppel). We hold, therefore, that the County of Mower is estopped from denying that the collectively bargained agreement in force at the time of the retirement of Baker and other similarly situated retirees provides retirement benefits which include payment by the county of premiums for health care insurance covering the retiree and his dependents and that the right to such benefits is vested for the life of the retiree and cannot be altered absent the retiree's express consent.

Law Enf. Labor Svcs. v. County of Mower, 483 N.W.2d 696, 701 (Minn. 1992).

Therefore an employee who retired before the effective date of 1988 Minn. Laws Ch. 605, at a time when there was in effect a collective bargaining agreement or other enforceable promise guaranteeing the employee a particular level or duration of employer-paid post retirement health care, would be entitled to fulfillment of that promise. In your letter you state that there is "no documentation of any promise" to provide any particular level of coverage to retirees. Assuming no such enforceable promise can be established, we answer your question in the negative.

Given our answers to your first two questions, responses to other questions raised in your letter are not required.

Please contact me if you have any questions.

Respectfully submitted,

MIKE HATCH
Attorney General

KENNETH E. RASCHKE, JR.
Assistant Attorney General