Can a Texas county pay health insurance premiums for retirees who weren't promised that benefit when they retired?

Plain-English summary

Smith County had nine retired employees who, when they retired (sometime between August 1992 and July 1996), were told they could keep their county health coverage only at their own expense, the way federal COBRA law allows. In September 1996 the commissioners court adopted a new policy: the county would provide group health insurance for future retirees and pay 100% of their premiums, effective October 1, 1996. The court decided to fold the nine existing COBRA retirees into that new policy too, and the county had been paying their full premiums ever since. The criminal district attorney asked the Attorney General whether the county could keep doing that, whether it had to claw back the premiums it already paid, and whether the nine could at least stay in the group plan if they paid their own way.

The opinion concluded that the county could not pay the nine retirees' premiums. Article III, section 53 of the Texas Constitution forbids granting "extra compensation" for service already rendered. A county generally cannot increase a former employee's retirement benefits beyond what the county provided at the time of retirement. There are only two exceptions: the retiree gives additional consideration, or the county's policy (or federal or state law) already provided for the possibility of the increase when the person retired. Neither applied here. The nine gave nothing extra in return, and when they retired the county's policy required them to pay 100% of their own COBRA premiums.

On the second question, the opinion concluded the county may, but is not required to, seek reimbursement from the nine for the premiums it had already paid in violation of the constitution. A government may use its discretion to recover funds an agent paid out erroneously, weighing things like the amount, the ease of collection, and the cost of pursuing it. On the third question, the opinion distinguished between two groups: those who retired on or after January 1, 1994 (when chapter 175 of the Local Government Code took effect) but before October 1, 1996 may participate in the county plan at their own expense under chapter 175, while those who retired before January 1, 1994 may not continue in the plan beyond the period COBRA requires.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. The Insurance Code and Local Government Code provisions on county retiree health benefits, and the COBRA rules, can change, so verify current law before relying on any specific rule, threshold, or deadline mentioned here.

What the opinion meant for those who asked

County commissioners courts (what the opinion held for them): The opinion held that a county cannot begin paying group-health-insurance premiums for a retiree if, at the time that person retired, neither county policy nor federal or state law provided for the possibility of that benefit. Doing so was treated as unconstitutional retroactive compensation under article III, section 53.

Counties that already made such payments (what the opinion held for them): The opinion held that the county may, but is not required to, seek reimbursement from a retiree for premiums it paid in violation of article III, section 53, and that the commissioners court could weigh the amount, the ease of collection, and the cost of pursuing it.

Retirees themselves (what the opinion held for them): The opinion held that a person who retired on or after January 1, 1994 but before October 1, 1996 may participate in the county group plan at the retiree's own expense under chapter 175 of the Local Government Code, while a person who retired before January 1, 1994 may not continue beyond the period COBRA requires.

Common questions

Can a Texas county start paying health premiums for someone who already retired?
Under this opinion, no, not if the county did not provide for that benefit (or the possibility of it) when the person retired. The opinion treated that as unconstitutional retroactive compensation under article III, section 53.

Are there any exceptions?
The opinion identified two. The retiree gives additional consideration in return, or the county's policy or applicable federal or state law already allowed for the possibility of additional payments at the time of retirement.

If the county already paid premiums it shouldn't have, must it get the money back?
The opinion concluded the county may seek reimbursement but is not required to. It found no case law or prior opinion requiring a government body to recover funds an agent paid out erroneously.

Could the nine retirees at least stay in the plan if they paid their own premiums?
The opinion said it depends on the retirement date. Those who retired between January 1, 1994 and October 1, 1996 may participate at their own expense under chapter 175 of the Local Government Code; those who retired before January 1, 1994 may not continue beyond the COBRA period.

Background and statutory framework

Article III, section 53 of the Texas Constitution prohibits the legislature from authorizing a county to grant "any extra compensation, fee or allowance to a public officer, agent, servant or contractor, after [a] service has been rendered." The opinion relied on a prior opinion, JC-0297 (2000), for the rule that a retired county employee generally may not receive a new or increased benefit the county did not provide at retirement, and for the two recognized exceptions (additional consideration, or a policy or law that provided for the possibility of additional payments). Tex. Const. art. III, § 53.

The opinion canvassed the statutes a county might invoke to pay retiree premiums and found none authorized retroactive payment here: article 3.51-2 of the Insurance Code (authorizing group-health contracts and premium payment for retirees, but not where the payment would be unconstitutional retroactive compensation), and section 157.002 of the Local Government Code (which requires the insurance to be provided "by rule" and "included in the person's employment contract"). Chapter 175 of the Local Government Code lets a person who retires from a county of 75,000 or more continue participating in the county plan at the retiree's expense, but does not authorize the county to pay those premiums. Tex. Ins. Code Ann. art. 3.51-2 (Vernon Supp. 2000); Tex. Loc. Gov't Code Ann. §§ 157.002, 175.001, 175.002 (Vernon 1999). The federal COBRA provisions permit continued coverage for eighteen to thirty-six months after retirement but do not require or authorize a county to pay any part of the premium. 29 U.S.C. §§ 1161-69; 42 U.S.C. §§ 300bb-1 to -8.

On the discretion to recover erroneous payments, the opinion drew on City of Taylor v. Hodges, 186 S.W.2d 61 (Tex. 1945), and a line of Texas and federal cases including Cameron County v. Fox, Gould v. City of El Paso, Nunn-Warren Publ'g Co. v. Hutchinson County, and United States v. Paddock, along with prior opinions JM-910 (1988) and MW-93 (1979). City of Greenville v. Emerson, 740 S.W.2d 10 (Tex. App.-Dallas 1987, no writ), supplied the additional-consideration exception.

Citations

Constitutional, statutory, and federal provisions:

• Tex. Const. art. III, § 53
• 29 U.S.C. §§ 1161-69; 42 U.S.C. §§ 300bb-1 to -8 (COBRA)
• Tex. Ins. Code Ann. art. 3.51-2 (Vernon Supp. 2000)
• Tex. Loc. Gov't Code Ann. § 157.002; ch. 175 (§§ 175.001, .002, .005, .006, .007) (Vernon 1999)

Cases:

• City of Greenville v. Emerson, 740 S.W.2d 10 (Tex. App.-Dallas 1987, no writ)
• City of Taylor v. Hodges, 186 S.W.2d 61 (Tex. 1945)
• United States v. Paddock, 178 F.2d 394 (5th Cir. 1949)
• Cameron County v. Fox, 2 S.W.2d 433 (Tex. Comm'n App. 1928, judgm't adopted)
• Gould v. City of El Paso, 440 S.W.2d 696 (Tex. Civ. App.-El Paso 1969, writ ref'd n.r.e.)
• Nunn-Warren Publ'g Co. v. Hutchinson County, 45 S.W.2d 651 (Tex. Civ. App.-Amarillo 1932, writ ref'd)

Prior Attorney General opinions:

• Tex. Att'y Gen. Op. Nos. JC-0297 (2000); JM-910 (1988); MW-93 (1979); LO-97-113

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/john-cornyn/jc-0383
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2001/jc0383.pdf

Original opinion text

Best-effort transcription from the official scanned PDF. Minor character-level errors from the source OCR have been corrected; the linked PDF is authoritative.

OFFICE OF THE ATTORNEY GENERAL . STATE OF TEXAS

JOHN CORNYN

May 23, 2001

The Honorable Jack M. Skeen, Jr.
Smith County Criminal District Attorney
100 North Broadway, 400
Tyler, Texas 75702

Opinion No. JC-0383

Re: Whether, without violating article III, section 53 of the Texas Constitution, a county may pay group-health-insurance premiums for retirees for whom, at the time they retired, the county did not provide such benefits, and related questions (RQ-0334-JC)

Dear Mr. Skeen:

Under article III, section 53 of the Texas Constitution, a retired county employee generally may not receive a new or increased benefit from the county if the county did not provide it when the employee retired. See TEX. CONST. art. III, § 53; Tex. Att'y Gen. Op. No. JC-0297 (2000) at 4. Since October 1, 1996, Smith County (the "county") has paid group-health-insurance premiums for its retired employees, including nine (the "nine retirees") who retired when the county provided that a retiree could continue to participate, at the retiree's own expense, in the county's health-insurance plan for a period consistent with federal law. See Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L. No. 99-272, 100 Stat. 82 (1986) (continued health-insurance coverage provisions are codified at 29 U.S.C. §§ 1161-69 and 42 U.S.C. §§ 300bb-1 to -8 (1994 & Supp. IV 1998)) [hereinafter COBRA]. We assume that the nine retirees have provided no additional consideration in return for the county's payment of health-insurance premiums. You ask whether, under article III, section 53 of the Texas Constitution, the county may pay the nine retirees' health-insurance premiums. See Request Letter, supra note 1, at 2; TEX. CONST. art. III, § 53. Because the county did not provide for such a benefit when the nine retired, it may not pay the premiums.

You ask two other related questions. You question whether the county must ask the nine retirees to reimburse the county for the premiums it has paid since October 1, 1996. See Request Letter, supra note 1, at 3. The county may, but it need not. You ask last whether the county may invite the nine retirees to participate in the county's group-health-insurance policy if the retirees pay their own premiums. See id. We conclude that those who retired between January 1, 1994 and October 1, 1996 may be entitled to participate in accordance with chapter 175 of the Local Government Code. See TEX. LOC. GOV'T CODE ANN. ch. 175 (Vernon 1999). Those who retired before January 1, 1994 may not participate beyond the period required by COBRA, however.

(Footnote: Letter from Honorable Jack M. Skeen, Jr., Smith County Criminal District Attorney, to Honorable John Cornyn, Texas Attorney General (Dec. 28, 2000) (on file with Opinion Committee) [hereinafter Request Letter].)

You provide these facts:

On September 9, 1996, the Smith County Commissioners Court approved a policy to provide group health insurance coverage for future retirees and to pay 100% of the premiums for these retirees. The effective date of this policy was October 1, 1996. Prior to October 1, 1996, Smith County retirees were offered continued . . . coverage [under COBRA] at their own expense. As of October 1, 1996, there were nine . . . county retirees on COBRA paying their own premiums. The Commissioners Court opted to include these 9 retirees in the new policy. Thus, the county included these 9 retired individuals in its group health policy and began paying the insurance premiums for these 9 retirees beginning October 1, 1996. The county has continued paying 100% of these premiums to [the] present.

Request Letter, supra note 1, at 1-2. You further stipulate that, "[a]t the time these 9 individuals retired, the [county] policies governing their retirement plan did not provide for the possibility of the county including them in [the] group plan or paying any portion of their health insurance premiums. Rather, [when] these 9 persons retired, the policy of the county was that retirees would pay 100% of their premiums for continued COBRA coverage." Id. at 3. The dates of retirement for the nine range from August 1992 through July 1996. Telephone Conversation with Lee Porter, Smith County Assistant District Attorney (Mar. 12, 2001).

Under article III, section 53 of the Texas Constitution, a county generally may not increase a former employee's retirement benefits beyond those for which the county provided at the time of retirement. Article III, section 53 expressly prohibits the legislature from authorizing a county to grant "any extra compensation, fee or allowance to a public officer, agent, servant or contractor, after [a] service has been rendered, . . . , and performed in whole or in part." TEX. CONST. art. III, § 53.

Increasing retirement benefits is constitutionally permissible in two circumstances. First, a county may increase a retiree's benefits if the retiree provides additional consideration. See City of Greenville v. Emerson, 740 S.W.2d 10, 13 (Tex. App.-Dallas 1987, no writ) (determining that "contract" that requires city to pay "additional sums of money for services already rendered and benefits already paid . . . for no additional consideration" contravenes article III, section 53); accord Tex. Att'y Gen. Op. No. JC-0297 (2000) at 5. Second, a county may increase a retiree's benefits if, at the time of the retiree's retirement, the county's retirement policy or applicable federal or state law "provided for the possibility of additional payments." Tex. Att'y Gen. Op. No. JC-0297 (2000) at 5. For example, the board of trustees of a fire fighters' retirement benefits plan may increase retirement benefits for current retirees without violating article III, section 53 because the applicable statute explicitly permitted the board to change retirement benefits for those already receiving monthly retirement benefits. See Tex. Att'y Gen. LO-97-113, at 4.

Neither circumstance appears present here. First, we assume that, to this point, the nine retirees have provided no additional consideration for the county's payment of health-insurance premiums. Nothing in the information you have provided suggests that they have done so. See generally Request Letter, supra note 1. Second, at the time of the nine retirees' retirements, nothing in the county policy or in applicable federal or state law provided for a possibility of increased health-insurance benefits. At that time, county policy required retirees to pay 100% of their health-insurance premiums for continued coverage under COBRA. See Request Letter, supra note 1, at 3. Under COBRA, a retiree may continue, for eighteen to thirty-six months after the date of retirement, health-insurance coverage through the former employer. See 29 U.S.C. §§ 1161-1163; 42 U.S.C. §§ 300bb-1 through -3. But COBRA "does not require or authorize a county to pay any part of a county retiree's health insurance premiums." Tex. Att'y Gen. Op. No. JC-0297 (2000) at 3. Similarly, no state law that requires or authorizes the county to pay the nine retirees' health-insurance premiums provided for increased benefits. Article 3.51-2 of the Insurance Code, which authorizes a county to procure group-health-insurance contracts covering retired county employees and to pay all or any portion of the premiums for retirees, see TEX. INS. CODE ANN. art. 3.51-2(a), (b) (Vernon Supp. 2000); Tex. Att'y Gen. Op. No. JC-0297 (2000) at 2, does not authorize a county to pay group-health-insurance premiums for a retiree if the payments constitute unconstitutional retroactive compensation. See Tex. Att'y Gen. Op. No. JC-0297 (2000) at 2. Section 157.002 of the Local Government Code "authorizes a commissioners court to provide various kinds of insurance to retirees," id., but the insurance must be provided "by rule" and "included in the person's employment contract." TEX. LOC. GOV'T CODE ANN. § 157.002 (Vernon 1999). Because you specify that the county did not provide for premium-paid health insurance for the nine retirees at the time they retired, see Request Letter, supra note 1, at 3, section 157.002 does not apply. Last, although chapter 175 of the Local Government Code, which entitles a person who is employed by a county with a population of 75,000 or more to, upon retirement, continue participating in the county's health-insurance program at the retiree's expense, appears to apply to the county, it does not authorize the county to pay retirees' health-insurance premiums. See TEX. LOC. GOV'T CODE ANN. §§ 175.001, .002(a) (Vernon 1999); 1 Bureau of the Census, U.S. Dep't of Commerce, 1990 Census of Population, General Population Characteristics: Texas 4 (1992) (Smith County population is 151,309) (174,706 according to 2000 census, available at http://www.census.gov/); see infra at 4-5 (discussing further chapter 175). But see TEX. LOC. GOV'T CODE ANN. §§ 175.006, .007 (Vernon 1999) (listing matters chapter 175 does not affect and exempting certain counties and municipalities from chapter 175).

We therefore conclude that the county may not pay health-insurance premiums for the nine retirees without violating article III, section 53 of the Texas Constitution. We do not understand the nine retirees to have provided any additional consideration for the increased benefit. Additionally, neither county policy, nor federal or state law require or provide for the possibility of the increased benefits.

You ask second whether the county must ask the nine retirees to reimburse the county for premiums the county paid in contravention of article III, section 53 of the Texas Constitution. The county may, but it is not required to do so.

A governmental entity, in the exercise of its discretion, may seek to recover a payment that its agent has erroneously paid to a private party from public funds. See City of Taylor v. Hodges, 186 S.W.2d 61, 63 (Tex. 1945); Tex. Att'y Gen. Op. No. JM-910 (1988) at 7. While the county may seek reimbursement, we found no case law or attorney general opinion stating that the governmental body must seek reimbursement. See United States v. Paddock, 178 F.2d 394, 398-99 (5th Cir. 1949), cert. denied, 370 U.S. 813 (1950) (discussing rule as articulated by several federal and state courts); Hodges, 186 S.W.2d at 63; Cameron County v. Fox, 2 S.W.2d 433, 436 (Tex. Comm'n App. 1928, judgm't adopted) (stating that amount wrongly paid "may be recovered in an action by the county"); Gould v. City of El Paso, 440 S.W.2d 696, 699 (Tex. Civ. App.-El Paso 1969, writ ref'd n.r.e.) (noting exception to general rule "where payment was mistakenly made out of the public treasury"); Nunn-Warren Publ'g Co. v. Hutchinson County, 45 S.W.2d 651, 653 (Tex. Civ. App.-Amarillo 1932, writ ref'd) ("Although the payment to the defendant was made by the county voluntarily, such payment was without lawful authority, and the action of the auditor, the commissioners[] court, and the county in said transaction was illegal and void and the amount paid to and received by the defendant is recoverable in this action.") (citing Fox, 2 S.W.2d 433); Tex. Att'y Gen. Op. Nos. JM-910 (1988) at 7, MW-93 (1979) at 2. Thus, a county may exercise reasonable discretion as to whether to seek reimbursement in a particular case. See Tex. Att'y Gen. Op. No. JM-910 (1988) at 7. In making its decision, the county commissioners court might consider, for instance, "the amount of funds to be reimbursed, the ease of collection, and the legal and other costs incident to collection." Id. (citing Tex. Att'y Gen. Op. No. MW-93 (1979) at 3). The county also should weigh the notion that the commissioners court may have authorized unconstitutional payments from funds belonging to the public. See Hodges, 186 S.W.2d at 63; Paddock, 178 F.2d at 398-99 (quoting City of Taylor v. Hodges).

We address your remaining question: whether the county constitutionally may "continue to include these 9 retirees under [the county's] group insurance policy if the retirees pay all of the premiums?" Request Letter, supra note 1, at 3. The answer to this question is complicated by the fact that some of the nine retirees retired before chapter 175 of the Local Government Code became effective, on January 1, 1994. Telephone Conversation with Lee Porter, Smith County Assistant District Attorney (Mar. 12, 2001); see also Act of May 28, 1993, 73d Leg., R.S., ch. 663, § 2(a), 1993 Tex. Gen. Laws 2460, 2462 (stating effective date of what is now chapter 175 to those who retire from county employment "on or after January 1, 1994"). For those who retired on or after January 1, 1994, when chapter 175 became effective, and before October 1, 1996, when the county policy became effective, we apply chapter 175. But the county has no authority to invite those who retired before January 1, 1994 to participate in the program.

We conclude that a person who retired on or after January 1, 1994 but before October 1, 1996 may participate in Smith County's group-health-insurance program at the retiree's expense, but only in accordance with chapter 175 of the Local Government Code. Chapter 175 applies to a person who "retires from county employment in a county with a population of 75,000 or more" and who "is entitled to receive retirement benefits from a county . . . retirement plan." TEX. LOC. GOV'T CODE ANN. § 175.001 (Vernon 1999). Under section 175.002, a person to whom the chapter applies has a limited right to purchase continued health benefits:

(a) A person to whom this chapter applies is entitled to purchase continued health benefits coverage for the person and the person's dependents as provided by this chapter unless the person is eligible for group health benefits coverage through another employer. The coverage shall be provided under the group health insurance plan or group health coverage plan provided by or through the employing county . . . to its employees.

(b) To receive continued coverage under this chapter, the person must inform the employing county . . . , not later than the day on which the person retires from the county or municipality, that the person elects to continue coverage.

(c) If the person elects to continue coverage for the person and on any subsequent date elects to discontinue such coverage, the person is no longer eligible for coverage under this chapter.

Id. § 175.002(a) - (c). A county that is subject to chapter 175 has a duty to inform a retiring employee of his or her right to continued health coverage:

A county . . . shall provide written notice to a person to whom this chapter may apply of the person's rights under this chapter not later than the date the person retires from the county or municipality. A county . . . may fulfill its requirements under this section by placing the written notice required by this section in a personnel manual or employee handbook that is available to all employees.

Id. § 175.005.

Under chapter 175, a person who has retired from county employment since January 1, 1994 is entitled to participate in the county's group-health-insurance coverage if he or she informed the county of his or her election to participate "not later than the day on which the person retire[d] from the county." Id. § 175.002(b). Of course, the county had a duty to notify the retiring employee of his or her entitlement in accordance with section 175.005. See id. § 175.005. We assume that none of the persons who retired between January 1, 1994 and October 1, 1996 is eligible for group health-benefits coverage through another employer. See id. § 175.002(a). We also assume that neither of the exemptions listed in section 175.007 apply to Smith County. See id. § 175.007 (exempting certain counties that provide health-benefits coverage through self-insured plan or plan authorized under chapter 172, Local Government Code, and counties that provide coverage "substantially similar to or better than the coverage" chapter 175 requires).

Those who retired before January 1, 1994 may not participate in the county's group-health-insurance program, even at their own expense. As we have stated, the county did not provide for paying these retirees' health-insurance premiums under section 157.002 of the Local Government Code at the time they retired. See TEX. LOC. GOV'T CODE ANN. § 157.002(a)(4) (Vernon 1999); supra at 3 (determining that section 157.002 does not apply); see also Act of May 18, 1989, 71st Leg., R.S., ch. 872, §§ 2, 3, 1989 Tex. Gen. Laws 3862, 3863 (adopting section 157.002(a)(4), Local Government Code, and noting effective date of June 14, 1989). Additionally, chapter 175 was not yet in effect. Consequently, the county had no authority to permit retirees to participate in the county's group-health-insurance program beyond the period required by COBRA. See Act of May 28, 1993, 73d Leg., R.S., ch. 663, § 2(a), 1993 Tex. Gen. Laws 2460, 2462 (setting effective date of what is now chapter 175).

SUMMARY

In light of article III, section 53 of the Texas Constitution, a county may not pay group-health-insurance premiums for a retired employee absent additional consideration from the retired employee, if at the time he or she retired, the county did not provide for such coverage nor for the possibility of such coverage. See TEX. CONST. art. III, § 53. The county may, but is not required to, seek reimbursement from a retired employee for whom the county paid premiums in violation of article III, section 53. With respect to a person who retired on or after January 1, 1994, that person may be entitled to participate in the county's health-insurance program in accordance with chapter 175. See TEX. LOC. GOV'T CODE ANN. ch. 175 (Vernon 1999). But the county may not permit a person who retired from employment with the county before January 1, 1994 to participate beyond the period required by federal law, even if the retiree pays the premiums.

JOHN CORNYN
Attorney General of Texas

ANDY TAYLOR
First Assistant Attorney General

SUSAN D. GUSKY
Chair, Opinion Committee

Kymberly K. Oltrogge
Assistant Attorney General - Opinion Committee