The Riverside School District could be forced to pay certain uncovered medical expenses for teachers if a judge affirms an arbitrator’s ruling that held it responsible for rate changes that occurred after two insurance companies merged.
The potentially precedent-setting case centers on a dispute over whether the merger of Blue Cross of Northeastern Pennsylvania and Highmark Blue Cross Blue Shield equates to a change in carriers that resulted in a decrease in benefits for union members, which would violate the most recent contract.
The dispute arose in 2017, after a retired teacher complained her out-of-pocket expense for mental health treatment increased because the amount Highmark paid the physician — known as the “allowable rate” — was less than what Blue Cross of NEPA had paid. The contract calls for employees to pay 20% of that fee, which resulted in her cost increasing from $51.80 to $100.48 per visit.
While the case involves a single teacher, it has significant financial implications for the district. If it loses, other employees could make the same claim going forward, the district’s attorney, Carl Poveromo, said during a Monday hearing before Lackawanna County Judge Margaret Bisignani Moyle.
“This case is precedent setting,” he said. “The district is potentially on the hook any time there is a change in the allowable charge for a service … That was never the intent of the collective bargaining agreement.”
Highmark and Blue Cross of NEPA merged in June 2015. The district had no control over the merger. It also has no control over the allowable rate Highmark pays physicians, which changes over time.
Despite that, arbitrator Michael Krchnar in April ruled the district unilaterally changed insurance carriers once the merger was complete. He further found the change in the allowable rate equated to a decrease in benefits. He ordered the district to reimburse the retired teacher for the uncovered portion of the fees. The total owed has not yet been calculated.
In seeking to vacate the ruling, Poveromo argued Krchnar erred when he determined the merger was a change in carriers because the plan is still a Blue Cross Blue Shield plan. It just has a different name.
“There was no switch. It was a merger,” he said.
He also argued there was no change in benefits because the Highmark plan calls for employees to pay 20% of the physician’s fee, the same as the Blue Cross of NEPA rate. The fact the allowable rate changed is irrelevant because the union contract requires the district pay only the premium. It does not cover any out-of-pocket expenses.
“What the arbitrator did was rewrite the contract to make the district liable for any increase in out-of-pocket expenses any time there is a change in the allowable charge for any service,” he said.
The union’s attorney, Jeffrey Husisian acknowledged the district had no control over the merger, but argued that does not matter. The arbitrator interpreted the contract and ruled the change equated to a change in carriers. He contends Moyle must accept the arbitrator’s findings because prior courts have repeatedly held judges cannot substitute their interpretation of a union contract for that of the arbitrator.
“Mr. Poveromo makes all these assertions that Highmark and Blue Cross are the same company and there was not a change. The arbitrator found differently,” Husisian said. “The case law is clear the arbitrators’ factual findings … cannot be changed or second guessed by the court.”
In order to overturn the ruling, the district would have to show Krchnar’s ruling was not “rationally derived” from the language in the union contract. Husisian said the district failed to do that, therefore the ruling must stand.
Moyle took the matter under advisement and will issue a ruling at a later date.