State Retirees Sue To Stop Medicare Advantage Plan

Rep. John Kowalko speaks at a Sept. 12 town hall in opposition the state’s plan to shift pensioners to a Medicare Advantage plan. Charlie Megginson/Delaware LIVE

A group of Delaware state government retirees and pensioners has filed suit against two government officials tasked with implementing a change in their health insurance coverage.

RISE Delaware, an organization formed after state officials announced a plan to transition retirees to a Medicare Advantage program, filed the lawsuit in the Delaware Superior Court.

RISE hopes to stop the transition to the Advantage program, which is set to take place on Jan. 1, 2023.

“I have worked and contributed to Medicare my entire adult life,” said retired state Sen. Karen Peterson, one of the plaintiffs in the lawsuit. “For the state to take my Medicare benefits and give them to Highmark who, in turn, will decide what medical treatments I can get, is totally unacceptable.”

“My doctors should make decisions about my medical care, not an insurance company that increases its profits by denying and delaying treatment,” Peterson said.

Secretary Claire DeMatteis, who leads the state’s Department of Human Resources, and Director Cerron Cade, who heads the Office of Management and Budget, are named as defendants in the suit.

Cade is also co-chair of the State Employee Benefits Committee, the government body that manages employee and retiree benefit coverage.

DeMatteis and Cade declined to comment Wednesday.

The complaint alleges that the State Employee Benefits Committee “quietly adopted a regulation” that will fundamentally change the health care benefits relied upon by Delaware’s retirees, “without following the procedures required for an open government, and without input from those most affected.”

In doing so, the plaintiffs allege, the committee violated the Administrative Procedures Act, which details procedural requirements for government agencies in adopting, amending or appealing regulations.

The plaintiffs say the State Employee Benefits Committee:

Did not file the required notice with the Register of Regulations;
Did not receive written comments from the public;
Did not hold public hearings;
Did not allow for at least a 30-day public comment period; and
Did not issue findings and conclusions based on information submitted by the public.

“Accordingly, the [State Employee Benefits Committee]’s decision to force Medicare-eligible State retirees into the Medicare Advantage plan is unlawful and cannot be implemented,” the complaint says.

Had the committee complied with the Administrative Procedures Act, “plaintiffs and countless other state retirees would have had an opportunity to object to the reduction of their healthcare benefits and explain why this directive was unwise and dangerous,” the suit says.

RISE also argues that the state’s communications to retirees about the Medicare Advantage plan “have been, at best, confusing and misleading. At worst, the realities of Medicare Advantage have been hidden in the representations made to retirees…”

In an interview with Delaware LIVE News Wednesday, Peterson called the lawsuit “pretty straightforward. The state failed to follow the requirements for open discussion in the adoption of regulations,” she said.

During a Sept. 12 town hall on the issue, DeMatteis said it’s too late to stop the implementation of the new plan.

Peterson disagrees.

“The contract has not been signed, so it’s not too late,” she said.

Outgoing Rep. John Kowalko, D-Newark, who has led the charge against the shift to Medicare Advantage, called the plan “an atrocity to retirees” and accused Gov. John Carney “and his minions [of] a callousness that is almost inhuman.”

“State retirees are not prominent in the hearts and minds of everybody in this administration, as they should be,” Kowalko said. “It’s because now that retirees are done working, the governor says, ‘Move on. Enjoy your future as best you can.’”

In an earlier interview, DeMatteis said the change is being made to alleviate the state’s $10 billion unfunded liability for retiree healthcare. Left unchanged, that liability would likely grow to $31 billion by 2050, she said.

Kowalko’s response is twofold: Retirees will suffer because the state failed to reduce that liability in the past, and the state plans to continue frivolously spending taxpayers’ money on pet projects like expanding Legislative Hall.

“This governor and his predecessors did not fund or even attempt to fund this obligation,” he said. “So they were looking for the path of least resistance to ease that burden and they saw retirees as that path.”

Kowalko believes the plan represents a “privatization of Medicare designed to generate profits for Highmark and others,” he said.

During the town hall, DeMatteis said Highmark Blue Cross Blue Shield “is prepared to and will lose money on this plan,” an announcement that prompted laughter from the audience.

DeMatteis and others noted that the change will align state retirees with health insurance requirements that active employees and public-sector retirees have had for decades.

Kowalko said the government shouldn’t look to for-profit corporations as an example when deciding how to treat its retirees.

“Of course the private sector wants these kinds of plans,” Kowalko said. “They save them and their shareholders money.”

“The difference is that the state made a promise to its retirees. We owe them,” he said. “We are obligated to keep our guarantee in place that their benefits will be there in the future and will not be cut open and dried out and used to generate profit for Highmark.”

RISE launched a GoFundMe to help fund its legal challenge. In two days, the fundraiser collected $13,771. Organizers have a total goal of $150,000.

Peterson said she and others pitched in $7,500 to file the suit, which seeks an expedited resolution.

“Oct. 3 to Oct. 24 is open enrollment,” Peterson said. “We would keep our fingers crossed that, with our request for an expedited procedure, this would be resolved in time for people to still be able to make a decision.”

Ultimately, RISE hopes for a declaratory judgment that DeMatteis and Cade violated the law and failed to execute their duties, and an order halting the implementation of the Medicare Advantage plan.

RISE will hold a rally on Tuesday, Oct. 4 in Wilmington.

The rally, which will be held on the plaza between the Carvel State Office Building and New Castle County Council Building, will begin at 12 p.m.

“It is imperative that we get a big crowd to voice our objections in a loud tone that will be heard in Dover,” an emailed announcement says. “Please be there with your friends, families and neighbors. It is essential to your future.”

Kowalko said he hopes to organize more rallies, preferably in Kent and Sussex Counties.

Read the Medicare Advantage complaint in its entirety:

Editor’s note: This story was updated to indicate that DeMatteis and Cade declined to comment Wednesday.

State retirees sue to stop Medicare Advantage plan

Read the Medicare Advantage complaint in its entirety:

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