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Got a question? Try Ask the MMA Can health benefits be pro-rated for part-timers?
Q: Part-time employees who work twenty or more hours a week are entitled to health insurance coverage under Section 2 of Chapter 32B. Most other benefits (e.g., vacation, sick and personal time) are pro-rated for part-time employees based on the number of hours worked per week. For example, a clerk working twenty hours per week accrues half the vacation, sick and personal time of a full-time employee. My question is, can a municipality pro-rate health insurance benefits to part-time employees? For example, if a municipality pays seventy percent of the cost of health insurance for full-time employees, can it offer to pay thirty-five percent (half of the seventy percent) for a part-time employee working twenty hours per week?
A: The pro-rating of a municipal employer’s contribution toward the premium expense for its part-time employees would appear to be equitable and make good economic sense. It would be extremely difficult, however, to effectuate under Chapter 32B.
The sections of Chapter 32B that deal with contributions define that obligation as it pertains to an “employee.” Within its definition of the term “employee,” Section 2(d) includes a part-time employee whose duties “require no less than twenty hours, regularly” in the service of a governmental unit.
Thus, Section 7, the default provision dealing with contribution toward indemnity-type plans, requires that the governmental unit withhold fifty percent of the premium for covered insurance “and the governmental unit shall contribute the remaining fifty per cent of such premium.” Section 7A is a local option statute that, if accepted, allows a governmental unit to contribute more than fifty percent of the premium cost for employees by paying “a subsidiary or additional rate” toward that premium cost. But Section 7A states: “No governmental unit, however, shall provide different subsidiary or additional rates to any group or class within that unit.” So it seems clear from sections 7 and 7A that a governmental unit is obliged to contribute toward the cost of indemnity-type coverage for eligible part-time employees at the same rate as it contributes toward the cost of coverage for full-time employees.
Section 16 of Chapter 32B deals with a governmental unit’s contribution toward the premium cost of HMO coverage. Prior to its amendment in 1989, Section 16 required that a governmental unit contribute “the same amount” toward the premium cost of HMO coverage as it contributed pursuant to Section 7 or 7A toward the premium cost of indemnity-type coverage. As the provisions of sections 7 and 7A precluded a pro-rated contribution toward indemnity-type coverage, Section 16’s requirement of a contribution toward HMO premium expense in “the same amount” as that required by Sections 7 or 7A prevented the establishment of a pro-rated contribution toward HMO premium expense.
Chapter 653 of the Acts of 1989 eliminated the “same amount” contribution requirement and, in its place, required that the governmental unit contribute no more than ninety percent and no less than fifty percent of HMO premium expense. However, Section 218 of Chapter 653 mandated that, until different rates were agreed upon in collective bargaining, governmental units that had been contributing at ninety percent or higher were required to contribute at ninety percent and other governmental units were required to contribute at the same percentage at which they had been contributing on the effective date of Chapter 653 (January 4, 1990). That limitation has precluded governmental units from implementing non-negotiated changes to the contribution rates for unionized employees.
That leaves the question of whether a governmental unit could negotiate with its employees’ bargaining representatives for different HMO contribution rates for full-time and part-time employees. (A strictly pro-rated arrangement would be precluded by the requirement in Section 16 that the contribution rate for all employees be set between fifty percent and ninety percent.) As there has been no published case that has considered the legality of such negotiated differential rates, it is impossible to predict with certainty whether the appellate courts would approve that type of negotiated rate structure.
A final issue is whether a governmental unit could implement reduced contribution rates (between fifty percent and ninety percent) for part-time non-union personnel. Once again, this is an issue that is not explicitly addressed within the text of Section 16 and has not been the subject of previous litigation.
While the provisions of sections 7, 7A and 16 may preclude a governmental unit from establishing lower contribution rates for part-time employees, that result may be attainable (with considerable difficulty) through use of a health and welfare trust fund agreement. Section 15 of Chapter 32B allows a governmental unit to utilize a health and welfare trust fund agreement for the purpose of “(ii) paying contributions by said governmental unit toward premium costs or rates in excess of the level of such premium cost or rate contributions otherwise provided for under the provisions of this chapter …”
By means of this device, a governmental unit could set a rate between fifty percent and ninety percent for all employees covered by a collective bargaining agreement and then contribute an additional amount into the health and welfare trust fund only for full-time employees. For example, a governmental unit that was prepared to contribute eighty percent of the HMO premium cost for full-time employees but only wished to contribute fifty percent for part-time employees could agree in its collective bargaining agreements to a unit-wide contribution rate of fifty percent. The collective bargaining agreements could provide for the establishment of a health and welfare trust fund and the contribution to that fund of thirty percent of the HMO premium rate for each full-time employee enrolled in the HMO. The agreement might also provide for a contribution of a lesser amount for each part-time employee who was regularly employed for more than thirty hours per week.
One difficulty with this arrangement is that, to the extent that the trust fund must be established through a collective bargaining agreement, this device could not be used to structure different rates for part-time and full-time non-union employees. Even with regard to bargaining unit employees, the difficulty of negotiating this arrangement with municipal unions and the expense of drafting the trust agreement and related documents makes this approach a daunting proposition.
Moreover, the uniformity requirement in Section 7A would preclude this approach (with regard to indemnity-type plans) unless all bargaining units accepted the same base rate. With regard to HMOs, it remains unresolved whether the uniformity requirement of Section 7A is implicit in Section 16. Section 16 contains no reference to uniformity. Indeed, the language in Section 16 that requires that any changes to the rates for unionized employees be effected through collective bargaining would seem inconsistent with an implied uniformity requirement. Nevertheless, until the appellate courts have addressed the issue, there can be no certainty. Thus, if a governmental unit is unable to negotiate the same base HMO contribution rate with all of the unit’s bargaining groups, there will be questions relating to the enforceability of that base contribution rate.
Answer provided by Paul Mulkern, an attorney who represents municipalities in the area of labor and employment law.
Got a question? Try Ask the MMA Can health benefits be pro-rated for part-timers?
Can health benefits be pro-rated for part-timers?
Q: Part-time employees who work twenty or more hours a week are entitled to health insurance coverage under Section 2 of Chapter 32B. Most other benefits (e.g., vacation, sick and personal time) are pro-rated for part-time employees based on the number of hours worked per week. For example, a clerk working twenty hours per week accrues half the vacation, sick and personal time of a full-time employee. My question is, can a municipality pro-rate health insurance benefits to part-time employees? For example, if a municipality pays seventy percent of the cost of health insurance for full-time employees, can it offer to pay thirty-five percent (half of the seventy percent) for a part-time employee working twenty hours per week?
A: The pro-rating of a municipal employer’s contribution toward the premium expense for its part-time employees would appear to be equitable and make good economic sense. It would be extremely difficult, however, to effectuate under Chapter 32B.
The sections of Chapter 32B that deal with contributions define that obligation as it pertains to an “employee.” Within its definition of the term “employee,” Section 2(d) includes a part-time employee whose duties “require no less than twenty hours, regularly” in the service of a governmental unit.
Thus, Section 7, the default provision dealing with contribution toward indemnity-type plans, requires that the governmental unit withhold fifty percent of the premium for covered insurance “and the governmental unit shall contribute the remaining fifty per cent of such premium.” Section 7A is a local option statute that, if accepted, allows a governmental unit to contribute more than fifty percent of the premium cost for employees by paying “a subsidiary or additional rate” toward that premium cost. But Section 7A states: “No governmental unit, however, shall provide different subsidiary or additional rates to any group or class within that unit.” So it seems clear from sections 7 and 7A that a governmental unit is obliged to contribute toward the cost of indemnity-type coverage for eligible part-time employees at the same rate as it contributes toward the cost of coverage for full-time employees.
Section 16 of Chapter 32B deals with a governmental unit’s contribution toward the premium cost of HMO coverage. Prior to its amendment in 1989, Section 16 required that a governmental unit contribute “the same amount” toward the premium cost of HMO coverage as it contributed pursuant to Section 7 or 7A toward the premium cost of indemnity-type coverage. As the provisions of sections 7 and 7A precluded a pro-rated contribution toward indemnity-type coverage, Section 16’s requirement of a contribution toward HMO premium expense in “the same amount” as that required by Sections 7 or 7A prevented the establishment of a pro-rated contribution toward HMO premium expense.
Chapter 653 of the Acts of 1989 eliminated the “same amount” contribution requirement and, in its place, required that the governmental unit contribute no more than ninety percent and no less than fifty percent of HMO premium expense. However, Section 218 of Chapter 653 mandated that, until different rates were agreed upon in collective bargaining, governmental units that had been contributing at ninety percent or higher were required to contribute at ninety percent and other governmental units were required to contribute at the same percentage at which they had been contributing on the effective date of Chapter 653 (January 4, 1990). That limitation has precluded governmental units from implementing non-negotiated changes to the contribution rates for unionized employees.
That leaves the question of whether a governmental unit could negotiate with its employees’ bargaining representatives for different HMO contribution rates for full-time and part-time employees. (A strictly pro-rated arrangement would be precluded by the requirement in Section 16 that the contribution rate for all employees be set between fifty percent and ninety percent.) As there has been no published case that has considered the legality of such negotiated differential rates, it is impossible to predict with certainty whether the appellate courts would approve that type of negotiated rate structure.
A final issue is whether a governmental unit could implement reduced contribution rates (between fifty percent and ninety percent) for part-time non-union personnel. Once again, this is an issue that is not explicitly addressed within the text of Section 16 and has not been the subject of previous litigation.
While the provisions of sections 7, 7A and 16 may preclude a governmental unit from establishing lower contribution rates for part-time employees, that result may be attainable (with considerable difficulty) through use of a health and welfare trust fund agreement. Section 15 of Chapter 32B allows a governmental unit to utilize a health and welfare trust fund agreement for the purpose of “(ii) paying contributions by said governmental unit toward premium costs or rates in excess of the level of such premium cost or rate contributions otherwise provided for under the provisions of this chapter …”
By means of this device, a governmental unit could set a rate between fifty percent and ninety percent for all employees covered by a collective bargaining agreement and then contribute an additional amount into the health and welfare trust fund only for full-time employees. For example, a governmental unit that was prepared to contribute eighty percent of the HMO premium cost for full-time employees but only wished to contribute fifty percent for part-time employees could agree in its collective bargaining agreements to a unit-wide contribution rate of fifty percent. The collective bargaining agreements could provide for the establishment of a health and welfare trust fund and the contribution to that fund of thirty percent of the HMO premium rate for each full-time employee enrolled in the HMO. The agreement might also provide for a contribution of a lesser amount for each part-time employee who was regularly employed for more than thirty hours per week.
One difficulty with this arrangement is that, to the extent that the trust fund must be established through a collective bargaining agreement, this device could not be used to structure different rates for part-time and full-time non-union employees. Even with regard to bargaining unit employees, the difficulty of negotiating this arrangement with municipal unions and the expense of drafting the trust agreement and related documents makes this approach a daunting proposition.
Moreover, the uniformity requirement in Section 7A would preclude this approach (with regard to indemnity-type plans) unless all bargaining units accepted the same base rate. With regard to HMOs, it remains unresolved whether the uniformity requirement of Section 7A is implicit in Section 16. Section 16 contains no reference to uniformity. Indeed, the language in Section 16 that requires that any changes to the rates for unionized employees be effected through collective bargaining would seem inconsistent with an implied uniformity requirement. Nevertheless, until the appellate courts have addressed the issue, there can be no certainty. Thus, if a governmental unit is unable to negotiate the same base HMO contribution rate with all of the unit’s bargaining groups, there will be questions relating to the enforceability of that base contribution rate.
Answer provided by Paul Mulkern, an attorney who represents municipalities in the area of labor and employment law.
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