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10/22/97 CHARLES S. HANNA v. COMMONWEALTH

October 22, 1997

CHARLES S. HANNA, PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, PUBLIC SCHOOL EMPLOYES' RETIREMENT SYSTEM/BOARD, RESPONDENT



Appealed From No. 1995-1. State Agency, Public School Employes' Retirement Board.

Before: Honorable Doris A. Smith, Judge, Honorable Dan Pellegrini, Judge, Honorable Emil E. Narick, Senior Judge. Opinion BY Senior Judge Narick.

The opinion of the court was delivered by: Narick

OPINION BY SENIOR JUDGE NARICK

FILED: October 22, 1997

The issue presented in this case is whether the Public School Employes' Retirement Board (board) properly determined that Claimant Charles S. Hanna (Hanna) was not eligible to receive health insurance premium assistance payments under Section 8509 of the Public School Employees' Retirement Code (Retirement Code), 24 Pa. C.S. § 8509, because he was not enrolled in a board-approved health insurance program.

Hanna appeals from an order of the board adopting a hearing examiner's recommendation to deny Hanna's request to receive premium assistance payments. We affirm.

By the Act of August 5, 1991, P.L. 183, No. 23 (Act 23), the General Assembly amended the Retirement Code, 24 Pa. C.S. §§ 8101-8534, by adding Section 8509. Section 8509 established a health insurance premium assistance program to provide a supplemental monthly payment of up to $55 per month to help annuitants purchase basic health insurance. In order to meet Act 23's effective date of July 1, 1992, the Board temporarily approved the Public School Employes' Retirement System (PSERS) group health insurance program, Medicare Part B, Medicare supplemental programs, and all health insurance programs sponsored by Pennsylvania school districts for participation in the premium assistance program. In January 1993, Hanna, then employed as a teacher with the Allentown School District, received a newsletter entitled "PSERS Update Special Report" from PSERS containing a list of the approved programs.

At some point after the passage of Act 23, a health insurance administrator for PSERS, Mark Schafer, conducted a study and prepared a report of the premium assistance program under Section 8509 and its effect on the PSERS group health insurance program. The report concluded that PSERS' health insurance program had become subject to what is known in the insurance industry as "adverse selection." *fn1 Based on this finding, Mr. Schafer recommended, among other changes, *fn2 that the programs approved for participation in Act 23's premium assistance program be limited to the PSERS program and programs sponsored by the school districts. By resolution passed at its meeting on June 25, 1993, the board adopted Mr. Schafer's recommendations and stated that the changes would go into effect on January 1, 1994. Two brochures containing information about the new changes were sent to all annuitants, including Hanna, prior to the January 1, 1994 effective date. The underwriter accepted for the new PSERS program was Capital Blue Cross/Pennsylvania Blue Shield.

Hanna, who had just retired on June 18, 1993 with over 30 years of credited service, applied for premium assistance payments by form dated August 3, 1993. Hanna's election form indicated that he was enrolled in a health insurance program sponsored by the Pennsylvania Bar Association *fn3 and underwritten by Capital Blue Cross/Pennsylvania Blue Shield. By letter dated July 12, 1994, PSERS informed Hanna that he was not eligible to receive premium assistance payments because the Pennsylvania Bar Association program was not one of the programs approved by the board. The PSERS Appeals Committee also reviewed Hanna's application and denied his request. At Hanna's request, an administrative hearing was held where both sides presented evidence. By an opinion dated July 26, 1996, the hearing examiner recommended that the board deny Hanna's application. Hanna filed exceptions to the hearing examiner's decision. The board denied the exceptions and adopted the hearing examiner's recommendation. Hanna appealed. *fn4

Hanna contends that the board erred by denying his request for premium assistance payments because the requirement that an annuitant be enrolled in PSERS' Health Options Program, or in one of the school district programs, exceeds what is required of an annuitant under Section 8509 of the Retirement Code. Hanna asserts that the board has no statutory authority to base participation in the premium assistance program on whether or not an annuitant participates in a board-approved health insurance program. Rather, Hanna argues that once a health insurance carrier such as Capital Blue Cross/Pennsylvania Blue Shield is approved by the board to underwrite a program, then any annuitant who has health insurance through that same carrier is entitled to premium assistance payments. Because Capital Blue Cross/Pennsylvania Blue Shield is the carrier for both PSERS' Health Options Program and the Pennsylvania Bar Association's program, Hanna claims that Capital Blue Cross/Pennsylvania Blue Shield is an "approved" carrier under Section 8509. Thus, Hanna concludes that he met the statutory requirements of Section 8509 and he should receive premium assistance payments.

PSERS counters that the language of the statutory sections involved in the instant case *fn5 explicitly requires Hanna to be enrolled in a board-approved health insurance program in order to receive premium assistance payments. PSERS further argues that Section 8509 must be read in conjunction with Section 8102 so as not to preclude the board from carrying out its obligations to PSERS' annuitants and their dependents. We agree.

The pertinent subsections of Section 8509 provide as follows:

(b) Amount of premium assistance. --Effective July 1, 1992, participating eligible annuitants shall receive premium assistance payments of $55 per month or the actual monthly premium, whichever is less. Such payments shall be made by the board to the participating eligible annuitants for their payment directly to their approved insurance carriers. Such payments may also be paid by the board, at the board's discretion, directly to the participating eligible annuitant's approved insurance carriers. The board shall have the right to verify the application and receipt of the payments by the participating eligible annuitants and their approved insurance carriers.

(c) Participating eligible annuitants. --An eligible annuitant may elect to participate in the health insurance premium assistance program by filing an election to be covered by a health insurance carrier approved by the board and to participate in the health insurance premium assistance program. Participation in the health insurance premium assistance program shall begin upon the effective date of the health insurance coverage ...


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