City Only Required to Provide “Basic” Health Insurance Plan Option Under PSEBA

by Meganne Trela

When an employee gets hurt in the line-of-duty, local government agencies are only required to pay the premiums for the “basic” health insurance plan – even if the employee was on a different, more expensive health plan at the time of the injury – under the Public Safety Employee Benefits Act (PSEBA). The Third District Appellate Court in Illinois formally acknowledged this minimum standard in its opinion in Esser v. City of Peoria, 2019 IL App (3d) 180702 (Nov. 20, 2019).

The court’s decision came from a dispute out of Peoria involving former police officer, Terry Esser. After injuring his back at work, Esser was awarded a line-of-duty disability pension. At the time of his injury, Esser was enrolled in a low deductible health plan with the City. He was subsequently awarded PSEBA benefits. Shortly thereafter, the City notified Esser that he had two health insurance options: (1) a high deductible plan (HDHP) with the entire premium paid by the City in accordance with PSEBA; or (2) a low deductible plan that would require him to contribute the difference in cost between the HDHP and the more expensive low deductible plan premium. Esser enrolled in the low deductible plan.

In 2014, prior to Esser’s pension application, the City adopted a policy regarding health insurance election for PSEBA benefit recipients, which reflected the options that the City provided to Esser and designated the HDHP as the “basic” plan. Prior to adopting the policy, the City paid the full premium for both the HDHP and the low deductible plan. Post-2014, the new policy regarding the “basic” plan was implemented with one exception – the City paid for the entire premium of the lower deductible plan for the family of an officer killed in the line of duty.

After selecting the City’s low deductible plan, Esser filed a declaratory judgment action asking the circuit court to declare that the City was required to pay the entire cost of Esser’s low deductible insurance premium. The trial court ruled in favor of the City and Esser appealed.

On appeal, Esser argued that he should be able to continue the low deductible plan at no cost because that was the plan he was on at the time he was injured, and the City offered participation in both plans. Esser further argued that there was no distinction between officers killed in the line of duty and those that were injured in the line of duty. Therefore, he argued, the City must pay the premium of the low deductible plan for him just as it did for the family of the fallen officer.

The City, on the other hand, argued that it was only required to pay the full premium of the “basic” health insurance plan, which in this case was the HDHP. The City further argued that under its authority as a home-rule unit of government, it was capable of designating a “basic” health plan and that doing so was fiscally responsible. The City further argued that it would be unworkable to require a certain set of benefits based on the plans PSEBA recipients had at the time of injury because health plans change from year to year.

In deciding for the City, the appellate court first reviewed the plain language of the statute. The statutory language provides that an employer is required to pay “the entire premium of the employer’s health insurance plan.” 820 ILCS 320/10(a). Section 10(a) goes on to specifically declare that the term “health insurance plan” does not include “‘supplemental’ benefits that are not part of the ‘basic’ group health insurance plan.” The appellate court found the plain language of the statute was clear.

In this case, because the City designated the HDHP as the “basic” health plan in 2014, the City was not required to pay the entire premium for the low deductible plan that Esser selected. The appellate court further determined that the City’s payment of the premium for the low deductible plan for the family of the fallen officer did not alter the outcome. The court reasoned that the City could, at its discretion, offer additional benefits to the families of fallen officers that went beyond the minimum requirements contained in the PSEBA statute.

Post-Esser, local government entities should make an official determination regarding which health plan offering is the “basic” option. Local governments should also implement a policy regarding receipt of “basic” health plan premiums for PSEBA recipients and ensure the policy is enforced consistently once adopted. While a local government agency may provide more benefits than a required under PSEBA, only the designated “basic” health insurance plan is required. Moreover, local government agencies should bear in mind that “supplemental” benefits, such as dental and vision, are not considered part of the “basic” health plan under PSEBA, unless an employer designates them as such.