Jury to decide Germantown teachers’ class action

Long-term care insurance taken away after Act 10

WEST BEND - As it swung its new Act 10 ax in 2012, did the Germantown School District’s exuberance wrongly take the security of long-term care insurance from its retired teachers?

An answer could come Monday when a Washington County jury begins deliberating a case nearly four expensive years in the making, a high-stakes affair likely headed for appellate courts no matter the verdict.

A dry trial about actuarial tables, labor contracts, government meeting minutes and emails wouldn’t normally attract much of an audience. But this one drew a pretty full gallery last week, mostly members of the plaintiff class — 90 retired teachers who say the district breached its duty to them when it dropped out of an affordable long-term care insurance plan in 2012.

The board says it was in a budget crunch. The retirees say some on the board just hated teachers unions and cut long-term care as part of a political power play.

“It’s a two-way street and we played ours faithfully,” said Bill Gay, 75, one of the named plaintiffs in the case. “Why do we get slapped in our retirement?”

There was a long level of trust with the district, and that’s what was broken,” said

Roger Choinsky, 74, a psychologist for the district from 1974 to 2006. The district “did it knowingly to a bunch of people who had no options to recoup” what they lost. “They were sacrificed.”

The move came soon after Act 10 eliminated most collective bargaining for public employees, a change the state’s teachers felt was aimed primarily at them, their state union, the Wisconsin Education Association Council, and the nonprofit insurance arm, WEA Trust.

A WEAC spokeswoman said the union helped the retirees sue to recover a vested benefit they had secured through collective bargaining but was unilaterally cut during “overreach” after Act 10. “It was like, ‘Who can we damage the most without looking them in the face?’” Christina Brey said of the Germantown board decision.

Dropping the benefit for teachers meant the administrators and retirees who were part of it would also lose out. The district paid the roughly $80 monthly premium for employees, and retirees could continue paying the same group rate to retain coverage. After 30 years of payments, the policy would be paid up.

When it was canceled, retirees got 60 days to come up with about $35,000 to pay up the policy or lost not only coverage but all the premiums they had paid since retirement. About half the 90 were able to pay the lump sum.

Gay, the former chair of the English department, said he lost about a decade of premiums he’d been paying since retiring in 2001 after 35 years. He said he couldn’t pay the lump sum, and now hopes he dies healthy or that his accountant son can keep him in smart investments.

The WEA Trust’s group plan for school employees cost far less than one they might buy on the open market, but also had a stricter standard of need to qualify for the payments, carried a lifetime 25% co-pay, and limited home care to only licensed providers. The plan had a lifetime benefits cap of about $550,000.

Ken School, director of actuarial services for WEA Insurance, testified last week how paying the $35,000 lump sum to keep the coverage cost those retirees future income they could have made from investing that money.

Howard Ruben, an expert in long-term care insurance from Minnesota, testified that a comparable private plan to what the WEA Trust used to offer school districts would cost retiree couples about $15,000 a year in premiums, about 15 times what they were paying through the district.

Ruben explained the other half of the equation that scares the retirees. After age 65, about 68% of men, and 79% of women will need long-term care at some point, for an average of 2.2 years for men, and 3.7 for women. That care ranges from about $50,000 a year for in-home services to more than $100,000 for a nursing home.

The district says the only question is whether it violated a contract. It says it had no formal obligation to the retirees, and the long-term care policy itself had no provision against ending it — though it did cost the district millions in premiums it had been paying since 1998 for people who never used the benefit.

Former Germantown school board member Bruce Warnimont testified that, historically, anything in the teachers’ contract that didn’t come up in bargaining stayed in the contract. He tried to suggest that when the board began looking for savings in 2011, and considered dropping long-term care, it didn’t realize, at first, that dropping it would also affect retirees, administrators and retired administrators.

But the WEA Trust clearly informed district staff of that “ripple effect,” yet the board took formal action in March 2012 to drop the plan. It settled with some retired administrators for $12,000 to $24,000 each — but not any of the 90 retired teachers.

Janice Weinhold, 70, was a reading specialist and coordinator in Germantown for 33 years. She retired in 2009 to care for her mother, who was in and out of nursing care, and her husband, who was fighting cancer. In August 2011, she pleaded to the board not to make the rumored cut to long-term care, and by one vote, the board held off.

But after a change in board membership, the cut passed.

“Their mind was made up and they would not listen,” she said. “It was kind of a political thing.”

Weinhold’s husband died in 2011. She used proceeds from his life insurance to pay up the longterm care premium. She said some others took out mortgages or sold off other investments to keep the coverage.

“If you don’t need it, you’re lucky,” she said. “If you do, you don’t want to be a burden on your children or the government if you can help it.”

The jury will be asked to decide if the board breached an implied contract with the retirees or its duty of good faith and fair dealing. The plaintiffs say they relied on oral and written assertions from the district that they could continue paying the premiums — and retain coverage — after retirement.

Those who paid the lump sum seek damages for the money they could have made investing that money instead. Those who didn’t pay the lump sum want enough money to buy their own long-term care coverage.

There’s already been a verdict related to the case. When the retirees sued in 2013, the district handed the case to its insurers. They denied coverage, claiming any damages to the plaintiffs resulted from deliberate acts by the board to reject retirees’ claim that they had vested rights to remain in the group long-term coverage.

A jury last year found the board was merely negligent. The insurers appealed, but are having to pay for the current defense on the main lawsuit in the meantime.

If the insurers prevail on appeal, it could cost Germantown schools dearly; the bill for the coverage trial alone was more than $600,000.

District officials declined to comment on the case.