On February 3, 2009, an administrative hearing in this case was held by video teleconference between Orlando and Tallahassee, Florida, before William F. Quattlebaum, Administrative Law Judge, Division of Administrative Hearings.
For Petitioner: Gregory D. Swartwood, Esquire
For Respondent: Sonja P. Mathews, Esquire
Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 260
The issues in the case are whether the Respondent erred in 2006 when a life insurance program applicable to retired state
employees was amended to provide for two levels of benefits with separate premiums, and, if so, whether the beneficiary of a retired, now deceased, state employee should receive a different life insurance benefit than was paid.
Alta Y. Jones (Petitioner) is the daughter of James W. Black, a retired state employee who died in 2007. The Department of Management Services, Division of State Group Health Insurance (Respondent), advised the Petitioner that Mr. Black's life insurance benefit was $2,500.00. The
Petitioner believed that Mr. Black's life insurance benefit was
$10,000.00 and is challenging the Respondent's determination of Mr. Black's life insurance benefit.
The Petitioner initially appealed the decision to the Respondent, where the appeal was denied, and thereafter filed a Petition for Formal Hearing dated October 8, 2008. The Respondent forwarded the Petition for Formal Hearing to the Division of Administrative Hearings on November 8, 2008.
By Notice of Hearing dated November 20, 2008, the hearing was scheduled for February 3, 2009. The case was transferred to the undersigned Administrative Law Judge on January 22, 2009.
At the hearing, the Petitioner presented the deposition testimony of three witnesses, which were admitted into evidence as Petitioner’s Exhibits 1 through 3. The Respondent presented
the live testimony of four witnesses and the deposition testimony of the Petitioner, which was admitted into evidence as Respondent’s Exhibit 1. Joint Exhibits 1 through 39 were admitted into evidence.
No transcript of the hearing was filed. Both parties filed Proposed Recommended Orders.
James W. Black was an employee of the State of Florida, who retired in May 1986 and who died in 2007.
The Petitioner is the daughter of Mr. Black and the beneficiary of Mr. Black's retired state employee life insurance.
Upon retirement, state employees can continue some of their existing insurance benefits by assuming the responsibility for payment of the full premium costs.
Mr. Black participated in the state group life insurance program available to retired state employees, which, upon his retirement in 1986, provided a $1,500.00 life insurance benefit for which he paid a $4.20 premium.
Mr. Black's monthly $4.20 premium payment was deducted from the retirement benefit paid to him through the Florida Retirement System.
Mr. Black was not legally incompetent, and he had not executed a power-of-attorney to the Petitioner; however, the
Petitioner began to assist Mr. Black with his business affairs in 2001, after the death of Mr. Black's wife.
Prior to May 2004, Mr. Black resided at his home, which was located at 936 Kensington Drive, Orlando, Florida, 32808.
In May 2004, Mr. Black moved from his residence to live with the Petitioner in her home at 10765 Wilderness Court, Orlando, Florida, 32821. He remained there for approximately one month.
In June 2004, Mr. Black moved to Donegan Square Villas, an assisting living facility located in Kissimmee, Florida, where he remained until his death.
Mr. Black failed to provide notice of the address changes to the Respondent, which continued to list the Kensington Drive location as his address of record.
At some time in 2004, a change of address form was provided to the U.S. Postal Service, and, for approximately one year, Mr. Black's mail was forwarded from the Kensington Drive address to the Wilderness Court address.
The Florida Division of Retirement, apparently aware that Mr. Black's address was changed, provided a change of address form to Mr. Black in early September 2004. On or about September 7, 2004, the form was returned to the Division of Retirement, stating that Mr. Black's address had been changed
from the Kensington Drive location to the Wilderness Court location.
The Respondent and the Division of Retirement utilize separate databases and do not routinely exchange address information. Retired employees are directed to submit separate changes to both agencies. A substantial quantity of mail sent by the Respondent (or its vendors) to retired state employees is returned as undeliverable due, at least in part, to issues related to incorrect addresses.
In 2000, the life insurance benefit for retired state employees was increased to $10,000.00, but the premium remained unchanged at $4.20. Mr. Black continued to pay the $4.20 premium and was eligible for the $10,000.00 benefit.
In 2006, the Respondent determined that the apparent use of a trust fund to subsidize premiums paid for retired state employee life insurance benefits and premiums failed to comply with the requirements of Subsection 110.123(4)(f), Florida Statutes (2005), which prohibits any state contribution to the premium cost of retiree insurance. The Respondent further determined that the provision of a $10,000.00 benefit for a
$4.20 premium payment was not fiscally sustainable.
The Respondent decided that the existing monthly $4.20 premium would support a $2,500.00 life insurance benefit.
The Respondent decided that a monthly premium of
$35.79 was required to support the previous $10,000.00 life insurance benefit.
Actuarial assumptions underlying the referenced benefit and premium levels are immaterial to this proceeding.
The State of Florida historically conducts an annual "open enrollment" period each fall, during which current and retired state employees can make changes in their insurance coverage applicable for the following year.
The State of Florida generally utilizes a "passive enrollment" method for open enrollment. Essentially, a passive enrollment means that each person's insurance benefits continue unchanged from year to year unless the person chooses another available option during the open enrollment period.
In 2006, the State utilized an "active enrollment" method for retired state employee life insurance. The Respondent decided that to maintain the existing $10,000.00 life insurance benefit after January 1, 2007, a retired state employee was required to affirmatively agree to the increased monthly premium of $35.79 during the open enrollment. The default option, for a retired state employee who took no action during open enrollment, would be a reduced benefit of $2,500.00 for the existing monthly premium of $4.20.
The Respondent's rationale for designating the reduced benefit/existing premium option as the default choice was that Subsection 110.123(4)(f), Florida Statutes (2006), directed the State's chief financial officer to deduct the amount requested by each retired state employee from the former employee's retirement payment. Continuation of the existing $4.20 premium payment required no action by a retiree, because the $4.20 monthly life insurance premium had been collected since as early as 1976. The Respondent did not have the authority to increase the monthly premium deduction from a retirement payment without affirmative consent by the retired state employee.
There was apparently also some concern that employees with a state retirement payment insufficient to support the premium increase could have their coverage terminated for underpayment (or non-payment) of the increased premium and that, once a retiree's state life insurance coverage was terminated, the employee was precluded from re-entering the life insurance program. On the other hand, a retired state employee was able to increase the life insurance coverage through a period extending beyond the open enrollment by contacting the appropriate agency and paying the additional premium.
The Petitioner has asserted that the Respondent's decision to designate the benefit reduction as the default option failed to comply with applicable legal requirements
related to agency policy and rulemaking. There is no credible evidence supporting the assertion. The designation of the existing premium of $4.20 and the reduced benefit of $2,500.00 as the default option was not arbitrary or capricious and was legally appropriate.
By letter dated July 31, 2006, the Respondent notified retired state employees that the retiree life insurance program would be changing effective January 1, 2007. In material part, the letter stated as follows:
The upcoming annual open enrollment period will provide you with three (3) options regarding your life insurance coverage. You should carefully examine all options and the information provided in your Open Enrollment packet, which will be mailed prior to Open Enrollment; to decide which choice best suits your unique circumstances.
Effective January 1, 2007, the three (3) life insurance options available will be:
A $2,500 benefit for a monthly premium of $4.20
A $10,000 benefit for a monthly premium of $35.79
Terminate life insurance coverage (precludes participants from re- enrolling for the product in the future).
Consistent with our practice in previous years, should you not participate in the annual Open Enrollment process, or make no changes to your life insurance election, you will continue to be enrolled with retiree life insurance coverage. Your default
election will be the $2,500 benefit, with its associated premium.
If there is a desire to modify your open enrollment life insurance election, requests for changes to your life insurance coverage enrollment will be accepted through Friday, January 19, 2007.
As always, you can terminate life insurance coverage under the State Group Insurance Program at any time simply by notifying People First of your decision. Please remember that should you terminate your State retiree life insurance coverage, you will not be permitted to re-enroll at a later time.
The letter clearly identified the available options, including the default choice, and advised of the extended period for submitting changes.
The letter was mailed to Mr. Black at his Kensington Drive address and was returned by the U.S. Postal Service to the Respondent as undeliverable.
The 2006 Open Enrollment period ran from September 19 through October 18, 2006.
Prior to the commencement of an open enrollment period, the Respondent (or a private vendor) routinely mailed benefit statements and enrollment information materials to current and retired state employees at their addresses of record.
"PeopleFirst/Convergys" was the private vendor responsible for conducting the open enrollment in 2006,
including the distribution of materials to current and retired state employees.
The Respondent provided the names and addresses of current and retired state employees to PeopleFirst/Convergys, and the information was used to mail the open enrollment packages.
On or about September 3, 2006, PeopleFirst/Convergys sent a package of open enrollment materials to Mr. Black at the Kensington Drive address.
A cover letter included with the benefit materials package stated that "passive enrollment" meant that an employee who took no action would retain the same benefits as had been previously selected, but also stated that there were specific items of note listed on the back side of the cover letter for review by plan participants. One of the items stated as follows:
Retiree Life Insurance
For Plan Year 2007, those currently enrolled with retiree life insurance may elect to retain the current $4.20 premium for a benefit of $2,500, retain the current benefit of $10,000 for a premium of $35.79, or cancel coverage. If no change is made during open enrollment, participation will continue at the $4.20 premium level.
The package of open enrollment materials sent by PeopleFirst/Convergys to Mr. Black at the Kensington Drive
address was returned as undeliverable by the U.S. Postal Service.
Because the mail deliveries to Mr. Black were unsuccessful, the Respondent attempted to locate an updated address for Mr. Black and discovered that the Division of Retirement records listed the Wilderness Court address as his then-current location.
The Respondent apparently provided the updated address to PeopleFirst/Convergys, and, on or about October 4, 2006, the vendor re-mailed the package of open enrollment materials to
Mr. Black at the Wilderness Court address. The return address on the package was that of the Respondent.
On approximately October 10, 2006, the Respondent re- mailed the letter dated July 31, 2006, to Mr. Black at the Wilderness Court address.
Neither the re-mailed letter nor the re-mailed open enrollment package was returned to the Respondent by the U.S. Postal Service.
Although the Petitioner denied having seen the letter or the open enrollment materials prior to commencing this litigation, there is no credible evidence that the re-mailed letter and package were not properly delivered.
Neither Mr. Black nor anyone acting on his behalf took any action during the 2006 Open Enrollment period, or at any
time thereafter, to select a life insurance benefit different than the default selection of the $2,500.00 life insurance benefit with the $4.20 premium.
The effective date of the change in the retired state employee life benefit was January 1, 2007.
Mr. Black died on May 30, 2007.
The Respondent correctly determined that Mr. Black's life insurance benefit was $2,500.00.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this proceeding. §§ 120.569 and 120.57, Fla. Stat. (2008).
The Petitioner has the burden of establishing by a preponderance of the evidence entitlement to the relief sought. Dept. of Banking and Finance, Div. of Securities and Investor Protection v. Osborne Stern & Co., 670 So. 2d 932 (Fla. 1996); Florida Department of Transportation v. J.W.C. Co., 396 So. 2d 778 (Fla. 1st DCA 1981); Balino v. Department of Health and Rehabilitative Services, 348 So. 2d 349 (Fla. 1st DCA 1977). In this case, the burden has not been met.
The challenge in this case is essentially two-pronged.
First, the Petitioner has asserted that the Respondent erred in 2006 by adopting an active enrollment process for retired state employee life insurance without complying with rulemaking
requirements and that the Respondent must articulate and defend the decision as an "unadopted rule." Second, the Petitioner asserted that the Respondent failed to provide proper notice of the change to Mr. Black.
Section 110.123, Florida Statutes (2006), the "State Group Insurance Program Law," provides, in relevant part, as follows:
STATE GROUP INSURANCE PROGRAM.—
(a) The Division of State Group Insurance is created within the Department of Management Services.
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(g) Participation by individuals in the program is available to all state officers, full-time state employees, and part-time state employees; and such participation in the program or any plan is voluntary. Participation in the program is also available to retired state officers and employees, as defined in paragraph (2)(g), who elect at the time of retirement to continue coverage under the program, but they may elect to continue all or only part of the coverage they had at the time of retirement. A surviving spouse may elect to continue coverage only under a state group health insurance plan, a TRICARE supplemental insurance plan, or a health maintenance organization plan.
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PAYMENT OF PREMIUMS; CONTRIBUTION BY STATE; LIMITATION ON ACTIONS TO PAY AND COLLECT PREMIUMS.--
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No state contribution for the cost of any part of the premium shall be made for retirees or surviving spouses for any type of coverage under the state group insurance program. . . .
Pursuant to the request of each state officer, full-time or part-time state employee, or retiree participating in the state group insurance program, and upon certification of the employing agency approved by the department, the Chief Financial Officer shall deduct from the salary or retirement warrant payable to each participant the amount so certified and shall handle such deductions in accordance with rules established by the department.
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DEPARTMENT POWERS AND DUTIES.--The department is responsible for the administration of the state group insurance program. The department shall initiate and supervise the program as established by this section and shall adopt such rules as are necessary to perform its responsibilities. To implement this program, the department shall, with prior approval by the Legislature:
Determine the benefits to be provided and the contributions to be required for the state group insurance program. Such determinations, whether for a contracted plan or a self-insurance plan pursuant to paragraph (c), do not constitute rules within the meaning of s. 120.52 or final orders within the meaning of s. 120.52. Any physician's fee schedule used in the health and accident plan shall not be available for inspection or copying by medical providers or other persons not involved in the administration of the program. However, in the determination of the design of the program, the department shall consider existing and complementary benefits provided
by the Florida Retirement System and the Social Security System. (Emphasis supplied.)
The Petitioner has asserted that the passive enrollment model historically utilized by the State of Florida during open enrollment period requires that benefit levels remain constant from year to year and that the Respondent may not alter the historic enrollment model without adoption of an administrative rule or without being required to defend the "unadopted rule" pursuant to Subsection 120.57(1)(e), Florida Statutes (2006), which provides as follows:
(e)1. Any agency action that determines the substantial interests of a party and that is based on an unadopted rule is subject to de novo review by an administrative law judge.
The agency action shall not be presumed valid or invalid. The agency must demonstrate that the unadopted rule:
Is within the powers, functions, and duties delegated by the Legislature or, if the agency is operating pursuant to authority derived from the State Constitution, is within that authority;
Does not enlarge, modify, or contravene the specific provisions of law implemented;
Is not vague, establishes adequate standards for agency decisions, or does not vest unbridled discretion in the agency;
Is not arbitrary or capricious. A rule is arbitrary if it is not supported by logic or the necessary facts; a rule is capricious if it is adopted without thought or reason or is irrational;
Is not being applied to the substantially affected party without due notice; and
Does not impose excessive regulatory costs on the regulated person, county, or city.
The Respondent asserted that the decision was a determination of benefits and premium contributions, which are specifically exempt from rulemaking pursuant to
Subsection 110.123(5)(a), Florida Statutes (2006); however, the Petition for Formal Hearing filed in this case does not constitute a rule challenge pursuant to Section 120.56, Florida Statutes (2006).
As to a requirement that an agency defend the nonrule policy, the evidence establishes that the Respondent has met the burden of defending the enrollment process utilized during the 2006 Open Enrollment period for retired state employee life insurance.
The Respondent was clearly charged with the responsibility for administering the state group insurance program by Section 110.123, Florida Statutes (2005). The 2006 Open Enrollment process for the retired state employee life insurance program did not enlarge, modify, or contravene the specific provisions of the referenced statute. The process was not vague. The process did not affect any existing standards
for agency decisions and did not vest unbridled discretion in the agency.
There are no regulatory costs at issue in this proceeding.
The process was not arbitrary or capricious. The process was rational and logical and was based on a reasonable interpretation of the referenced statute that appears to preclude an increase in deducting additional funds from a retirement warrant absent an affirmative act by a retiree.
The designation of the reduced benefit/existing premium option as the default choice also included deliberation as to the effect of the process on retired state employees, and the Respondent offered an extended period following the end of open enrollment during which retirees could change their life insurance selections.
Finally, due notice was provided to the affected parties. Despite the fact that Mr. Black failed to notify the Respondent of his correct address, the life insurance benefit information was delivered to the Petitioner's updated address with more than sufficient time to permit selection of the increased premium option.
The letter and the enrollment package were initially sent in separate mailings to Mr. Black's address of record on file with the Respondent. There is no evidence to the contrary.
They were separately returned by the U.S. Postal Service as undeliverable.
The Respondent made a subsequent effort to obtain an updated address, and the letter and package were re-sent through separate mailings to the updated address. Neither the letter nor the package was returned to the Respondent, whose return address was identified on both.
Although the Petitioner denied having seen either the letter or the package prior to initiating this proceeding, the denial alone fails to support a finding that the materials were not delivered to the Wilderness Court address. Absent credible evidence to the contrary, it is presumed that both the letter and the enrollment package, re-mailed separately, were properly delivered.
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Service, Division of Group State Insurance, enter a final order determining that the life insurance benefit for James W. Black is $2,500.00.
DONE AND ENTERED this 13th day of March, 2009, in Tallahassee, Leon County, Florida.
WILLIAM F. QUATTLEBAUM
Filed with the Clerk of the Division of Administrative Hearings this 13th day of March, 2009.
Sonja P. Mathews, Esquire Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 260
Gregory D. Swartwood, Esquire The Nation Law Firm
John Brenneis, General Counsel Department of Management Services 4050 Esplanade Way
15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
