Why is Delaware appealing ruling that blocked Medicare Advantage plan for state retirees?

Editor's note: This story has been updated to include comment from RISE Delaware attorneys received after deadline.

Delaware is appealing a ruling from May over its failure to follow proper administrative procedures when opting for Medicare Advantage coverage for state retirees’ health care, fearing the decision opens the door to legal challenges on contracting decisions across state agencies.

RISE Delaware, a group of state retirees, filed a lawsuit against Delaware in Superior Court in 2022, alleging the state failed to follow administrative procedures when switching retirees’ health care coverage to Medicare Advantage without their input.

While the state argued the switch would decrease Delaware’s unmanageable unfunded liability, retirees feared it would result in being denied care and a group banded together to stop the change from occurring.

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The case has been tied up in the state Supreme Court ever since Delaware appealed an order issued by Superior Court Judge Calvin Scott, Jr. in May. The concern stems from a stay order issued in October 2022 in Superior Court – which temporarily halted Delaware from making the switch to Medicare Advantage – potentially creating a precedent for state agencies on future contract awards.

“The reason the state is pursuing the appeal is because of the significant impact the Superior Court ruling would have on all other state agencies when negotiating and awarding contracts,” said Claire DeMatteis, secretary for Delaware’s Department of Human Resources.

Why Delaware is concerned about precedent

The crux of the appeal focuses on the stay order that temporarily blocked the state’s transition to Medicare Advantage.

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In the order, the Superior Court determined it had jurisdiction over the case “if the decision of the (State Employee Benefits Committee) is considered a regulation under the Delaware Administrative Procedures Act (APA).”

Delaware argues in court papers that the benefits committee is not required to follow the Administrative Procedures Act because it has “explicit” statutory authority to select health care providers.

The state says the Superior Court “erred” when it determined the committee should follow the administrative procedures, and so the stay on Delaware implementing Medicare Advantage should be lifted.

State officials are concerned that the order, and the Superior Court implying the benefits committee needs to follow proper administrative procedures, could open Delaware up to future lawsuits over contract awards in other departments.

RISE Delaware attorneys from Fox Rothschild LLP say the Superior Court did not err, and underscored that the intended switch from the MedicFill Supplement represented a substantial change in health coverage for retirees if enacted. The Superior Court in the stay order agreed.

"This court cannot agree with the sentiment that the need for prior authorization for over 1,000 procedures and the use of only in-network doctors is the same level of benefits retirees obtained with the current policy," the October 2022 stay order reads.

What is the case’s status?

Attorneys for Delaware and the retiree group appeared in the Delaware Supreme Court on Jan. 31 for judges to hear arguments on the state’s appeal.

A decision has yet to be issued.

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In the meantime, the stay on implementing Medicare Advantage remains, and retirees continue to receive health care through the Medicfill Supplement.

The benefits committee also put out a new request-for-proposal, as was suggested by the retiree subcommittee formed to provide recommendations on retiree health benefits following the issues with implementing Medicare Advantage.

The committee is set to review those proposals in March.

Mary Graham, legal liaison for RISE Delaware, said the state's appeal is "moot" because the benefits committee has already gone out to bid for a new contract with a request-for-proposal stipulating that there be no "deviation" from the MedicFill Supplement.

She questioned Delaware's standing to argue the stay order sets a precedent for other state agencies.

"Why should retirees pay for the state to get guidance for some other future, unknown and not even imagined case?" Graham said. "The administration’s choice to pursue a fanciful appeal feels to retirees like spite and punishment because we dared to challenge the (Gov. John) Carney Administration. And we won."

Got a tip? Contact Amanda Fries at afries@delawareonline.com. Follow her on X at @mandy_fries.

This article originally appeared on Delaware News Journal: Why Delaware is appealing Medicare Advantage lawsuit filed by retirees