Legal Updates


2017-2019 BUDGET SERIES: CHANGES AFFECTING HEALTH INSURANCE FOR SCHOOL DISTRICTS – SUPPLEMENTAL COMMENTS 10/09/2017

October 9, 2017

As we explained in our article published on October 3, 2017, the 2017-2019 Budget Bill clearly changed the coverage rules for employees’ domestic partners and the dependents of domestic partners under group health insurance plans sponsored by the Department of Employee Trust Funds.  Specifically, most domestic partners of covered employees and the dependents of domestic partners will now be excluded from coverage under such health insurance plans.  However, the impact of the Budget on domestic partnership coverage provided by school districts that offer group health insurance through a plan that is not sponsored by ETF is not as clear.

The 2017-2019 Budget creates a new statute, Wis. Stat. § 66.0510, which authorizes a “local governmental unit” to offer an employee benefit plan only to officers, agents and employees and their spouses and dependent children.  Section 66.0510 of the Wisconsin Statutes provides as follows, in relevant part:

Benefits to officers, employees, agents.

(1)        DEFINITIONS.  In this section:

(a)        “Employee benefit plan” means a plan as defined in 29 USC 1002(3).

(b)        “Local governmental unit” has the definition given in s. 66.0131 (1)(a).

(2)        BENEFITS.  If a local governmental unit provides an employee benefit plan to its officers, agents, and employees, the plan may cover only such officers, agents, and employees and their spouses and dependent children.

The new statute uses the definition of “local governmental unit” found in Wis. Stat. § 66.0131(1)(a):

Local governmental unit” means a political subdivision of this state, a special purpose district in this state, an agency or corporation of a political subdivision or special purpose district, or a combination or subunit of any of the foregoing.

Chapter 66[1] of the Wisconsin Statutes includes several different definitions of “local governmental unit” -- some definitions explicitly include public school districts and other definitions do not.  For purposes of the new Wis. Stat. § 66.0510, the Legislature chose a definition of “local governmental unit” that does not explicitly include school districts.  Based on this language, we believe that the statute does not apply to public school districts.

The Wisconsin Court of Appeals addressed the issue of a school district’s authority to extend group health insurance benefits to domestic partners in Pritchard v. Madison Metropolitan School District, 2001 WI App 62.  In Pritchard, the Court held that school districts have the authority under Wis. Stats. ch. 118 and ch. 120 to provide group health insurance coverage to the domestic partners of employees even though the municipal employee insurance statute, Wis. Stat. § 66.0137, does not specifically allow for domestic partner coverage.  Thus, in accordance with Pritchard, public school boards are permitted to extend, or decline to extend, group health insurance coverage to the domestic partners of eligible employees.  At this time, the Pritchard decision remains good law. 

The interpretation reflected above is not the only possible reading of the new Wis. Stat. § 66.0510.  We are aware that some authorities and commentators have concluded that Wis. Stat. § 66.0510 will prohibit all municipalities, counties and school districts from offering employee benefit plan coverage, including health insurance, to the domestic partners of eligible employees effective January 1, 2018.  Until regulatory guidance or subsequent legislation is issued, the new statute is subject to more than one reasonable interpretation.

As a practical matter, we encourage school districts to determine whether their fully funded and/or self-insured group health plan(s) currently provide coverage for the domestic partners of eligible employees and the dependent children of such domestic partners as eligible plan participants.  If the school district wishes to eliminate such domestic partnership coverage, it would be best to assess the impact of that change by running a census that shows domestic partner and domestic partner dependent group health plan participation.

Please note that the Affordable Care Act requires plan sponsors to furnish a notice of a material plan modification to all plan participants at least 60 days before the effective date of any significant modification of coverage.  For school districts that adopt a mid-year plan change to terminate domestic partnership coverage effective January 1, 2018, the notice of material modification must be delivered to plan participants no later than November 2, 2017.

The attorneys of Strang, Patteson, Renning, Lewis & Lacy will keep clients and friends informed as these issues develop.  In the meantime, we are happy to provide counsel to school districts regarding employee benefit decisions.

For questions regarding this article, please contact the author, Attorney Julie A. Lewis (email: jlewis@strangpatteson.com; telephone: 844.626.0909), or your Strang, Patteson, Renning, Lewis, & Lacy, s.c., attorney.

[1] Chapter 66 of the Wisconsin Statutes covers general municipality law.  Public school districts are, technically, municipalities.  Some of the provisions in ch. 66 apply to school districts; some do not.  The majority of the laws applying to school districts are found in chs. 115-121.

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