CASE:  GLENDON #3
AMERICAN ARBITRATION ASSOCIATION SOME PLACE SCHOOLS
-and-		

UNION
SUBJECT
Change of insurance plans for bargaining unit employees. ISSUE
Did the Employer violate Article XI of the parties' 1997-2000 Agreement when it discontinued the FIRST insurance plans listed therein and adopted the "Some Place Health Care Plan" administered by Benefit Services?
CHRONOLOGY
Grievance filed: October 12, 1998
Grievance amended: November 5, 1998
Arbitration hearings: April 30 and June 25, 1999 Briefs received: September 3, 1999
Award issued: October 6, 1999
SUMMARY OF FINDINGS
The Employer violated Article XI by unilaterally developing and implementing a bidding process for a potential alternative provider for insurance coverages comparable to the FIRST plans specified therein and by discontinuing such FIRST plans and adopting a "Some Place Health Care Plan" in which all coverage is not provided by an insurance carrier and not all benefit levels are guaranteed by an insurance company, so the grievance must be sustained, the specified FIRST plans must be reinstated and the Employer must comply with the requirements of Article XI.A. and H. in any future solicitation of bids from and/or selection of potential alternative insurance providers for as long as the 1997-2000 agreement remains in effect.

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BACKGROUND
Article XI of the parties' 1997-2000 agreement requires the Employer to "provide, without cost to the employee, insurance benefits in accordance with the specifications of the Some Place FIRST Plan A and B (or comparable)." In May 1998 Personnel Director William Top informed Association President James Can and UNION Director Susan Spoon that the Employer was "looking at bidding out" for such insurance coverage from alternative sources and asked them to provide the FIRST specifications for that purpose. Spoon obtained from FIRST and sent to Top on June 3 a sixteen-page document entitled "FIRST SPECIFICATIONS" with an attached but separately numbered four-page document bearing the generic title, "Health Plan Service Specifications." Top gave those same documents to M. Lakor & Associates, the consultant the Employer was using for the bid solicitation process, and in mid-July Lakor sent them to the UNION and two other potential bidders, Benefit Services Inc. (BSI) and SET-SEG, with a Request for Proposal. In response to the RFP sent to Local One, FIRST submitted a bid on July 29, 1998. Otherwise, the Association neither had nor asked for any involvement in the bid solicitation process.
After receiving and reviewing the bids, the Employer decided to accept the BSI bid and so advised bargaining unit (and other) employees in a letter from Top dated October 6, 1998, which in pertinent part read as follows:
The District has undertaken an exhaustive and comprehensive review of our employee benefits and evaluated the potential savings gained by competitive bidding.
The results of the comparison of the quotes received have identified a significant savings by adopting the Some Place Health Care Plan and providing plan administration through Benefit Services Inc. (BSI), with underlying coverage through Blue Cross Blue Shield of Michigan. The Some Place Health Care Plan will be a high deductible plan with Some Place funding the deductible. January 1, 1999 will be the effective date of the new coverage. This date coincides with the increase in deductible corridors [as provided in Article XI.A.Plan A.1.] to $100 per individual and $200 per family.
•	As a third party administrator, BSI processes claims. BSI pays claims to the limit of the plan as specified in the Summary Plan Description.
•	Submissions of covered claims for benefits will be promptly processed. Individuals covered by this plan have the right to question claim payments and request detailed explanation from the Plan Administrator and insurers.

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Our concern, as we would assume yours as well, is comparability of coverage. We will request that our union representatives review the Summary Plan Description (SPD) and provide us with written notice of any changes that are needed to comply with our decision to provide comparable coverage to the coverage we have had previously.
Our Dental and Vision coverage will also be administered through Benefit Services. Again, the levels of coverage will remain the same for these benefit areas.
Additionally, we will change our carrier for the group term life and long term disability coverage. No changes will be made to the benefits provided in these two coverages.
The Association filed Grievance No. 1998-5 on October 12, 1998 complaining that the Employer had "unilaterally transferred Health Plan from FIRST to BSI as of January 1, 1999, in violation of Article XI" and asking, as a remedy for the alleged violation, that the Employer "maintain current Health Plan and not transfer to BSI or any other Health Plan on January 1, 1999." The Association amended the grievance on November 5 with these more specific complaints: that there was "no specific guarantee [of] the level of benefits and payments" and it was impossible to determine whether the new plan truly was comparable with FIRST coverage because the Employer had furnished only a "Sample" plan description; that the BSI "service component" was not comparable to FIRST, particularly as to "confidentiality of claims" and "access to field representatives"; that "contract language calls for 'insurance' and self-funded aspects of the new plan "are not insurance"; that "biddable specifications" for comparable coverage had not been "jointly developed by the Board and the Association" as required under Article XI.H. of the agreement; and that the Employer "unilaterally changed the benefit package" by raising the lifetime limit for hospital-medical benefits from $2 million to $5 million and "base life insurance" from $5,000 to $10,000.
Top denied the grievance in a November 12 letter to Association Vice President Terry Jam, in which he also advised that "the Board has delayed implementation of the change of benefit providers from FIRST to BSI until February 1, 1999" and expressed appreciation for the Association's "willingness to continue to exchange information between now and the implementation date." On November 16 the Employer distributed a "Draft SPD" (Summary Plan Description) for the "Some Place Schools Medical Plan." On December 14, Spoon sent Superintendent Ronald Boat a six-page letter filled

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with questions and requests for clarification about various aspects of the Draft SPD. In it she also noted the grievance had been appealed to arbitration and asked the Employer to "forestall making a decision on implementation of the new plan" pending issuance of the arbitrator's decision. The Employer never answered the questions in Spoon's letter, nor did the Association ever give the Employer a list of specific benefits in the FIRST coverage as to which it claimed the new plan was not comparable, but the new plan was implemented on February 1, 1999.
In arbitration, the Association continues to press the two general arguments that the new plan is not comparable to FIRST coverage because it contains major elements of self-insurance and that the Employer violated the agreement by developing bidding procedures and "biddable specifications" for the new plan unilaterally. It finds support for both of these arguments in Article XI.H., which reads as follows:
The procedures for bidding the insurance provisions contained in Sections C and D above and the development of the biddable specifications shall be jointly developed by the BOARD and ASSOCIATION. The insurance carrier selected to provide the insurance coverage shall be responsible for the administration of the insurance package. The insurance company shall guarantee the levels of benefits agreed to for the duration of the awarded contract.
As Top acknowledged in his arbitration testimony, the references to "Sections C and D above" in Article XI.H. are erroneous. Sections C and D in the 1997-2000 agreement respectively provide for Workers' Compensation insurance and that teachers employed after the start of a school year are to receive insurance benefits "as of the first day of employment," so it is obvious that Article XI.H. could not apply to those "Sections C and D." It is equally obvious, upon review of previous contracts, that the error is traceable to a failure to update section references since the 1983-86 agreement, in which the same provision that now is Article XI.H. appeared as Article XI.I., and in which Sections C and D of Article XI dealt with "FIRST 5" health insurance and "FIRST Plan II Long-Term Disability Insurance" respectively. Thus it is clear, and undisputed, that Article XI.H. applies to FIRST insurance coverage.
The Association argues this is significant not only because it is undisputed that procedures and "biddable specifications" for the alternative insurance bidding process initiated by the Employer in 1998 were unilaterally, not jointly, developed, but also because Article XI.H. makes it explicitly clear that the health insurance benefits to be provided

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and guaranteed to bargaining unit employees under Article XI are to be provided and guaranteed by an "insurance company." In the Association's view, that leaves no room for doubt that those benefits for which the Employer has made itself responsible through self-funding under the new Some Place Health Care Plan do not satisfy this contractual requirement and thus cannot be considered comparable to FIRST coverage. For both those reasons, the Association contends the grievance should be sustained and the Employer should be ordered to restore the status quo ante by reinstating the FIRST insurance coverages specifically referenced in the agreement.
It is undisputed that the "biddable specifications" on which BSI made its bid and pursuant to which the Employer adopted the new Some Place Health Care Plan were not developed jointly by the parties; Top expressly so testified and in its post-hearing brief the Employer does not directly address this point. However, it emphasizes that Association representatives had advance notice of its decision to seek bids for alternative insurance coverage and were asked to provide FIRST specifications to be used in that process, which they did; that FIRST was invited to bid and did so; and that the RFP was transmitted to FIRST through the Association. The Employer also criticizes the Association for not bringing forward "specific concerns regarding benefit comparability" after it had announced that the new plan would be implemented.
In response to the second argument, the Employer of course concedes that it is not an insurance company, but insists that fact is of no contractual or practical significance as long as the health insurance benefits provided under the Some Place Health Care Plan are comparable to FIRST coverage, which it also insists they are. It points out that the Association offered no testimony that the parties ever discussed a necessity for an insurance company to provide all negotiated health insurance benefits, and that Top, who has participated in contract negotiations at various times as a bargaining representative for the Association as well as the Employer, said that point had not been discussed. It also notes that health care plans self-funded either wholly or in part by employers "are a regular and accepted part of the public and private sector employment landscape," and argues there is no reason to think partial self-funding by it would jeopardize the provision of health care benefits to bargaining unit employees.

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In response to the Association's request for restoration of the status quo ante through reinstatement of the FIRST plans, in its brief the Employer argues that would be inappropriate because "the arbitrator's authority is coterminous with the contractual right of the School District to change health plans." In its view, that means the arbitrator only may determine whether the benefits it has provided are comparable to the FIRST coverage listed in Article XI and, if any lack of comparability is found to exist, may only order that comparable benefits be provided under whatever plan it has adopted.
DISCUSSION AND FINDINGS
The parties also presented evidence and lengthy argument about whether "insurance benefits" as to which Article XI requires comparability include "quick turnaround time" and other aspects of the "Service Specifications" that were attached to the FIRST specifications and included in the Employer's RFP, whether "comparable" means "equal" or something less than that, and whether the new Some Place Health Care Plan actually is comparable to contractually referenced FIRST coverages in several specific areas that were called into question by an Association witness. That evidence and those arguments have been given due consideration, but it is unnecessary to discuss or resolve them in order to appropriately dispose of this grievance, for the following reasons.
First, the Employer clearly did violate Article XI.H. by not developing bidding procedures and "biddable specifications" for its exploration of potential insurance arrangements other than but comparable to contractually specified FIRST plans jointly with the Association. To develop them jointly was not a voluntary option of which the Employer was free to avail itself, or not, under Article XI.H. It was – and is – a clear and explicit contractual requirement which the Employer simply and blatantly disregarded by presenting both its plans for "bidding out" and the alternative coverage bid it accepted to the Association as faits accomplis and merely inviting the Association to identify areas of incomparability in the alternative plans.
Perhaps the Association should have raised an earlier and more forceful objection to the Employer's unilateral actions, by insisting upon joint development of such procedures and specifications when first told of the Employer's plans in May 1998 rather than furnishing the FIRST specifications as requested and grieving later. But the failure

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to proceed jointly as Article XI.H. clearly required was primarily the Employer's, and the lack of earlier protest from the Association cannot be construed as a waiver of its rights thereunder. In this regard and to this extent, therefore, the grievance must be sustained.
Equally clear, and clearly dispositive of this grievance, is the requirement in Article XI.H. that an "insurance carrier" must be selected to provide and administer the "insurance coverage" specified in Article XI, and that "[t]he insurance company shall guarantee the levels of benefits agreed to" (emphasis added). It may be true, and I am perfectly willing to take arbitral notice, that entire or partial employer-self-funding of health insurance benefits indeed is a common phenomenon in today's employment landscape. It may also be true that during contract negotiations the parties never talked about prohibiting employer-self-funding of health insurance benefits. It may be equally true that delivery of such benefits to bargaining unit employees would not be jeopardized, as a practical matter, by the Employer self-funding medical and hospitalization insurance deductibles and vision and dental benefits. But all that is irrelevant in light of the plain contractual requirement that an insurance company provide and guarantee the insurance coverage specified in Article XI.
The Employer certainly has a contractual right to obtain "comparable" insurance coverage from a source other than FIRST. But that right must be exercised within the contractual constraints clearly stated in Article XI.H. – namely, that procedures and biddable specifications used for "bidding the insurance provisions contained" in Article XI "be jointly developed by the BOARD and ASSOCIATION," that an "insurance carrier [be] selected to provide the insurance coverage," and that an "insurance company shall guarantee the levels of benefits agreed to."
The parties themselves, jointly, might agree to change some of those requirements, either in negotiations for their next agreement or in the process of "jointly develop[ing]" procedures and biddable specifications for mid-contract-term bidding by potential alternative providers. But the Employer had no right to change or disregard them unilaterally, no matter what financial advantage it might achieve by doing so, nor may I ignore them. To do so would be an abuse of authority under Article XV.D., which says the "arbitrator shall have no power to alter, add to or subtract from the terms of the Agreement."

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For these reasons it must be concluded that the Employer violated Article XI.A and H. by unilaterally adopting procedures and biddable specifications for mid-contract-term bidding by would-be alternative providers of insurance coverage comparable to FIRSTPAK plans specified in Article XI and by implementing a health care plan in which not all coverage is provided by an insurance carrier and all benefits are not guaranteed by an insurance company and which therefore is not comparable, as a whole, to the specified FIRST plans. The only appropriate remedy for these violations is to set the new plan aside and order restoration of the FIRST plans and compliance with Article XI.A. and H. in the event of any future bidding for alternative providers.
AWARD
The Grievance is sustained. The Employer shall discontinue its "Some Place Health Care Plan," reinstate the FIRST insurance plans specified in Article XI of the 1997-2000 agreement and which were in force until February 1, 1999, and comply fully with Article XI.A. and H. in any solicitation of bids from and/or selection of potential alternative providers of insurance coverage comparable to the specified FIRST Plans as long as the 1997-2000 agreement remains in effect.

Paul E. Glendon, Arbitrator October 6, 1999