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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State of Alaska, Department of Administration, and Acting Commissioner Amanda Holland, in an official capacity v. The Retired Public Employees of Alaska, Inc. (1/21/2022) sp-7581

State of Alaska, Department of Administration, and Acting Commissioner Amanda Holland, in an official capacity v. The Retired Public Employees of Alaska, Inc. (1/21/2022) sp-7581

            Notice:   This opinion is subject to correction before publication in the P                              ACIFIC  REPORTER.  

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            303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email  

                                                                                                                                       

            corrections@akcourts.us.  



                         THE SUPREME COURT OF THE STATE OF ALASKA                                               



STATE  OF  ALASKA,                                                      )  

DEPARTMENT  OF                                                          )     Supreme Court No. S-17577  

                                                                                                                   

ADMINISTRATION,  and  ACTING                                            )  

COMMISSIONER  AMANDA                                                    )     Superior Court No. 3AN-16-04537 CI  

                                                                                                                                               

HOLLAND,  in  an  official  capacity,                                   )  

                                                                                                    

                                                                        )     O P I N I O N  

                                    Appellant,                          )  

                                                                                                                          

                                                                        )     No. 7581 - January 21, 2022  

            v.                                                          )  

                                                                        )  

                               

THE RETIRED PUBLIC                                                      )  

                                                        

EMPLOYEES OF ALASKA, INC.                                               )  

                                                                        )  

                                    Appellee.                           )  

                                                                        )  



                                                                                                                          

                        A              

                           ppeal from the Superior Court of the State of Alaska, Third  

                                                                                                           

                        Judicial District, Anchorage, Eric A. Aarseth, Judge.  



                                                                                                                  

                        Appearances:                  Katherine  Demarest,  Assistant  Attorney  

                                                                                                                    

                        General, Clyde "Ed" Sniffen, Jr., Acting Attorney General,  

                                                                                                                    

                        Juneau,  for  Appellant.                     Susan  Orlansky,  Reeves  Amodio  

                                                                

                        LLC, Anchorage, for Appellee.  



                                                                                                                 

                        Before:           Bolger,  Chief  Justice,  Winfree,  and  Maassen,  

                                                                                                                                  *  

                                                                                                                                     

                        Justices,  and  Matthews  and  Eastaugh,  Senior  Justices. 

                        [Carney and Borghesan, Justices, not participating.]  

                                                                                            



            *           Sitting by assignment made under article IV, section 11 of the Alaska                                                 



Constitution and Alaska Administrative Rule 23(a).                                 


----------------------- Page 2-----------------------

                       BOLGER,  Chief  Justice.
  

                       WINFREE,  Justice,  dissenting.
  



I.	         INTRODUCTION  



                       Article  XII,  section  7,  of  the  Alaska  Constitution  protects  "[a]ccrued  

                                                                                                                                    



benefits"  of  public  retirees  from  diminishment.                                        The  State  redesigned  the  dental  

                                                                                                                                            



insurance  plan  offered  to  retirees  in  2014,  narrowing  coverage but  also  decreasing  

                                                                                                                                    



premiums paid by retirees, and the Retired Public Employees of Alaska challenged the  

                                                                                                                                                  



redesign.            After  a  bench  trial  the  superior  court  concluded  that  the  new  plan  

                                                                                                                                              



unconstitutionally diminished retirees' accrued benefits.  

                                                                                                     



                       The State appeals, arguing that the superior court erred by determining the  

                                                                                                                                                  



dental plan was a constitutionally protected "accrued benefit" and by refusing to consider  

                                                                                                                                         



premium rates for retirees as relevant to the diminishment analysis.  We agree with the  

                                                                                                                                                  



State on the second point only.  The Alaska Constitution does protect public retirees'  

                                                                                                                                         



option to purchase dental insurance as an accrued benefit, but both coverage for retirees  

                                                                                                                                           



and price to retirees influence the value of this option.  Therefore, we vacate and remand  

                                                                                                                                           



for the superior court to reevaluate the plan changes and incorporate premium pricing  

                                                                                                                                           



into its analysis.  

              



II.	        FACTS AND PROCEEDINGS  

                                       



            A.	        Since 1979 The State Has Offered Its Retirees The Option To Purchase  

                                                                                                                                       

                       Dental Insurance; A 2014 Plan Revision Narrowed Coverage While  

                                                                                                                                            

                       Reducing Premiums.  

                                           



                        State employees and retirees are members of the Alaska Public Employees  

                                                                                                                                    

Retirement  System (PERS).1                           Enrollment in PERS is generally a condition of public  

                                                                                                                                            



            1          See  AS39.35.001(establishingPERStoencouragehiring andretention "by                                                       



establishing plans for the payment of retirement, disability, and death benefits to or on                                                          

behalf of the members").                     



                                                                         -2-	                                                                 7581
  


----------------------- Page 3-----------------------

                          2  

employment.    The State has provided medical insurance benefits to various tiers of                                                                                 



                                                                                                                                                                        3  

PERS members ever since the Alaska Legislature required the State to do so in 1975.                                                                                        



                          In 1979 the Legislature also authorized the State to begin offering dental  

                                                                                                                            

                                                      4   Under the current statute, the State "may obtain" a group  

insurance to public retirees.                                                                                                                                 

                                       



insurance  policy  covering  PERS  members  that  provides  audio,  dental,  and  vision  

                                                                                                                                                             

insurance subject to various conditions.5                                           These conditions include requirements that  

                                                                                                                                                                  



each participating governmental unit individually decide to opt-in and that any members  

                                                                                                                                                        

electing to participate pay the cost of the dental insurance.6  

                                                                                                                      



                          Since 1979 the State has provided PERS beneficiary recipients the option  

                                                                                                                                                             



to  participate  in  a  Dental-Visual-Audio  (DVA)  plan  with  premiums  paid  by  the  

                                                                                                                                                                   

recipients.7              Implementing  regulations  adopted  by  the  Division  of  Retirement  and  

                                                                                                                                                                  



             2            See  AS 39.35.120 (requiring inclusion in the defined benefits retirement                                                  



plan   for  most   State   employees);   AS   39.35.720   (requiring   inclusion   in   the   defined  

contribution retirement plan for most State employees hired on or after July 1, 2006).                                                                                   



             3            See Ch. 200,  1-2, SLA 1975 (codified as amended at AS 39.35.535)  

                                                                                                                                                    

("Each person who is entitled to receive a monthly benefit from the retirement system  

                                                                                                                                                           

shall be provided with major medical insurance coverage." (emphasis added)).  Certain  

                                                                                                                                                                           

categories of members need not pay premiums to receive this coverage, but others do.  

        

AS 39.35.535(c)(2).  



             4            Ch. 55, 1, SLA 1979 (codified as amended at AS 39.30.090).  

                                                                                                                               



             5            AS 39.30.090(a)(10) (providing that "[t]he Department of Administration  

                                                                                                                                            

may obtain a policy or policies of group insurance" and "a person receiving benefits  

                                                                                                                                                          

under AS 14.25, AS 22.25, AS 39.35, or former AS 39.37 may obtain auditory, visual,  

                                                                                                                                                             

and dental insurance").  

                      



             6            AS  39.30.090(a)(3)  (requiring  unit  opt-in),  (10)  (specifying  "a  person  

                                                                                                                                                            

electing to have insurance under this paragraph shall pay the cost of the insurance").  

                                                                                                                                                                        



             7            When applying for retirement, employees mark a box to indicate whether  

                                                                                                                                                          

                                                                                                                                               (continued...)  



                                                                                  -3-                                                                           7581
  


----------------------- Page 4-----------------------

Benefits provide that "[a] benefit recipient may elect to obtain [DVA] insurance,"                                                            8 but  



failure to timely apply to do so "will result in the loss of all rights to apply for or obtain                                             

                                                                  9   A benefit recipient who subsequently fails to  

[DVA] insurance under this chapter."                                                                                                               

                                                                                                                                  10   Another  

make premium payments also "forfeits the right to participate in the plan."                                                             

                                                                                                                        



regulation cautions:  "When necessary to maintain the financial integrity of the [DVA]  

                                                                                                                                          

plan, the administrator may change the premiums and the terms of coverage."11  

                                                                                                                                           



                       In keeping with these regulations, communications from the State to its  

                                                                                                                                                  



employees have consistently portrayed its dental insurance plan as available to any  

                                                                                                                                                



employee who upon retirement elects to participate and pays the associated premiums.  

                                                                                                                                                        



These publications speak of employees' "right[s] to elect coverage" and, once enrolled,  

                                                                                                                                       



their "rights to future coverage."  

                                                          



                       The  1979,  1984,  1985,  and  1989  booklets  all  promise  that  the  DVA  

                                                                                                                                            



coverage for recipients who elect to participate "will continue . . . as long as [they] are  

                                                                                                                                                 



eligible to receive a monthly benefit" from PERS and "the premiums are continuously  

                                                                                                                         



paid" by the recipients.  The 1984 booklet specifies that "coverage will consist of the  

                                                                                                                                                 



benefits described in this booklet."   The 1989 booklet warns that "[t]he cost of this  

                                                                                                                                                



insurance is subject to change each year."  

                                                                          



            7          (...continued)  



they  choose  to  enroll  in  the  DVA  plan.  



            8          2  Alaska  Administrative  Code  (AAC)  39.210(a)  (2021).   



            9          2  AAC  39.220(e).   



            10         2  AAC  39.240(b).  



            11         2   AAC   39.280.    The   "administrator"   is   defined   as   "the   director   of   [the  



division]  or  their  designee."   2  AAC  39.290(1).   



                                                                        -4-                                                                  7581
  


----------------------- Page 5-----------------------

                                                   The booklets published between 1990 and 2014 all caution that "[t]hese                                                                                                                                                                                



benefits   may   change   from   time   to   time"   before   summarizing   the   available   dental  



coverage. But these booklets still specify that a recipient's coverage shall end only if that                                                                                                                                                                                                                         



recipient fails to pay the required premium, decides to discontinue participation, or                                                                                                                                                                                                                                          



becomes ineligible to receive PERS benefits in general. And they still speak in terms of                                                                                                                                                                                                                                        



retirees' "rights to future coverage" or their initial "right[s]" to purchase coverage.                                                                                                                                                                                                                                      



                                                   From 2000 to 2013, the monthly premiums retirees paid for individual                                                                                                                                                          



DVA coverage rose from 41 to 70 dollars. As a result of these increases, which mirrored                                                                                                                                                                                                                



the rising cost of care, the State decided to substantially revise the terms of the DVA                                                                                                                                                                                                                            



plan.   The new dental plan (the 2014 plan) took effect January 1, 2014, replacing the                                                                                                                                                                                                                                      



previous plan (the 2013 plan).                                                                                       



                                                   Significant   structural   changes   in   the   2014   redesign  included   reducing  



payments to out-of-network providers inorder toincentivizeuseofin-networkproviders                                                                                                                                                                                                                   



and adding frequency, age, or other types of limitations to many services. The revisions                                                                                                                                                                                                              

                                                                                                                                                                     12  narrowed coverage for 21 services,13 had  

entirely eliminated coverage for 7 services,                                                                                                                                                                      



                          12                       These eliminated services were diagnostic casts and study models, topical                                                                                                                                                                                  



fluoride   for   adults   without   specified   dental   conditions,   palliative   emergency   care,  

apicoectomy, periodontal splinting, gold foil restoration, and inlays.                                                                                                                                                                   



                          13                       The 2014 plan added frequency, age, or other types of limitations to 21  

                                                                                                                                                                                                                                                                                                                              

 services (oral exams, diagnostic x-rays, routine full-mouth x-rays, routine bite-wing  

                                                                                                                                                                                                                                                                                                  

x-rays, prophylaxis, periodontal maintenance, space maintainers, repairing bridges and  

                                                                                                                                                                                                                                                                                                                          

dentures, extractions and other oral surgery, root canals and retreatment, pulp capping,  

                                                                                                                                                                                                                                                                                                       

periodontal scaling and root planing, full-mouth debridement, anesthesia, crowns and  

                                                                                                                                                                                                                                                                                                                          

onlays, bridges, full dentures, partial dentures, adjusting dentures, replacing dentures,  

                                                                                                                                                                                                                                                                                                     

and tissue conditioning). The plan also decreased coverage levels for 2 of these services  

                                                                                                                                                                                                                                                                                                          

 such that they would cost the recipient more (adjusting dentures and repairing bridges  

and dentures).  

                                                        



                                                                                                                                                               -5-                                                                                                                                                    7581
  


----------------------- Page 6-----------------------

                                                                                                 14                                                                       15  

an indeterminate effect on 4 services,                                                                left unchanged 3 services,                                               and resulted in more                    



favorable coverage for only 1 service(athleticmouth                                                                                      guards). Themodifications                                               yielded  



a 10% decrease in premiums; for instance, the monthly premium for a retiree paying for                                                                                                                                       



individual DVA coverage decreased from 70 to 63 dollars.                                                                                                     



                  B.	              The Superior Court Concluded The 2014 Plan Violated The Alaska                                                                                                               

                                   Constitution By Diminishing Retirees' Benefits.                                                                                         



                                                                                                                                                                 16  

                                   TheRetired                      PublicEmployeesofAlaska(RPEA)                                                                                                                  

                                                                                                                                                                      filedacomplaint against  



                                                                                                                                                                                                                         

the State in January 2016, alleging that the 2014 plan adoption violated article XII,  



                                                                                                                                                                                                        

section 7 of the Alaska Constitution by diminishing the accrued benefits of employees  



                                                                                                                                                                                                           

hired by the State before 2014.                                                             RPEA's complaint sought a declaratory judgment  



                                                                                                                                                                                                                            

recognizing  the  DVA  plans  as  an  accrued  benefit  and  the  2014  changes  as  an  



                                                                                                                                                                                                                     

unconstitutional diminishment of  that protected benefit,  as well as injunctive relief  



                                                                                                                                                                                                                            

requiring the State to either reinstate the 2013 plan or adopt an equivalent plan for  



                                                                

employees hired before 2014.  



                                                                                                                                                                                                              

                                   Both parties moved for partial summary judgment on whether the optional,  



                                                                                                                                                                                          

retiree-funded  DVA  insurance  plan  qualified  as  an  accrued  benefit  constitutionally  



                                                                                                                                                                                                                   

protected from diminishment.  The superior court granted RPEA's motion and denied  



                                                                                                                                                                                                                       

the State's, concluding  that the DVA benefits were constitutionally  protected  from  



                                                                                                                                                                                                                           

diminishment.  The court denied the State's request for reconsideration, explaining that  



                  14               For one service (implants), the new plan removed a limitation, and for                                                                                                                   



another service (sealants), it removed one limitation while adding another. The redesign                                                                                                                      

added limitations on two other services (periodontalmaintenanceandspacemaintainers)                                                                                                                 

while simultaneously making them cost less to the recipient by increasing their coverage                                                                                                                     

levels.   



                  15               These unchanged services were fillings, brush biopsy, and nitrous oxide.  

                                                                                                                                                                                                                                       



                  16               RPEAisanonprofit corporation with thepurposeofeducatingretireesfrom  

                                                                                                                                                                                                                        

State employment about their benefits and assisting them in obtaining those benefits.  

                                                                                                                                                                                                                                  



                                                                                                               -6-	                                                                                                    7581
  


----------------------- Page 7-----------------------

                                                                                                                               

"[a]lthough retirees self-fund their DVA coverage, the option to buy the insurance is still  



                                                                           

part of the benefit they are offered at the time of employment."  



                                                                                                                          

                    The court analogized the State's offer to provide DVA insurance to retirees  



                                                                                                                            

who  choose  to  participate  and  pay  the  premium to  an  option  contract.                                      The  court  



                                                                                                                    

acknowledged that no statute required the State to offer DVA coverage to its employees,  



                                                                                                                              

but reasoned that since the State did offer this coverage, the employees "have [the] right  



                                                                                                                       

to take advantage of that" by purchasing DVA insurance based on the terms in existence  



                                                                                                                      

when they were hired.  The court determined that this right vested when the employee  



                                                                                                                               

became  employed  and  enrolled  in  the  system,  not  when  the  employee  retired  and  



                                                                                                                      

purchased  the  insurance.                 The  option  to  purchase  DVA  insurance  was  therefore  



                                                                        

constitutionally protected from diminishment.  



                                                                                                                    

                    A  bench  trial  ending  in  July  2018  addressed  whether  the  2014  plan  



                                                                                                                               

diminished retirees' benefits in comparison to the 2013 plan.   RPEA presented two  



                                                                                                                                

witnesses who explained the plans' terms.  Exhibits introduced by RPEA detailed the  



                                                                                                                  

claims denied in 2014, 2015, and 2016 under the 2014 plan. A dentist and a periodontist  



                                                                                                                                 

explained the medical necessity and recommended frequency of 14 services limited by  



                        

the 2014 plan.  



                                                                                                                               

                    RPEAalso presented an expertin benefitsplan evaluations who opined that  



                                                                                                                            

based  on  the 2014  plan's  imposition  of  frequency,  age,  and other  limits,  the 2014  



                                                                                                                            

revisions overall diminished the plan's value.   But the expert also stated that when  



                                                                                                                  

evaluating  a  plan,  he  usually  surveyed  the  beneficiaries  to  learn  their  preferences,  



                                                                                                                     

considered the premiums, and weighed estimates of costs in coming years as calculated  



                                                                                                                                

by an actuary; he admitted that he had taken none of these steps when comparing the  



                                                                                                                            

2014  and  2013  plans.               Nor  did  RPEA's  expert  consider  how  many  or  how  often  



                                                                -7-                                                         7581
  


----------------------- Page 8-----------------------

                                                                                                                                                                17  

beneficiaries used any of the services, or how much they paid when using them.                                                                                       



                                                                                                                                                               

Instead, the expert essentially formed his opinion by counting the number of services for  



                                                                                                            

which the 2014 revision decreased rather than increased coverage.  



                                                                                                                                                             

                         The division's chief health policy administrator testified for the State that  



                                                                                                                                                                

the 2014 redesign was intended to eliminate coverage for unnecessary services and to  



                                                                                                                                                 

control costs to rein in rising premiums, while meeting or exceeding industry standards.  



                                                                                                                                                      

She explained that the State seeks to keep premiums low in order to attract healthy  



                                                                                                                                                                     

participants and keep the participating population broad, preserving the plan's stability.  



                                                                                            

An expert witness for the State in dental benefit plan design and analysis also testified  



                                                                                                                                                     

to the importance of keeping premiums low for voluntary, beneficiary-funded plans to  



                                                                                                                             18  

                                                                                                                

avoid the risk of an "actuarial death spiral" leading to plan failure. 



                         The  State  also  presented  a  witness  qualified  as  an  expert  in  actuarial  

                                                                                                                                                   

valuation of health benefit plans. The State's expert estimated the actuarial value19 of the  

                                                                                                                                                               



2014 plan to be either 2.4% or 6.1% higher than the 2013 plan, as measured by the  

                                                                                                                                                              



             17          A utilization report from the third-party administrator showed a higher rate                                                        



of services used per member under the 2014 plan than the 2013 plan.                                                                 



             18          Theexperttestifiedthatas premiums risein abeneficiary-funded, voluntary  

                                                                                                                                                  

plan, dentally  healthy people who need less care tend to drop out.   If this adverse  

                                                                                                                                                     

selection continues, the plan population will skew towards people who use the dental  

                                                                                                                                                        

benefits heavily, risking an "actuarial death spiral" in which rising costs necessitate  

                                                                                                                                               

rising premiums, resulting in a further exodus of healthy people in a self-perpetuating  

                                                                                                                                 

cycle leading to plan failure.  

                                                        



             19          Theexpertdefined actuarial valueofahealth insuranceplanas "theaverage  

                                                                                                                                                      

share of medical spending that is paid by the plan as opposed to being paid out of pocket  

                                                                                                                                                        

by the consumer."                       Actuarial value thus  measures the practical dollar  value of the  

                                                                                                                                                             

coverage itself, incorporating cost-sharing measures like deductibles and co-payments,  

                                                                                                                                           

but excluding premiums and intangible benefits of a plan such as the ability to freely  

                                                                                                                                                         

choose one's own provider.  

                                                       



                                                                               -8-                                                                        7581
  


----------------------- Page 9-----------------------

                                                                                                                                

proportion of costs paid by the average member in 2014 as opposed to 2013.  But the  



                                                                                                                                

superior court rejected this expert's valuation as unreliable for a number of reasons. For  



                                                                                                                                

instance, even though out-of-network claims made up 27% of all claims in 2014, the  



                                                                                                                       

expert's valuation of the 2014 plan excluded them. Since a 2014 plan member generally  



                                                                                                                            

must pay a higher proportion of the cost for out-of-network claims, this omission likely  



                                                        

overstated the 2014 plan's actuarial value.  



                                                                                                      

                    The superior court also disregarded the testimony of the State's expert in  



        

part because he relied solely on the plan booklet in forming his opinion.  The superior  



                                                                                                           

court accepted RPEA's evidence that coverage under the 2013 plan included several  



                                                                                      

services not specifically mentioned in the plan booklet.  The superior court also found  



                                                                                                                            

credible  RPEA's  expert  witness  testimony  "that  many  of  the  2014  changes  deny  



                                                                                                                             

coverage for dentally necessary care, where such coverage was available under the 2013  



           

plan."  



                                                                                                                                

                    The superior court ruled in favor of RPEA in April 2019. It interpreted the  



                                                                                                                                

anti-diminishment provision in the Alaska Constitution to protect "retirees' benefits, not  



                                                                                                                                  

the premium paid for the benefits . . . regardless of who pays the premium."  And it  



                                                                                                                                

concluded that the State's 2014 plan violated the Alaska Constitution by diminishing the  



                                                                                      

benefits available to retirees in comparison to the 2013 plan.  



                                                                                                                               

                     Specifically,  the  court  found  the  2014  plan  diminished  coverage  for  



                                                                                                                            

24 services and enhanced coverage for only 3 services.  The court asserted that rather  



                                                                                                                         

than merely counting up these changes, it had "considered themagnitude of each change,  



                                                                                                               

the number of members affected by the changes, the fact that two of the enhancements  



                                                                                                                               

are in themselves a mix of an enhancement . . . and a diminishment," and "the fact that  



                                                                                                                          

the only unequivocal enhancement (coverage for athletic mouthguards) is of limited  



                                                                -9-                                                         7581
  


----------------------- Page 10-----------------------

                                                                                                      20  

utility to a largely retired population."                                                                   The court also found "the loss of the freedom                                                        



to choose one's dental provider without financial penalty" impaired benefits.                                                                                                                                   And the   



court determined that because                                                  the reduction in coverage was so clear fromthe plan terms,                                                                              



its finding of diminishment did not need to be supported by quantitative or actuarial                                                                                                                           



analysis.   



                                    Thesuperior court awardedRPEA"itsfull reasonablecostsandattorney['s]                                                                                                  

                                                                                                                  21      In addition to the recovery authorized by  

fees" as a prevailing constitutional litigant.                                                                                                                                                                                  

Alaska Civil Rule 79,22 RPEA requested another $51,758.75 in "other reasonable costs."  

                                                                                                                                                                                                                                          



The  State  opposed  this  request.                                                            The  superior  court  awarded  RPEA  all  requested  

                                                                                                                                                                                                            



attorney's fees and costs.  

                                                     



                                    The superior court's April 2019 order declaring the 2014 changes to the  

                                                                                                                                                                                                                               



retiree dental plan unconstitutional "enjoin[ed] the State from continuing to offer the  

                                                                                                                                                                                                                               



2014 retiree dental plan as the only dental plan available to retirees," and the superior  

                                                                                                                                                                                                                 



court entered final judgment in favor of RPEA in August.  In September RPEA filed a  

                                                                                                                                                                                                                      



motion to enforce the April order and "related relief" which the State opposed as an  

                                                                                                                                                                                                                                

untimely attempt to alter the court's final judgment.23                                                                                             The superior court granted two  

                                                                                                                                                                                                                             



                  20                The   clearest   indication   that  the   superior   court   actually   considered   the  



number of members affected by the changes was the court's finding that, after the 2014                                                                                                                                    

plan decreased coverage for fluoride, approved claims for fluoride for adults dropped by                                                                                                                                         

over 5,750:                      from over 7,000 in 2013 to under 1,250 in 2014.                                                                     



                  21                AS  09.60.010(c)  directs  the  superior  court  to  award  "full  reasonable  

                                                                                                                                                                                                         

attorney['s] fees and costs" to a party that has prevailed in asserting a right under the  

                                                                                                                                                                                                                               

United States Constitution or the Alaska Constitution.  

                                                                                                              



                  22                Alaska R. Civ. P. 79(f) lists "the only items that will be allowed as costs"  

                                                                                                                                                                                                                       

recoverable by the prevailing party.  

                                                                                



                  23                Alaska R. Civ. P. 59(f) requires all motions to alter or amend a judgment  

                                                                                                                          

                                                                                                                                                                                                    (continued...)  



                                                                                                              -10-                                                                                                        7581
  


----------------------- Page 11-----------------------

further forms of relief: It (1) prohibited the State from treating the 2014 plan as the                                                                                                                                                                                             



default choice for retirees during the 2020 open enrollment period and (2) directed the                                                                                                                                                                                              



 State "to conduct a complete retrospective review of claims denied under the 2014 plan                                                                                                                                                                                          



that would have been granted had the 2013 plan remained in effect."                                                                                                                                        



                                            The State now appeals from the superior court's conclusions that the DVA                                                                                                                                                         



plan was a constitutionally protected accrued benefit and that the 2014 plan diminished                                                                                                                                                                   



this benefit.                              The State also contests the court's award of attorney's fees and costs                                                                                                                                                            



beyond those specified in Rule 79 and the grant of additional injunctive relief after entry                                                                                                                                                                                   



of final judgment.        



III.                   STANDARD OF REVIEW                                           



                                            We   apply   our   independent   judgment   to  questions   of   constitutional  



interpretation, "adopt[ing] the rule of law that is most persuasive in light of precedent,                                                                                                                                                                  



                                                                   24  

reason, and policy."                                                                                                                                                                                                                                                                 

                                                                           When interpreting the constitution, we aim "to give effect to the  



                                                                                                                                                                                                                                                                                 

intent and purpose of the framers of the constitutional provision and of the people who  



adopted it.  Unless the context suggests otherwise, words are to be given their natural,  



                                                                                                            25  

                                                                                                                  

obvious and ordinary meaning." 



IV.                   DISCUSSION  



                                            Article XII, section 7, of the Alaska Constitution provides:  "Membership  

                                                                                                                                                                                                                                                 



in employee retirement systems of the State or its political subdivisions shall constitute  

                                                                                                                                                                                                                                                              



a contractual relationship.  Accrued benefits of these systems shall not be diminished or  

                                                                                                                                                                                                                                                                                        



                      23                     (...continued)
  



to  be  filed  within   10  days  of  the  judgment's  entry.
  



                      24                     Wilson   v.   State,   478   P.3d   1217,   1221-22   (Alaska   2021)   (alteration  in  



original).  



                      25                    Duncan  v.  Retired  Pub.  Emps.  of  Alaska,  Inc.,  71  P.3d  882,  886-87  (Alaska  



2003)  (quoting  Hammond  v.  Hoffbeck,  627  P.2d   1052,   1056  n.7  (Alaska   1981)).  



                                                                                                                                         -11-                                                                                                                                  7581
  


----------------------- Page 12-----------------------

impaired."    These benefits constitute "an element of the bargained-for consideration                                             



given in exchange for an employee's assumption and performance of the duties of his                                                                   



                          26  

                                                                                                                                                     

employment."                  As a result, these rights vest as soon as the employee is employed and  



                                                                                                                                                    

enrolled in the system, and "system benefits offered to retirees when an employee is first  



                                                                                                                                                       

employed and as improved during the employee's tenure may not be 'diminished or  



                      27  

                                                                                                                                                     

impaired.' "                Modifications to vested benefits are permissible only if they do not  



                                                                                                                                

diminish the benefits; new advantages to employees must offset new disadvantages,  



                                                                                                   28  

                                                                                                                                                       

resulting in benefits of "equivalent value" to employees.                                               Whether the modification of  



                                                                                                                                                     

a health insurance benefit is a diminishment is analyzed from the perspective of the  



                                                                                                                                              29  

                                                                                                                                                  And  

group, rather than the individual circumstances of a particular benefit recipient. 



            26          Metcalfe v. State             , 484 P.3d 93, 97 (Alaska 2021) (quoting                                 Hammond, 627   



P.2d at 1056).     



            27          Duncan, 71 P.3d at 886 (quoting Alaska Const. art. XII,  7).  

                                                                                                                                 



            28          Id. at 892.  Additionally, the alterations "must bear some material relation  

                                                                                                                                              

to the theory of" operating a successful system of benefit provision, and the added,  

                                                                                                                                               

offsetting advantage must "relate generally to the benefit that has been diminished."  

                                                                                                                                                             

Hammond, 627 P.2d at 1057 (first quoting Allen v. City of Long Beach , 287 P.2d 765,  

                                                                                                                                          

767 (Cal. 1955); and then quoting Betts v. Bd. of Admin. of the Pub. Emps.' Ret. Sys., 582  

                                                                                                                                                     

P.2d 614, 618 (Cal. 1978)).  

                                     



            29          We adopted this group-based analysis of diminishment of health insurance  

                                                                                                                                          

benefits in Duncan . 71 P.3d at 891-92.  But we qualified this holding with a caveat: An  

                                                                                                                                                      

old plan - even if not a diminishment from the group perspective - should remain an  

                                                                                                                                                       

option for individuals for whom the new plan would result in "a serious hardship that is  

                                                                                                                                                        

not offset by comparable advantages," unless the State showed "a compelling need for  

                                                                                                                                                      

the change and the impracticability of providing for" such a choice.  Id. at 892.  Neither  

                                                                                                                                              

party here has advocated for this half-measure on appeal.  Therefore, we analyze the  

                                                                                                                                                     

issueon appeal in group-based terms,rather than contemplatingindividualizedor subset- 

                                                                                                                                               

based analysis.  

                             



                                                                          -12-                                                                    7581
  


----------------------- Page 13-----------------------

this analysis must be supported by reliable evidence.                                     30  



                                                                                                                                     

                       The State argues that dental coverage for public retirees is not an "accrued  



                                                                                                                                                

benefit" protected by article XII, section 7 of the Alaska Constitution.  And even if it is,  



                                                                                                                                             

the State argues, the court erred by refusing to consider changes in premium rates paid  



                                                                                                                                

by enrollees in addition to the terms of coverage in its analysis, and thus erroneously  



                                                                              

concluded that the 2014 plan diminished the benefit.  



                                                                                                                                                

                       We conclude that because the State held out the option to purchase its  



                                                                                                                                              

dental insurance plan to employees as part of their retirement benefits package, this  



                                                                                                                                          

option   qualifies   as   an   accrued   benefit   and   is   constitutionally   protected   from  



                                                                                                                                                

diminishment.  But because the value of the option to purchase the plan is affected by  



                                                                                                                                         

both the plan's coverage and price to the purchaser, analysis of the option's value should  



                                                                                                                                                 

incorporate both these dimensions.  Therefore, by refusing to consider the reduction in  



                                                                                                                                           

premiums  paid  by  enrolled  retirees,  the  superior  court  applied  an  erroneous  legal  



                                                                                                                                       

standard when concluding the State's redesign diminished the benefit's value.  



                                                                                                                             

           A.	         The Superior Court Correctly Determined The Alaska Constitution  

                                                                                                                                        

                       Protects The Option To Buy Dental Insurance As An Accrued Benefit  

                                                           

                       For State Retirees.  



                                                                                                                                                 

                       When determining whether the Alaska Constitution protects something as  



                                                                                                                                               

an "accrued benefit," we ask whether it is "an element of the consideration that the  



                                                                                                                                                 31  

                                                                                                                                                      

[S]tate  contracts  to  tender  in  exchange  for  services  rendered  by  the  employee." 



Article XII, section 7 uses the term "accrued benefits" without limitation, and our case  

                                                                                                                                             

law  favors  defining  the  term  broadly:32                               We  have  previously  determined  that  it  

                                                                                                                                                 



           30          Id.  at 892.   



           31          Hammond, 627 P.2d at 1059.               



           32  

                                                          

                       Duncan, 71 P.3d at 887.  



                                                                      -13-	                                                                7581
  


----------------------- Page 14-----------------------

encompasses    medical    insurance    plans    and    death    benefits    payable    to    retirees'  

beneficiaries.33                                                                                                              

                        Accrued benefits incorporate "all retirement benefits that make up the  



                                                                                                                              

retirement benefit package that becomes part of the contract of employment when the  



                                                                                                                      

public employee is hired," including not only "dollar amounts" but also "the practical  



                                                                 34  

                                                                      

effect of the whole complex of provisions." 



                    The  State  contests  the  superior  court's  conclusion  that  retirees'  DVA  

                                                                                                                          



insurance plans qualify as accrued benefits.   The court determined that "[a]lthough  

                                                                                                                 



retirees self-fund their DVA coverage, the option to buy the insurance is still part of the  

                                                                                                                              



benefit they are offered at the time of employment."  Because the State decided to offer  

                                                                                                                            



DVA coverage to its employees, the court reasoned, retirees "have [a] right to take  

                                                                                                                            



advantage of that" option by purchasing DVA insurance based on the terms in existence  

                                                                                                                     



when they were hired.  

                          



                    The State attempts to dismiss the superior court's analogy to an option  

                                                                                                                         



contract by arguing that in contract law, "[t]o create an enforceable option, the terms  

                                                                                                                          



must be clear and fixed - an offer to transfer a particular thing for a particular price at  

                                                                                                                                



some time in the future."   It claims that AS 39.30.090 creates only an illusory and  

                                                                                                                             



unenforceable "agreement to agree" by authorizing the State to offer dental insurance  

                                                                                                                    



without requiring it to do so.  In contrast, the statute in Duncan - the case in which we  

                                                                                                                               



held major medical insurance to be an accrued benefit -  required the State to provide  

                                                                                                                       

major medical insurance.35                The State portrays the dental insurance plan as optional for  

                                                                                                                              



          33        Id. ;  Hammond,  627  P.2d  at   1059.  



          34        Metcalfe  v.  State,  484  P.3d  93,  97  (Alaska  2021).  



          35        See  Duncan,   71   P.3d   at   885 n.4, 888   ("Each   person   who   is   entitled   to  



receive   a   monthly   benefit   from   the   retirement   system   shall   be   provided   with   major  

medical  insurance  coverage."  (emphasis  added)  (quoting  Ch.  200,    1-2,  SLA  1975)).  



                                                              -14-                                                        7581
  


----------------------- Page 15-----------------------

both the State and retirees, arguing it does not "accrue" unless or until retirees buy the                                                                                                    



coverage upon retirement. The State asserts that because members buy dental insurance                                                                                           



by paying premiums instead of "earn[ing]" it by working, the dental insurance is not                                                                                                         



deferred compensation for their labor.                                                  



                              But   this   argument   confuses   the   right   promised   as   part   of   the   initial  



employment   contract   -   the   option   to   purchase   the   dental   insurance   -   with   the  

                                                                                                                                                                                     36     The  

employee's later exercise of that right - the actual purchase of the insurance.                                                                                                            



employees provided consideration for the option by assuming and performing the duties  

                                                                                                                                                                                        

of their employment.37  An employee's rights to retirement benefits "veston employment  

                                                                                                                                                                         



and enrollment in the system," not "when an employee becomes eligible to receive those  

                                                                                                                                                                                         

benefits" on retirement.38  

                                                            



                              Whendeterminingthescopeoftheanti-diminishmentprovisionin Duncan,  

                                                                                                                                                                                  



we looked not only to the statute requiring the State to provide medical insurance, but  

                                                                                                            

                                                                                                                                                             39     Since 1979 the  

to "the various employee publications" which "promise[d] coverage."                                                                                                                           

                                                                                                                                      



State  has  unequivocally  chosen  to  offer  PERS  beneficiary  recipients  the  option  to  

                                                                                                                                                                                                



participate in a DVA plan, with premiums paid by the recipients.  

                                                                                                                             



               36             Metcalfe,    484    P.3d    at    100    (dismissing    the    State's    argument    "that  



AS   39.35.350   was   simply   an   offer   to   contract  again  in   the   future   under   specified  

terms . . . and that the offer could be revoked any time before it was accepted").                                                                                                     



               37             See id. ("[C]onsideration for that benefit, like every other benefit of the  

                                                                                                                                                                                              

system, was simply the 'employee's assumption and performance of the duties of his [or  

                                                                                                                                                                                               

her] employment.' " (alteration in original) (quoting Hammond, 627 P.2d at 1056)).  

                                                                                                                                                                                                 



               38             Hammond, 627 P.2d at 1055 (footnote omitted); see also Metcalfe, 484  

                                                                                                                                                                                            

P.3d at 100 ("[T]he State's 'offer' was irrevocable when the employee accepted State  

                                                                                                                                                                                          

employment in objective reliance on the promise that conditional reinstatement . . . [was]  

                                                                                                                                                                                        

among the benefits of enrollment in the system.").  

                                                                                                                     



               39              71 P.3d at 889.  

                                                       



                                                                                              -15-                                                                                       7581
  


----------------------- Page 16-----------------------

                             The State's previous communications to employees about the DVA plan                                                                                    



consistently  speak   in   terms   of   the   recipients'   "rights"   to   elect   coverage   and,   once  



enrolled, their "rights" to future coverage.                                                    Regulations provide that failure to timely                                     



elect DVA insurance "will result in the loss of all rights to apply for or obtain [DVA]                                                                                       

                                                                 40  and that a benefit recipient who fails to make premium  

insurance under this chapter,"                                                                                                                                            

payments "forfeits the right to participate in the [DVA] plan."41                                                                          The 1979, 1984, 1985,  

                                                                                                                                                                                 



and  1989  booklets  all  promise  that  the  DVA  coverage  for  recipients  who  elect  to  

                                                                                                                                                                                        



participate "will continue as long as [they] are eligible to receive a monthly benefit" from  

                                                                                                                                                                                   



PERS and "the premiums are continuously paid" by the recipients. More recent booklets  

                                                                                                                                                                           



similarly assure readers that "[n]ew benefit recipients who elect coverage at retirement  

                                                                                                                                                                       



will be covered under this plan."  

                                                           



                             DVA booklets from 1991, 1998, 2000, and 2003 caution that "[t]hese  

                                                                                                                                                                           



benefits may change fromtime to time." The booklets nonetheless provide that coverage  

                                                                                                                                                                          



for  a  recipient  will  end  only  if  the  recipient  fails  to  pay  the  premium,  decides  to  

                                                                                                                                                                                        



discontinue participation, or becomes ineligible to receive PERS benefits in general.  

                                                                                                                                                                                               



Another regulation alerts beneficiaries:   "When necessary to maintain the financial  

                                                                                                                                                                         



integrity of the [DVA] plan, the administrator may change the premiums and the terms  

                                                                                                                                                                                 

of coverage."42   But it says nothing about the State reserving the right to modify the plan  

                                                                                                                                                                                    



for any other reason, let alone to terminate the DVA program.  

                                                                                                                    



                             The State has thus long held out the option to purchase its DVA insurance  

                                                                                                                                                                        



plan as part of the package of retirement benefits tendered  to  public employees in  

                                                                                                                                                                                        



               40            2 AAC 39.220(e).                          



               41            2 AAC 39.240(b).                          



               42  

                                                                 

                             2 AAC 39.280.  



                                                                                          -16-                                                                                    7581
  


----------------------- Page 17-----------------------

                                                                                                                                                                                                                                                                 43  

 exchange for their performance of services.                                                                                                                                                                                                                                An option to purchase dental insurance in                                                                                                                                                                                                    



 the future has value.                                                                                                    Therefore, we conclude this option is an accrued benefit protected                                                                                                                                                                                                                                                                                



 from diminishment by the Alaska Constitution.                                                                                                                                                                                                                                                



                                         B.	                                     The Superior Court Erred By Categorically Ignoring Premiums Paid                                                                                                                                                                                                                                                                                                                                                      

                                                                                By Retirees When Assessing The 2014 Dental Plan's Value.                                                                                                                                                                                                                                                                                                                                   



                                                                                The State primarily argues that if the diminishment clause applies to the                                                                                                                                                                                                                                                                                                                                                       



 DVA plan, it "protects - at most - the opportunity to purchase a dental plan if one has                                                                                                                                                                                                                                                                                                                                                                                                                        



been created by the State, not the details of coverage."                                                                                                                                                                                                                                                                               But the State also insists that if                                                                                                                                                 



 the diminishment analysis nonetheless applies to theDVAplan's terms,                                                                                                                                                                                                                                                                                                                                                             "premiums must   



be part of the analysis" as well.                                                                                                                                                                       It argues that "[p]rotecting the details of coverage                                                                                                                                                                                                               



 without regard to the expense - as the superior court did - traps retirees in an upward                                                                                                                                                                                                                                                                                                                                                                                              



 spiral of premiums to pay for outdated coverage, ultimately dooming the plan to fail."                                                                                                                                                                                                                                                                                                                                                                                                           



                                                                                At theotherextreme,RPEAportrays theterms                                                                                                                                                                                                                                    ofcoverageasdeterminative                                                                                                                                                  



but the premiums paid by retirees as irrelevant to the diminishment analysis.                                                                                                                                                                                                                                                                                                                                                                                                          RPEA  



 argues   that   the   anti-diminishment   provision   "protects   the   details   of   a   benefit   that  



 determine its value to the retiree, not just the general concept of the benefit." But RPEA                                                                                                                                                                                                                                                                                                                                                                                                  



 simultaneously claims that premiums are irrelevant, interpreting this court's holding in                                                                                                                                                                                                                                                                                                                                                                                                                               



Duncan   as   establishing   "that   the   [C]onstitution   protects   coverage,   not   premiums."   



 Agreeing with RPEA, the superior court read our holding in                                                                                                                                                                                                                                                                                                              Duncan  to mean "that the                                                                                                               



 Alaska Constitution protects retirees' benefits, not the premium paid for the benefits,"   



 and declared that this "applies regardless of who pays the premium." The superior court                                                                                                                                                                                                                                                                                                                                                                                                             



 thus considered the DVA coverage itself to be the accrued benefit protected by the                                                                                                                                                                                                                                                                                                                                                                                                                            



                                        43                                      See Duncan                                                              , 71 P.3d at 888 (concluding that "accrued benefits," as a term,                                                                                                                                                                                                                                                                      



 "includes   all   retirement   benefits   that   make   up   the   retirement  benefit   package   that  

becomes part of the contract of employment when the public employee is hired").                                                                                                                                                                                                                                                                                                                                                                          



                                                                                                                                                                                                                                                       -17-	                                                                                                                                                                                                                                            7581
  


----------------------- Page 18-----------------------

Alaska   Constitution,   dismissing   the   price   of   the   insurance   plan  paid   by   retirees   as  



irrelevant to the diminishment analysis.                                                                        



                                                 1.	                     The coverage provided by the insurance plan is relevant to the                                                                                                                                                                       

                                                                         diminishment analysis.   



                                                 WerejecttheState'sargumentthattheanti-diminishment                                                                                                                                                        provisionprotects   



only the right to purchase whatever dental insurance plan the State might offer, and                                                                                                                                                                                                                        



conclude that the coverage terms are relevant to the value of that right.                                                                                                                                                                                           



                                                 The State bases its argument on the absence of any statute requiring it to                                                                                                                                                                                        



create a dental plan, let alone one with any specific terms or provisions.                                                                                                                                                                                         But the State's                



pre-2014 communications to employees about their benefits package do not merely                                                                                                                                                                                                                 



reference a vague, hypothetically worded opportunity to purchase whatever kind of                                                                                                                                                                                                                                 



dental   plan   the   State   might   offer   at   an   indeterminate   time.     Instead,   they   contain  



straightforward assurances that retiring employees will have the opportunity to purchase                                                                                                                                                                                                  



coverage under the DVA plan offered by the State, and then to continue that coverage                                                                                                                                                                                     



as long as they pay the premiums.  Some of the booklets caution that "[t]hese benefits                                                                                                                                                                                                       



may change from time to time," but this would technically be true for benefits protected                                                                                                                                                                                                 

from diminishment.                                                      44  



                                                                                                                                                                                                                                                                                           

                                                 One regulation does warn employees that, "[w]hen necessary to maintain  



                                                                                                                                                                                                                                                                                      

the financial integrity of the [DVA] plan, the administrator may change the premiums  

                                                                                                     45         But this language may well imply to the reader that the  

                                                                                                                                                                                                                                                                                                               

and the terms of coverage." 



 State's ability to modify the terms of the DVA plan is constrained to changes actually  

                                                                                                                                                                                                                                                                                             



necessary to maintain the plan's financial integrity.  And this regulation is in harmony  

                                                                                                                                                                                            



                        44                       See   id.   at   886   ("Reasonable   modifications   [to   vested   benefits]   are  



permissible.   But to be sustained as reasonable, changes that result in disadvantages to                                                                                                                                                           

employees should be accompanied by comparable new advantages.").                                                                                                                                          



                        45                       2 AAC 39.280.  

                                                                                                           



                                                                                                                                                      -18-	                                                                                                                                              7581
  


----------------------- Page 19-----------------------

with an approach to the diminishment analysis that allows modifications "for thepurpose                                                                           



of keeping a pension system flexible to permit adjustments in accord with changing                                                                            

                                                                                                                                             46   This regulation  

conditions and at the same time maintain the integrity of the system."                                                                                       



may limit the extent of the DVA benefits' protection from diminishment, but does not  

                                                                                                                                                                



render these benefits immune from the diminishment analysis.  

                                                                                                                                  



                           Article XII, section 7 of the Alaska Constitution protects the specific value  

                                                                                                                                                                       



of an accrued benefit, not just the general concept of having a benefit instead of nothing.  

                                                                                                                                                                                   



In  Hammond   v.   Hoffbeck   we   stated   that   the   vested   rights   protected   by   the  

                                                                                                                                                                         



anti-diminishment provision "necessarily include . . . the dollar amount of the benefits  

                                                                                                                                                    

payable."47               In Sheffield v. Alaska Public Employees' Ass'n, Inc. we held that early  

                                                                                                                                                             



retirement benefits for an employee must be calculated using the actuarial table in effect  

                                                                                                                                                                      



whentheemployeebegan hisemploymentrather than theless-advantageous oneadopted  

                                                                                                                                                                  

later.48         In Flisock v. State, Division of Retirement & Benefits we held the State was  

                                                                                                                                                                         



constitutionally  required  to  use  the  specific  method  of  calculating  an  employee's  

                                                                                                                                                         



retirement benefits in effect when the employee was first employed and enrolled in the  

                                                                                                                                                                           

retirement system.49  

                       



                           Undertheanti-diminishmentprovision, modifications to vested benefits are  

                                                                                                                                                                            



permissible only if new disadvantages to employees are offset by new advantages,  

                                                                                                                                                         



              46           Duncan,   71  P.3d   at   889  n.26   (quoting Hammond  v.  Hoffbeck,   627  P.2d  



 1052,   1057  (Alaska   1981)).   



              47           627  P.2d  at   1058.   



              48           732  P.2d   1083,   1085-89  (Alaska   1987).  



              49            818  P.2d  640,  643-45  (Alaska   1991).   



                                                                                    -19-                                                                               7581
  


----------------------- Page 20-----------------------

                                                                                                                                                50  

resulting in benefits of "equivalent value" to employees.                                                                                             Value is the touchstone of this                                     



analysis. We conclude that when the accrued benefit in question is an option to purchase                                                                                                                    



an insurance plan, the services covered by that plan are relevant to the benefit's value.                                                                                                                          



                                   2.	               The price of purchasing the insurance plan to the retirees is also                                                                                                  

                                                     relevant to the diminishment analysis.                                             



                                   We reject RPEA's argument that the insurance premiums paid by retirees                                                                                                       



are irrelevant to the diminishment analysis.                                                                      RPEA's argument and the superior court's                                                       



reasoning on this point both ultimately rely on our statement in                                                                                                       Duncan  that the health                     



insurance benefits themselves were protected, not the cost of the premiums paid by the                                                                                                                                     



               51  

State.                                                                                                                                                                                                                     

                      But the logic of Duncan does not compel the same conclusion here, where the  



                                                                                                     52  

                                                                                                          

retirees themselves pay the premiums. 



                                                                                                                                                                                                                             

                                   In Duncan the State argued the protected benefit was the premium paid by  



                                                                                                                                                                                         53  

                                                                                                                                                                                                           

the public employer, rather than the coverage provided to the employee.                                                                                                                         We disagreed  



                                                                                                                                                                                                                  

for two reasons: First, "[t]he natural and ordinary meaning of 'benefits' in a health  



                                                                                                                                                                                                      

insurance context refers to the coverage provided rather than the cost of the insurance,"  



                                                                                                                                                                                                                 

and second, the State's publications to employees "promise[d] coverage, not merely  



                                                                                           54  

                                                                                                 

payment of a particular premium." 



                  50	              Duncan,  71  P.3d  at  886,  892.  



                  51               See  id.  at 892  ("[The]  health  insurance  benefits  are  benefits protected  by  



article  XII,  section  7,  and  .  .  .  it  is  the  benefits  themselves  .  .  .  rather  than  the  cost  of  the  

benefits  .  .  .  that  receive  constitutional  protection.").   



                  52               See AS 39.30.090(a)(10) ("[A]person electing to have insurance under this  

                                                                                                                                                                                                                           

paragraph shall pay the cost of the insurance.").  

                                                                                                                               



                  53               71 P.3d at 888.  

                                                                



                  54               Id. at 889-90. One such employee handbook read:  "Comprehensive major  

                                                                                                                                                                                                                     

                                                                                                                                                                                                (continued...)  



                                                                                                            -20-	                                                                                                     7581
  


----------------------- Page 21-----------------------

                         The first of those reasons could apply here; ordinarily, the term "benefits"                                         



in the dental insurance context would mean coverage.                                                 But the second reason does not.                              

In  Duncan  the State was paying the premiums,55 so reducing them would have had no  



value to retirees.  Here the retirees are paying the premiums, so reducing them would  

                                                                                                                                                    



have clear value to the retirees.  We did not proclaim premiums categorically irrelevant  

                                                                                                                                              



to diminishment in Duncan . Rather, weurged detailed analysis of "offsettingadvantages  

                                                                                                                                            



and disadvantages" to determine whether a new plan had "equivalent value" compared  

                                                                                                                                              

to an old plan.56  

                               



                         We do not rigidly apply a single inflexible approach to assessing whether  

                                                                                                                                                 



changes to retirement benefits are diminishments; rather, we adjust our  assessment  

                                                                                                                                   

method to the circumstances and structure of the benefit at issue.57                                                                In Duncan  we  

                                                                                                                                                          



                                                                                                                                                             58  

diverged  from  the  individualized  assessment  approach  we  used  in  Hammond .    

                                                                                                                                       



Hammond evaluated changes to fixed income streams, namely occupational disability  

                                                                                                                                               



            54           (...continued)  



medical  insurance  coverage  is  provided  .  .  .  .   There  is  no  cost  to  you  for  this  insurance."   

Id.  at  885  n.5.   



            55          Id.  at  885,  888.   



            56          Id .  at  892.  



            57           See  id. at 892 ("[E]quivalent value must be proven by  a comparison of  

                                                                                                                                                            

benefits provided - merely comparing old and new premium costs does not establish  

                                                                                                                                         

equivalency."); Hammond  v. Hoffbeck, 627 P.2d  1052, 1058 (Alaska  1981) ("[T]he  

                                                                                                                                                  

vested  benefits protected  .  .  . necessarily  include not  only the  dollar  amount  of the  

                                                                                                                                                          

benefits payable, but the requirements for eligibility as well.").  

                                                                                                       



            58           See  Duncan,  71  P.3d  at  891;  Hammond,  627  P.2d  at   1059  ("[A]  

                                                                                                                                                     

determination of whether vested rights to benefits have been diminished must be made  

                                                                                                                                                      

on a case-by-case basis.").  

                                   



                                                                            -21-                                                                      7581
  


----------------------- Page 22-----------------------

                 59  

payments;             in contrast,        Duncan   evaluated changes to health insurance benefits, for                                       



whichindividualutilization fluctuates                          "according to theunpredictable, changing                              medical  

                                             60  We reasoned that this difference rendered the individual  

needs of each individual."                                                                                                       



assessment approach used in Hammond "generally inappropriate with respect to health  

                                                                                                                                        



insurance," and prescribed that health insurance changes be assessed instead from the  

                                                                                                                                             

standpoint of the group.61  

                                              



                      Value is generally defined as "[t]he significance, desirability, or utility of  

                                                                                                                                               

something."62             The price a person has to pay for an insurance plan is relevant to how  

                                                                                                                                           



desirable an option to buy into the plan is.   A reasonable assessment of the value to  

                                                                                                                                               



retirees of an option to purchase dental insurance must include the price of that insurance  

                                                                                                                                  



to the retirees.  

                           



                      By insisting that price is irrelevant, RPEA urges us to mandate a constant  

                                                                                                                                    



quantum of coverage even if this necessitates skyrocketing premiums, arguing that  

                                                                                                                                            



"[r]etirees' protection against excessive premiums inheres in their right to discontinue  

                                                                                                         



participation in the DVA plan."  But RPEA's argument would suggest that an option to  

                                                                                                                                               



purchase coverage at a bargain is equivalent in value to an option to purchase that same  

                                                                                                                                          



amount of coverage for an astronomical sum.  If the State could keep coverage constant  

                                                                                                                                    



but needlessly increase premiums without diminishing the plan's value, the "protection"  

                                                                                                                              



provided by retirees' ability to opt out would be illusory at best.  

                                                                                                     



                       To the holder of an option contract, a lower purchase price is clearly an  

                                                                                                                                              



advantage. To retirees with an option to buy into an insurance plan, lower premiums are  

                                                                                                                                              



           59          627 P.2d at 1058.              



           60          71 P.3d at 891.  

                                         



           61         Id.  



           62  

                                   

                       Value, BLACK 'S  LAW  DICTIONARY  (11th ed. 2019).                          



                                                                     -22-                                                                7581
  


----------------------- Page 23-----------------------

 also clearly an advantage.                                                                                                       Thus, we hold that when premiums are paid by retirees,                                                                                                                                                                                            



 decreases in premiums should be considered relevant to the value of the benefit.                                                                                                                                                                                                                                                                                                               



                                                                We   ultimately   conclude   that   because   the   State   held   out   the   option   to  



purchase   its   DVA insurance                                                                                                                plan   to   employees   as   part   of   their   retirement   benefits  



package, the Alaska Constitution protects this option from diminishment.                                                                                                                                                                                                                                                                                     And because   



this option's value is affected by both the plan's coverage and purchase price, analysis                                                                                                                                                                                                                                                                                             



 of   its   potential   diminishment   should   incorporate   both   these   dimensions.     When  



 determining   that   the   State's   2014   plan   was   an   unconstitutional   diminishment,   the  



 superior court analyzed only whether coverage was diminished.                                                                                                                                                                                                                                                              Deeming premiums   



 categorically irrelevant to the diminishment analysis, the court did not consider whether                                                                                                                                                                                                                                                                                            



the premium decrease, alongside the few documented coverage increases, might have                                                                                                                                                                                                                                                                                                                    



 offset the disadvantages of the coverage decreases.                                                                                                                                                                                                We therefore hold that it was error                                                                                                             



to fail to consider the reduction in premiums paid by retirees as an advantage in the                                                                                                                                                                                                                                                                                                                       



 diminishment analysis.                                                                                          



                                                                The State additionally argues that the superior court erred by concluding                                                                                                                                                                                                                             



the 2014 plan was a diminishment without support from reliable quantitative analysis.                                                                                                                                                                                                                                                                                                                                            



The superior court claimed to have "considered the magnitude of each change" to the                                                                                                                                                                                                                                                                                                                          



plan benefits and "the number of members affected by the changes."  But the superior   



 court did not identify reliable evidence of the number or proportion of members affected                                                                                                                                                                                                                                                                                             

                                                                                                                                                                                                                                                                                  63            RPEA's expert witness in  

by given changes, nor did RPEA provide such evidence.                                                                                                                                                                                                                                                                                                                     



plan  evaluation  essentially  counted  the  number  of  services  for  which  the  redesign  

                                                                                                                                                                                                                                                                                                                                                                                 



 decreased or increased coverage, then compared the resulting totals; he did not consider  

                                                                                                                                                                                                                                                                                                                                                                                    



how many or how often beneficiaries used any of the services, nor how much they paid  

                                                                                                                                                                                                                                                                                                                                                                                                       



                                63                              The only indication to the contrary was the court's finding of a decrease in                                                                                                                                                                                                                                                                       



 adult claims for fluoride following the 2014 plan's reduction in fluoride coverage.                                                                                                                                                                                                                                                                                                                    See  

supra  note 20.                                                        



                                                                                                                                                                                                     -23-                                                                                                                                                                                             7581
  


----------------------- Page 24-----------------------

for   them.     And   ultimately   the   superior   court  disclaimed   any   need   to   support   its  



conclusion with quantitative or actuarial analysis.                                                  



                           We reiterate our admonishment in                                    Duncan  that a benefit's "value must be                                  



proven by reliable evidence. . . . [O]ffsetting advantages and disadvantages should be                                                                                  



established   under   the   group   approach   by   solid,   statistical   data   drawn   from   actual  



experience   -   including   accepted   actuarial   sources  -   rather   than   by   unsupported  

                                                    64   As the plaintiff claiming a constitutional violation, RPEA  

hypothetical projections."                                       



has the burden to show that the plan's value has diminished.  

                                                                                                                          



                           The benefit in question here is the right to buy DVA coverage, at a price  

                                                                                                                                     



that covers the State's costs to provide the coverage, and both price and coverage are  

                                                                                                                                                                       



relevant in assessing plan value.  Benefit value is to be judged from a group rather than  

                                                                                                                                                                    

                                                      65   including  when  evaluating  cost-saving  measures.                                                      The  

an  individual  perspective,                                                                                                                                        

                             



coverage itself need not be fixed; modifications that keep abreast of changing practices  

                                                                                                                                                           

and preferences are expected.66  Premium and coverage limits are permitted as needed  



                                                      67     But as we admonished in Duncan :   "Unusual gaps in  

to maintain plan integrity.                                                                                                                                             

                                    



coverage should be avoided. . . . [T]he coverage that is offered should generally be 'in  

                                                                                                                                                                       



             64           Duncan,   71   P.3d   at   892;   see   also   Hammond,   627   P.2d   at   1058  n.12  



(dismissing as "speculative" the State's "hypothetical projections" of potential increases                                                                 

in benefits).             



             65           Duncan, 71 P.3d at 884, 891.  

                                                                             



             66            See id. at 891 ("[H]ealth insurance benefits must be allowed to change as  

                                                                                                                                                                         

health care evolves.").  

                                               



             67            See id. at 889 n.26 (recognizing the need to make modifications "for the  

                                                                                                                                                                       

purpose of keeping a pension system flexible to permit adjustments in accord with  

                                                                                                                                                                   

changing conditions and at the same time maintain the integrity of the system" (quoting  

                                                                                                                                                            

Hammond, 627 P.2d at1057)).  

                                                               



                                                                                  -24-                                                                            7581
  


----------------------- Page 25-----------------------

keeping with the mainstream' of health insurance packages offered to active public                                                            



                                                                           68  

employees in terms of scope and balance."                                       



                        Given all these variables, it may be impossible to determine whether the  

                                                                                                                                                    



modified plan here is more or less valuable than the plan it replaced.  If that turns out to  

                                                                                                                                                      



be the case, the court should look to whether the modification reflects a good faith effort  

                                                                                                                                                



by the State to continue providing a viable plan in keeping with mainstream DVA  

                                                                                                                                               



coverage for active public employees. This, at a minimum, is required by the prohibition  

                                                                                                                                      



on diminishment of benefits.  

                                     



V.          CONCLUSION  



                        Because it was error to refuse to consider the reduction in premiums paid  

                                                                                                                                                  



by retirees, we VACATE the superior court's judgment and REMAND for the new  

                                                                                                                                                 



diminishment analysis using the correct legal standard.   We thus also VACATE the  

                                                                                                                                                   



superior court's post-judgment rulings awarding attorney's fees and costs and granting  

                                                                                                                                           



additional injunctive relief.  

                                      



            68  

                                                                                                                                                 

                       Id.   at   892   (quoting  Studier   v.   Mich.   Pub.   Sch.   Emps.   Ret.   Bd.,  

                                                                                                                                     

No. 00-92435-AZ, slip op. at 20, 2001 WL 35980737 (Mich. Cir. Feb. 21, 2001)).  



                                                                         -25-                                                                        7581  


----------------------- Page 26-----------------------

                                

WINFREE, Justice, dissenting.  



                                                                                                                     

                     Today the court effectively holds that the legislature created mandatory  



                                                                                                                           

group health insurance benefits for retired State employees and that, under the Alaska  



                                                                                                                    

Constitution, these benefits may not be diminished at or during retirement. I respectfully  



                                                                                                                     

disagree.  In my view the legislature authorized the executive branch, in its discretion,  



                                                                                                                            

to  supplement  mandatory  health  insurance  benefits  with  group  health  (and  other)  



                                                                                                                     

insurance benefit programs for covered individuals' voluntary participation, mandating  



                                                                                                                       

only that retirees be eligible to voluntarily participate in those group health insurance  



                                                                                                                                

benefit programs at the retirees' own expense.  The relevant statute cannot be read any  



                                                                                                                       

other way. It is the legislature's prerogative to authorize discretionary benefit programs  



                                                                                                                                 

for retirees who voluntarily choose to participate in those benefit programs.  It is not the  



                                                                                                                     

court's prerogative to change discretionary retiree benefit programs into mandatory  



                                        

retiree benefit programs.  



                                                                                                                               

                     The constitutionally protected retirement benefit in this context is the right  



                                                                                                                       

to participate - voluntarily and at a retiree's sole expense - in group health insurance  



                                                                                                                    

programs  that  the  State,  in  its  discretion,  establishes  and  maintains  for  employees,  



                                                                                                         

retirees, and other statutorily designated individuals.  A retiree has no constitutionally  



                                                                                                                            

protected contract rights requiring the State to maintain a discretionary group health  



                                                                                                                               

insurance program, a particular group health insurance benefit level that may have been  



                                                                                                                               

in place in years past, or a particular group health insurance premiumlevel that may have  



                                            

been in place in years past.  



                                       

                     I therefore dissent.  



                                                               -26-                                                          7581
  

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