O.C. Ordered to Pay Retirees for Insurance

A Superior Court judge Friday ordered Orange County to pay what could amount to $50 million to thousands of retired county workers who were forced to pay more for their medical insurance after the county stopped contributing to the coverage in 1979.

The decision caps a five-year legal battle between the county and the Orange County Employees Assn., which argued that discontinuing medical insurance contributions violated gov

ernment regulations.

County officials reached Friday declined to comment on the judgment, saying they had not yet seen the ruling. A private attorney represented the county in the case and he could not be reached for comment.

In his 15-page ruling, Judge Claude M. Owens agreed with the association and ordered the Board of Supervisors to pay back the retirees and approve “a health benefit plan or plans that comply with the provisions” of government codes.

Owens said the exact amount of the refund, the number of people affected by the ruling and the method of paying the refunds must still be decided before any money is received by retirees. The attorney for the employees association said up to 46,000 retirees could be affected.

If the association and county cannot agree on a new benefit plan or on payment of damages, the matter will go before the court again for another hearing.

Richard S. Rockwell, attorney for the employees association, hailed the ruling as significant because other counties in the state have also discontinued insurance payments on behalf of retirees.

Rockwell also said Orange County’s decision to halt payments for retirees forced some of them to go without insurance because they could not make the payments. “There were people being cut loose,” he said.

The case hinged on the interpretation of an obscure Government Code section dealing with medical benefits.

Association attorneys argued that the statute required that counties offer the same coverage to retirees as it does to current employees.

Owens agreed with the association, saying it is the board’s duty “to approve health benefits plans that have the same coverage for retirees that is available to active county employees and at no increase in cost to retirees over the cost to active employees.”

Owens rejected arguments forwarded by the county’s attorneys that portions of the statute are “permissive” and that the meaning of certain key phrases in the code are unclear.

For nearly 11 years, Orange County paid all or part of health insurance premiums for retired county employees.

Then, in 1979, the Board of Supervisors voted to stop making payments, agreeing with a staff recommendation that the payments were “not an effective expenditure of benefit dollars,” according to court records.

Officials at the time said county contributions, which amounted to between $22 and $44 per retiree, were “not a vested right but rather (are) subject to the annual discretion” of the county.

They also noted that county employees “have a stronger and more beneficial retirement program than most private sector retirees” even without the medical insurance contributions.

County Counsel Adrian Kuyper said a private attorney handled the case because of the possible conflict of interest that could arise with county employees handling a case that deals with their own health benefits. He identified that attorney as Santa Ana lawyer Ken Smart.

It was not known what action the county would take next or whether an appeal was likely.

Supervisor Thomas F. Riley, contacted at home, had not been informed of the judge’s decision, but he acknowledged that the ruling could be a blow to the county.

“Of course, $50 million is one tremendous liability,” Riley said.

Owens said in his ruling that estimates varied as to how much the county owed retirees, noting that figures as low as $12 million and as high as $50 million were used in the trial.

However, the judge rejected the county’s contention that the expense involved in paying the retirees should exempt the county from having to make a full payment.

“Although this argument would evoke considerable sympathy in the hearts of many taxpayers, the law bars such consideration as an excuse for non-compliance with the law,” Owens stated in his ruling.