Court: City's early retirees not entitled to insurance

PORTLAND — Former city employees in Medford have no constitutional right to health insurance coverage if they retire early, despite an obligation under state law, a federal appeals court has ruled.

The 9th U.S. Circuit Court of Appeals said Wednesday that state law requiring Oregon cities to make health coverage available "to the extent possible" does not create a property interest in those benefits.

The 14th Amendment of the U.S. Constitution protects against taking property without due process of law, but the 9th Circuit said it did not apply in this case.

The federal ruling followed an Oregon Supreme Court decision last February that the city of Medford must provide health benefits to retired workers unless the city showed it was not possible.

Both rulings resulted from a lawsuit over whether the city of Medford was obligated to provide health insurance to cover the gap between early retirement and age 65.

Former City Attorney Ron Doyle and three other former employees sued the city claiming they were entitled to a health insurance plan to bridge that gap.

The case has bounced back and forth between state and federal courts since 2006, with the 9th Circuit at one point asking the Oregon Supreme Court to clarify state law on those benefits.

The Oregon Supreme Court said in its February ruling that a city is obligated to provide coverage under state law but could be excused depending on the circumstances, including whether the city can afford it.

The 9th Circuit noted that local governments have "functional discretion" over whether it will be possible to offer health insurance to retirees because they can decide "what services they offer, what contractual obligations they undertake and what taxes they levy on their citizens."

Chad Jacobs, general counsel for the League of Oregon Cities, said the federal ruling leaves the application of state law to individual cities.

"The statute has some wiggle room in there," Jacobs said. "So to the extent that a jurisdiction can come forward and demonstrate they can't provide these services, then they can get out of the obligation.

"But if they can't demonstrate it because of financial reasons or some other reasons, then they're going to have to still provide coverage under the statute," he said.

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