Prior to 2003, the City of Pittsburgh provided healthcare at no cost to its employees. On December 29, 2003, due to the City entering Act 47 protection as a financially distressed local government, a minimum employee contribution of 15% for healthcare was mandated, and the City became self-insured for healthcare benefits beginning January 1, 2005. This self-insured status continued until January 1, 2008, when the City switched to a fully-insured contract of insurance until January 1, 2016. It then reverted to self-insurance and remained so to the present day, although it remained fully insured for vision and dental benefits.
When rates were adjusted in 2007, the Fraternal Order of Police, Fort Pitt Lodge No. 1, challenged the calculation of the new rates through a grievance procedure. An arbitrator sustained the grievance, determining what the City could and could not include in calculating employee contributions. Subsequent agreements allowed the City to choose between fully insured and self-insured options and gave the FOP’s healthcare consultant access to the City’s healthcare consultant’s information during the entire process.
In 2016, the City again became self-insured for healthcare. Police officers contributed 15% of the premium for health, vision, and dental in 2017 and 17.5% thereafter. There was a provision of the expired CBA that required the City to contribute toward the cost of health insurance coverage for retirees an amount equal to the amount charged for insurance by the carrier providing coverage on the date of retirement. This subsidy was not referred to by the parties as a “premium,” but was instead referred to as a “premium equivalent rate.” The City, after becoming self-insured, provided health insurance for retirees but deducted the premium equivalent rate from the year of the retirees’ retirement, with this rate being set by the City.
The FOP filed a grievance in January 2017, alleging that the City had unilaterally imposed inflated rates for dental and vision benefits that exceeded the required 15% premium cost. The FOP further contended that the City had failed to provide information regarding premium equivalent rates and comparable rates between the City’s selected healthcare carriers. They requested a refund of overpayments beyond the 2016 rates.
The Arbitrator ultimately found that the City’s calculations had inflated the premium equivalent rate, which in turn inflated the active officers’ contributions. The Arbitrator ordered a recalculation of employee contributions and directed that affected members be made whole for overpayments, retaining jurisdiction to resolve issues regarding retiree benefits. Later, when the Arbitrator began to hear the issue of retiree healthcare, the City challenged the Arbitrator’s jurisdiction, arguing that the FOP’s grievance failed to adequately raise the issue of the retiree subsidy, that a 2019 interest arbitration award had mooted the controversy, and that it was procedurally defective for a grievance arbitrator to retain jurisdiction for over four years from the date of the filing. The FOP argued that the City was improperly calculating the subsidy by deducting the member contribution from the full cost of the subsidy, in contravention of the working agreement.
The Arbitrator found that she retained jurisdiction and awarded the retirees the reimbursements. The City filed an appeal in the trial court, which denied the appeal. The Court also noted that the City and FOP had conferred on and produced a 2020 Memorandum of Understanding that required the City to reimburse 2017 and 2018 medical contributions, and that the premium equivalency rates, recalculated pursuant to a 2018 arbitration award, ended up being undisputed, and that the City was therefore unable to contest the fact that retirees were overcharged. The City appealed once more.
The Commonwealth Court of Pennsylvania upheld the lower court’s ruling, finding that the Arbitrator had not exceeded her jurisdiction nor violated due process. “The FOP’s grievance complained that the premium equivalent rates were inflated, i.e., inaccurate, and specifically sought a refund for any resulting overpayment. Because the subsidy turns on the premium equivalent rate in place at the time of the officers’ retirement, an inflated premium equivalent would lead to retirees’ overpaying beyond the 2016 rates because of a resulting reduced subsidy. At bottom, then, the Arbitrator’s award redresses the harm alleged by the FOP and the instant grievance adequately implicated the subsidy issue. To hold otherwise would be to ‘suggest that a demand for arbitration must be crafted with the exacting specificity of a complaint’ despite our Supreme Court’s admonition to the contrary.”
Regarding the City’s due process claims, the Court was “perplexed by the City’s assertion that its counsel was prevented from fully cross-examining the FOP’s expert witness, because a plain reading of the Arbitrator’s hearing transcript suggests otherwise. In reality, the City’s counsel was able to cross-examine the FOP’s expert witness and did so by inquiring about errors regarding the exact figures to which the expert witness testified.”
The Court thus affirmed the trial court’s judgment, upholding the Arbitrator’s award of reimbursements of $257,333.32 and $233,089.78 for 2017 and 2018.
City of Pittsburgh v. FOP Fort Pitt Lodge No. 1, 2025 Pa. Commw. Unpub. LEXIS 52 (Pa. Cmwlth. Ct., 2025).