EEOC Defends Retiree Health Benefits Decision Amid Criticism from AARP

The Equal Employment Opportunity Commission on Friday defended its decision that employers can reduce or eliminate health benefits for retirees when they become eligible for Medicare coverage at age 65, while AARP continued its criticism of the ruling, the Washington Post reports (Joyce, Washington Post, 4/24). On Thursday, the EEOC voted 3-1 to approve the rule, which states that employers who reduce or eliminate health benefits for Medicare-eligible retirees do not violate civil rights law on age discrimination. In addition, the decision allows employers to reduce or eliminate health benefits for retirees who are eligible for state-sponsored health benefits similar to Medicare. The EEOC decision reverses its prior policy, as well as an August 2000 ruling by the 3rd U.S. Circuit Court of Appeals stating that federal law requires employers to ensure that pre- and post-Medicare-eligible retirees receive health benefits of "equal type and value." The EEOC said that it had the power to make "reasonable exemptions" in the public interest to the Age Discrimination in Employment Act of 1967. The new rule states that "in order to ensure that all retirees have access to some health care coverage, employers and unions may provide retiree health coverage to only those retirees who are not yet eligible for Medicare," adding, "They also may supplement a retiree's Medicare coverage without having to demonstrate that the coverage is identical to that of non-Medicare eligible retirees." A preamble to the rule states that it "is not intended to encourage employers to eliminate any retiree health benefits they may currently provide." The ruling must still undergo comment from several federal agencies and review by the Office of Budget Management, but it is expected to stand. Three Republican members of EEOC voted in favor of the new rule, while a Democrat opposed it (California Healthline, 4/23).

AARP Action

Last week, EEOC received more than 10,000 calls and e-mail messages from AARP members opposed to the commission's new rule, the Wall Street Journal reports (Schultz, Wall Street Journal, 4/26). Michael Naylor, director of advocacy for AARP, said that the rule "creates discrimination against older retirees" (Malone, Atlanta Journal-Constitution, 4/24). "All of us understand the pressures employers are under with regard to health costs," Naylor said, adding, "But robbing Peter to pay Paul here is not a good option for anyone and not a good option for the EEOC in particular" (Washington Post, 4/24). Naylor said that AARP would seek revisions to the rule before it is finalized and could ask "allies on Capitol Hill to take legislative action if necessary," the Journal-Constitution reports (Atlanta Journal-Constitution, 4/24). Naylor also said that AARP has "a very good legal case [against the EEOC rule], and we think we can win in court. And we're prepared to take that step if necessary." Vicki Gottlich, an attorney at the Center for Medicare Advocacy, agreed with Naylor, saying that the EEOC rule could cause the "wholesale abandonment of employer-sponsored coverage" for Medicare-eligible retirees, the Philadelphia Inquirer reports (Pugh, Philadelphia Inquirer, 4/24).

EEOC Response

In response to reaction by retirees, EEOC Chair Cari Dominguez on Friday released a statement to "America's Retirees," the Post reports (Washington Post, 4/24). "Unions, teachers' organizations, state and local governments and employers told us that the court's ruling would force them to cut back or eliminate their retiree health benefit programs" because of increasing health care costs, the statement said, adding, "The commission did not want this to happen. We acted so that you may continue to receive the health benefits you want and need" (Philadelphia Inquirer, 4/24). In an interview Friday, Dominguez said that the commission was "concerned the rationale [and] reasoning behind the [decision] wouldn't be fully understood," adding that she felt "beaten up" by seniors' reaction to the rule. However, Dominguez went on to say that the "net effect" of the 2000 appeals court ruling regarding equal benefits "was not to raise the value of post-65 retiree plans, but to reduce benefits." She pointed to a General Accounting Office study that found that 33% of large employers and less than 10% of small employers offered retiree health benefits in 2000, compared with about 70% of all employers in the 1980s, the Post reports (Washington Post, 4/24). EEOC Vice Chair Naomi Earp said, "This rule should be welcome news for America's retirees" (Philadelphia Inquirer, 4/24). Joseph Martingale, national leader for health care strategy at benefits consulting firm Watson Wyatt Worldwide, said that because retiree health benefits are "so obviously beyond affordability to employers," the EEOC rule is "just common sense and in the best interest of retirees" (Washington Post, 4/24).

Broadcast Coverage

Several broadcast programs reported on the EEOC rule:

ABCNews' "World News Tonight": The segment includes comments from Dominguez and Naylor (Reynolds, "World News Tonight," ABCNews, 4/23). The complete transcript is available online.

CBS' "Evening News": The segment includes comments from David Certner of AARP and EEOC Commissioner Leslie Silverman ("Evening News," CBS, 4/25). The complete segment is available online in RealPlayer.

MPR's "Marketplace": The segment includes comments from Joan Bernstein, president of the Older Women's League, and Paul Dennett, vice president for health policy at the American Benefits Council (Scott, "Marketplace," MPR, 4/23). The complete segment is available online in RealPlayer.

NBC's "Nightly News": The segment includes comments from James Klein of the American Benefits Council and Naylor (Reid, "Nightly News," NBC, 4/23). Complete video of the segment in Windows Media and a transcript of the segment are available online.

PBS' "NewsHour with Jim Lehrer": The segment includes comments from Certner and Silverman (Warner, "NewsHour with Jim Lehrer," PBS, 4/23). The complete segment is available online in RealPlayer.

WBUR's "Here and Now": The segment includes comments from Silverman (Young, "Here and Now," WBUR, 4/23). The complete segment is available online in RealPlayer.

This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.