Judge Blocks Rule Allowing Reduction of Retiree Health Coverage After Age 65
Judge Anita Brody of the Federal District Court in Philadelphia on Wednesday blocked a new rule that would have allowed companies to reduce or eliminate health care coverage for retirees ages 65 and older while providing such benefits to younger retirees, the New York Times reports (Pear, New York Times, 3/31). The rule, written by the Equal Employment Opportunity Commission and scheduled to take effect in April, would have allowed employers to eliminate health insurance coverage for retirees once they become eligible for Medicare.
AARP in February filed suit to block the rule, alleging that the commission would exceed its authority if it granted the rule final approval. AARP said its position is supported by a 2000 opinion by the U.S. 3rd Circuit Court of Appeals that found offering two separate packages of benefits to younger and older retirees would violate U.S. anti-discrimination laws.
Supporters of the rule said that rising health care costs might force some employers to stop offering retiree health benefits altogether if they were required to provide the same level of benefits to younger and older retirees. Last month, the federal court granted AARP a temporary injunction against the new rule to allow the lawsuit to proceed (American Health Line, 2/7).
Brody issued a permanent injunction against enforcing the rule, saying it "is contrary to congressional intent and the plain language of the Age Discrimination in Employment Act" (New York Times, 3/31). Brody said that "the EEOC argues persuasively that without this exemption, employers will reduce or eliminate health benefits for all retirees, no matter what their age" (Smith, Philadelphia Daily News, 3/31).
However, she added that the 3rd Circuit Court of Appeals "has already ruled that allowing employers to give retirees 65 and older health benefits that are inferior to the health benefits given to retirees who are younger than 65 is illegal under ADEA" (Crenshaw, Washington Post, 3/31).
AARP Associate Executive Director Chris Hansen said the rule would have allowed employers to reduce or eliminate health benefits for as many as 10 million current retirees older than 65 and many more future retirees. He added, "The court's ruling provides critical protection for older retirees living on fixed incomes by making it clear that the EEOC cannot rewrite the ADEA and negate Congress's express intent to prohibit discrimination based on age in all aspects of employment, including benefits" (Washington Post, 3/31).
AARP lawyer Michele Pollak added, "We recognize that there has to be some sacrifice here, but there has to be shared sacrifice. You can't just arbitrarily decide that the oldest, frailest people will have their benefits reduced so that the less old can get a better package" (Caruso, AP/Raleigh News & Observer, 3/30).
EEOC Chair Cari Dominguez said the agency will appeal the ruling. She added the decision was a "misunderstanding of the EEOC's authority," and the agency "remains confident on both policy and legal bases in its authority to implement the rule."
Daniel Yager, a spokesperson for the HR Policy Association, said, "Pre-Medicare retirees constitute a significant share of the uninsured, but the AARP's actions and the district court's decision will only exacerbate the situation."
Susan Relland, a spokesperson for the American Benefits Council, added, "The EEOC rule is a sensible one that validates a long-standing practice supported by unions and employers alike" (Washington Post, 3/31).