NU Online News Service, April 23, 2004, 1:13 p.m. EDT — The U.S. Equal Employment Opportunity Commission voted Thursday to let employers end retiree health benefits for retirees who become eligible for Medicare.[@@]
The 5-member commission approved a proposed final rule that would let employers coordinate retiree health benefits with eligibility for Medicare and comparable state health benefit programs, the EEOC says.
The EEOC must submit the approved proposed rule to federal agencies for final review. The EEOC must wait for the interagency review before implementing the rule.
The federal Age Discrimination in Employment Act prohibits employers from discriminating against most older employees and retirees on the basis of age.
But the EEOC notes that employers have coordinated retiree health benefits with Medicare benefits for decades.
The 3rd U.S. Circuit Court of Appeals threw coordination of efforts into question in a 2000 ruling on Erie County Retirees Association vs. County of Erie. The court held that ADEA requires employers to assure that retirees who are and are not eligible for Medicare receive health benefits of equal type and value.
“This rule is intended to ensure that the ADEA does not have the unintended consequence of discouraging employers from providing valuable health benefits to retirees,” EEOC Chair Cari Dominguez says in a statement about the ruling.
Adding rules that alienate sponsors of retiree health plans is counterproductive, because most employers offer retiree health benefits voluntarily and have no obligation to continue to do so, Dominguez notes.
Employer groups and benefits groups are welcoming the EEOC decision.
“Despite anxieties and misperceptions created by the AARP, this rule does not cut back retiree benefits,” says James Klein, president of the American Benefits Council, Washington. “It allows for the integration of employer-sponsored coverage with that offered by Medicare. Without this rule, many more pre-age 65 retirees would have their health care benefits reduced or lose coverage completely.”
Klein points out that Erie County, the employer in the case that brought the controversy to a boil, ended up evening out benefits for younger retirees and Medicare-eligible retirees by cutting back on the younger retirees’ benefits, not by improving the older employees’ benefits.
But consumer groups and groups representing older Americans have expressed concern about the ruling.
“More than 12 million Medicare beneficiaries receive benefits from their former employers,” Michael Naylor, advocacy director at AARP, Washington, says in a statement. “AARP is concerned that this rule may jeopardize those benefits.”
Before the Bush administration came into office, the EEOC held that coordinating retiree health benefits with Medicare eligibility constituted an illegal age-based distinction under ADEA.
The EEOC has posted a copy of the proposed rule at http://edocket.access.gpo.gov/2003/03-17738.htm