The Supreme Court last week declined to review an appellate court decision that formed the basis for an Equal Employment Opportunity Commission rule that allows employers to reduce health care benefits when retirees become eligible for Medicare.
The decision was greeted positively by representatives of employers, and a benefits lawyer said it will likely mean that health insurers will use the fact that there is certainty to a controversy that has been underway since 2000 to seek to sell new products to their customers.
The decision upholds a June 2007 decision by a panel of the 3rd U.S. Circuit Court of Appeals, based in Philadelphia–as well as a final rule issued by the agency last December providing guidance on the issue.
Reaction to the decision was mixed. The American Benefits Council, which represents employers in Washington, D.C. on employee benefit issues, said employers could “breathe a little easier” as a result of the decision.
ABC president James Klein said, “The Third Circuit Court decision, now final, permits public and private employers to continue the long-standing practice of coordinating retiree health programs with Medicare without fear of running afoul of federal law.”
Without the ability to do so, Klein said, “employers would–for practical purposes–have been compelled to reduce retiree health benefits for younger retirees not eligible for Medicare.”
Stephen Bowers, a benefits lawyer with Cozen O’Connor in Philadelphia, said the decision is a positive both for large employers and health insurers. “I think that because it provides certainty, a lot of the larger employers that are affected by this have been hesitating to make any change until it was finalized.”
They acted in this way because the issue has been debated since 2000, and “everyone was concerned about the ebb and flow [of the litigation and regulation],” Bowers said.
As to health insurers, it will let them sell more targeted products, he said. “It certainly will give them a marketing opportunity.”
“I am sure that they have products ready to go and will use the Supreme Court decision not to review the 3rd Circuit decision to market new products to employers,” Bowers said.