A federal district judge on Wednesday blocked a Bush administration rule that would have allowed employers to reduce or eliminate health benefits for retirees when they reach age 65 and become eligible for Medicare,
The judge, Anita B. Brody of the Federal District Court in Philadelphia, struck down the rule and issued a permanent injunction that prohibits federal officials from enforcing it.
The rule “is contrary to Congressional intent and the plain language of the Age Discrimination in Employment Act,” the 1967 law that bans most forms of age discrimination in the workplace, Judge Brody wrote.
The rule would have created an explicit exemption to the age discrimination law, allowing employers to reduce health benefits for retirees when they became eligible for Medicare. Under the rule, Judge Brody said, employers could have given older retirees “health benefits that are inferior” to those given retirees younger than 65.
The Equal Employment Opportunity Commission argued that employers were more likely to continue providing health benefits to retirees under 65 if they were allowed to reduce or eliminate benefits for those 65 and older.
AARP, the main plaintiff in the case, rejected that argument. It said the rule would accelerate the erosion of retiree health benefits, a trend that has been evident for more than a decade.
Judge Brody rejected that contention. The commission, she said, was trying to “issue a blanket exemption for illegal behavior,” not confined to a few individual cases. “An administrative agency, including the E.E.O.C., may not issue regulations, rules or exemptions that go against the intent of Congress,” she added.
The law clearly forbids employers to discriminate on the basis of age in setting pay and employee benefits, Judge Brody said. And the law, as interpreted by the appeals court, “prohibits the practice of coordinating retiree benefits with Medicare eligibility,” she said.
Lawyers said the ruling would apply to companies that give health benefits to early retirees and want to reduce coverage when the retirees reach 65 and become eligible for Medicare. Employer-provided health benefits do not duplicate Medicare. Rather, they help retirees pay medical expenses not covered by Medicare. Those expenses could include co-payments and deductibles and prescription drug costs, beyond what Medicare might pay.
Michele Pollak, a lawyer at AARP, said, “It is less expensive for employers to purchase a health plan that supplements Medicare than it is to purchase health benefits for younger retirees not eligible for Medicare.”
The American Benefits Council, a trade group for large employers, and the HR Policy Association, which represents human resource executives at 250 large companies, said they were disappointed with Judge Brody’s decision.
Daniel V. Yager, senior vice president of the association, said the ruling was “a major setback for many employers that are trying to maintain employer-provided benefits for pre-65 retirees.”
I get the feeling we are going to here allot about social Security and Medicare over the next few years.