Health Care

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Age and Health: Employers may Drop Older Americans from their Health Plans

Retirement may have just gotten more expensive.

The Equal Employment Opportunity Commission decided on April 22, 2004 to allow employers to eliminate health benefits for retirees who are eligible for Medicare. Any retiree over 65 who receives employer health benefits could be affected by this change.

What’s at stake

More than 12 million retirees over the age of 65 utilize both Medicare benefits and retirement health benefits from their previous employer. The New York Times reports that employer-sponsored health plans often cover areas where Medicare falls short, including co-payments, deductibles, and even catastrophic care.

Why then, would the Equal Employment Opportunity Commission (EEOC) approve a rule that would allow employers to eliminate or reduce these benefits? The EEOC says its decision will help preserve benefits to retirees, not eliminate them.

The EEOC point of view

The EEOC argues that many employers already coordinate benefits, meaning they offer health benefits to retirees until age 65 when they become eligible for Medicare. A federal appeals court ruled in 2000 that this practice violates the Age Discrimination in Employment Act of 1967 (ADEA).

The EEOC, a commission appointed by the president and confirmed by the Senate, oversees litigation related to ADEA and has the power to interpret and to create policy related to this law. The commission says that ADEA allows for some “reasonable exceptions" to the law and that it is “reasonable" for employers to provide fewer benefits to employees who are covered by Medicare.

The American Benefits Council, the American Federation of Teachers, and the National Education Association all support the EEOC decision. They claim that they do not have the funds to provide benefits to all retirees, but they will be able to continue to provide health care to those under 65, thanks to the EEOC.

The EEOC reasons that many employers are in the same position as teachers associations and unions; they may have to eliminate their retiree health programs altogether if they are not allowed to shift some of the burden over to Medicare.

AARP point of view

So far, the group most outspokenly opposed to the decision is AARP. The group, which represents millions of Americans age 50 and older, says the rule will jeopardize the health care of retirees over the age of 65. AARP feels that the rule encourages employers to alter, reduce, or eliminate benefits to retirees.

At the encouragement of AARP, some 50,000 seniors wrote to the commission to oppose the ruling.

In a response entitled "A Message to America’s Retirees," Cari M. Dominguez, the chairwoman of EEOC, says that the rule does not require any cuts to benefits. A preamble to the rule says that "it is not intended to encourage employers to eliminate any retiree health benefits that they may currently provide."

While the EEOC decision may not explicitly persuade employers to cut benefits, AARP fears the worst - millions of retirees 65 and older dropped from their employee health care plans. Without ADEA standing in their way, employers are free to rework health benefits for retirees 65 or older.

AARP plans to do all it can to block the rule from taking affect, including taking its case to the courts, if necessary.

Does Medicare compare?

Employers are not required by law to provide health benefits to retirees, so many are fully dependent on Medicare and have no employee-sponsored back up plan. Before the EEOC decision, these folks were among those most concerned about the recent changes to Medicare. Now, even retirees with comprehensive employer plans have a stake in Medicare reform. To learn more about how Medicare has changed, click here.

The EEOC rule seems to assume that Medicare is equivalent to employee-sponsored plans. While these plans vary greatly, many of them are more thorough than Medicare (i.e. they have prescription drug benefits already in place). What will it mean for Medicare to take on the needs of older retirees whose employer-sponsored plans have been eliminated?

Employee-sponsored plans have helped to meet health care needs for America’s seniors. If employers interpret the EEOC decision as an opportunity to drop benefits, the quality of health care for seniors may diminish.

Discuss these issues with other WomenMatter readers in one of our online forums. If healthcare is an important Life Issue for you, sign up for an e alert and we’ll keep you posted on the subject. Don’t forget to register to vote, and let your representatives know what you think.

Posted on: 5/4/2004

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