Weather | Sports | Forums | Comics | Classifieds | Calendar | Movies

Judge: Companies can't favor younger retirees in health benefits

In a lawsuit brought by the AARP, a federal judge says companies can't base benefits for retirees on whether they qualify for Medicare.

PHILADELPHIA - A federal judge Wednesday barred the government from allowing companies to provide younger retirees with better health care benefits than they give to older ones who qualify for Medicare.

The AARP, the nation's largest advocacy group for retirees, sued in February to block the proposed rule change, saying that giving differing packages to the young and the old amounts to age discrimination.

In her finding in favor of the AARP, U.S. District Judge Anita B. Brody said the U.S. Equal Employment Opportunity Commission lacked the power to make the change.

Brody said the proposed regulation also would violate a legal precedent that companies may offer different health plans to retirees of different ages only if they are of equal value or provide equal benefits.

EEOC chairwoman Cari M. Dominguez said she planned to appeal.

EEOC officials had proposed exempting retiree health plans from age discrimination regulations as part of an attempt to slow the trend of companies eliminating retiree health benefits altogether.

The percentage of companies with more than 1,000 workers offering health coverage to retirees dropped from 80 percent in 1991 to 57 percent in 2003, according to a study by the benefits consulting firm Hewitt Associates and the Kaiser Family Foundation.

Large employers and some unions have argued that age discrimination rules are worsening the problem for people looking to retire before age 65, when they would qualify for free or low-cost care through Medicare.

Somewhere between 10-million and 15 million retirees receive health care coverage from former employers. Of those, between 3-million and 4-million are younger than 65.

Many companies now offer a type of "bridge" health insurance for retirees in their late 50s and early 60s who aren't old enough to qualify for government health programs and likely would find it difficult to pay for medical care out of their own pockets.

It is also common for the same companies to provide a less comprehensive package, or nothing at all, to workers once they turn 65 and qualify for Medicare.

American Benefits Council president James A. Klein said companies increasingly see their prime responsibility as providing coverage for the younger group of workers.

"Those are the people who need it more," Klein said. "Absent an employer-sponsored plan, those people would potentially have nothing, and they might have to postpone their retirement if not for our help."

The AARP opposes that argument.

"We recognize that there has to be some sacrifice here, but there has to be shared sacrifice," said AARP lawyer Michele Pollak. "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."

AARP associate executive director Chris Hansen said the EEOC's proposed rule would have permitted employers to reduce or eliminate health benefits "for any reason whatsoever" for approximately 10-million retirees.