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Retiree health plans can be cut

The EEOC says its ruling will help preserve benefits, but the AARP and others say the practice is discriminatory.

By CHRISTINA REXRODE, Times Staff Writer
Published December 28, 2007


There was a time, when health care costs weren't rising at twice the rate of the cost of living, that employers promised their workers lifetime medical benefits.

Now, faced with a wave of baby boomers on the brink of retirement, those companies have a formal escape clause.

On Wednesday, the Equal Employment Opportunity Commission ruled that employers don't have to offer health benefits to retired workers once they turn 65 and are eligible for Medicare. Many companies already require workers who retire before 65 to register for Medicare when they're old enough, but the EEOC ruling gives legal merit to the practice, which has been challenged in court.

The government's move earned praise from some employer and labor organizations, but swift condemnation from the AARP.

The retiree group says the practice is just legalized age discrimination and lets employers off the hook for health care commitments they've made.

The EEOC, meanwhile, says it is helping preserve retiree health benefits. Employers are more likely to offer medical coverage to retired workers if they know that Medicare will help absorb the cost for the older ones.

Without the EEOC's ruling, financially strapped employers would have simply reduced or eliminated health benefits for all retirees, the government suggests.

"A commendable idea," said Bob Archer, the Tampa Bay area coordinator for SHINE, a government program that helps seniors with Medicare issues. "I think it's long overdue."

Archer and others are quick to point out that there's no federal law requiring companies to offer benefits to retired workers.

"The fact that someone worked for you does not mean you have to provide health insurance for them or their spouse or their dependents for life," said John Robinson, an employment lawyer for Fowler White Boggs Banker in Tampa. "That is just a blank check that no one can really afford."

And those promises have become even less affordable as life expectancies have increased.

"Used to be, nobody lived to be 65," said Robinson, "so you were giving away something nobody ever used."

Now, with the oldest baby boomers passing 60 - and likely to live for many years after they retire - employers are wising up to how unsustainable their benefits plans are.

According to a series of surveys by the Mercer consulting firm, the percentage of large employers offering health insurance to Medicare-eligible retirees fell from 44 percent in 1993 to 29 percent in 2006.

"We have limited resources, an aging population," said Theresa Gallion, a labor lawyer with Fisher & Phillips in Tampa. "This is the same predicament that Social Security is in."

Gallion thinks the EEOC ruling is justifiable: If employees have paid into Medicare, they might as well take advantage of it. "It's not like these people are now going to be destitute," she said. "It's reasonable to say, 'You've got other resources, and the younger people do not.'"

[Last modified December 27, 2007, 22:21:53]

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