Review of Retiree Health Care Bias Ruling Denied

The 3rd U.S. Circuit Court of Appeals has declined to review a ruling upholding the ability of employers to reduce health benefits to retirees when they become eligible for Medicare, bringing a long-running legal battle near an end.

On an 11-1 vote Tuesday, August 21, the 3rd Circuit denied a request by AARP for the full appeals court to review a unanimous decision by a three-judge 3rd Circuit panel. In that June ruling, the panel said the Equal Employment Opportunity Commission has the authority to implement a rule that would exempt from the Age Discrimination in Employment Act health plan changes for retired workers when they become eligible for Medicare.

The rule was proposed by the EEOC in 2003 as a way of counteracting an August 2000 decision—also by the 3rd Circuit, which is based in Philadelphia—that found the plans were subject to the ADEA, potentially exposing employers with mainstream retiree health care plan designs that reduce retiree benefits to big damage awards.

Experts predicted—and the EEOC later agreed in proposing its rule—that the threat of age discrimination charges would have resulted in employers cutting benefits for younger retirees or eliminating retiree health care programs.

The practical effect of the EEOC rule, which never was implemented because of the AARP challenge, would allow employers to continue to provide—without fear of litigation—a two-tier system of retiree health care coverages, with younger retirees receiving richer benefits than Medicare-eligible retirees.

Laura McCann, a senior attorney with AARP in Washington, said the organization is considering whether to seek a Supreme Court review of the panel’s decision.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.