AARP Sues Over EEOC Retiree Health Coverage Policy

February 4, 2005 ( - The nation's most prominent lobbying group for older Americans has gone to court to block the Bush Administration from making a policy change allowing companies to cut health care when the covered retirees become Medicare eligible.

The AARP claimed in a US District Court suit filed in Philadelphia that the Equal Employment Opportunity Commission (EEOC) would overstep its authority if it approved rules exempting retiree health benefits from federal age discrimination law, the Associated Press reported. AARP attorneys asked a judge to issue an injunction blocking EEOC from implementing the rule.

“We took this action to protect our members and all retirees from losing their rights under the age discrimination laws” explained David Certner, AARP’s Director of Federal Affairs in a statement . “This would have put millions of retirees at greater risk for losing their retiree health coverage.”  On Friday, the judge temporarily blocked the federal Equal Employment Opportunity Commission (EEOC) from issuing an age discriminatory rule that, according to the AARP, “… opens the door to elimination of employer-sponsored health benefits for Medicare recipients.”  The judge’s ruling delays final implementation for at least sixty days.

Age Claims

Approved in April 2004, the EEOC rule stated that employers are not violating the Age Discrimination in Employment Act (ADEA) if they provide greater health benefits to individuals who retiree early and are not yet eligible for Medicare than they provide to retirees who are 65 or older and qualify for Medicare benefits (See  EEOC Approves ‘Erie County’ Exemption  ).  Some supporters of the rule change had argued that employers facing skyrocketing costs might stop offering retiree benefits if they were forced to provide the same level of care to younger and older retirees.

“The law is clear that if they choose to provide retiree health benefits, they cannot deny them to some of their retirees based on age.” Said Laurie McCann, an AARP attorney.

>Cari M. Dominguez, Chair of the U.S. Equal Employment Opportunity Commission (EEOC), in a  statement said, “I’m saddened and disappointed by AARP’s premature legal action today. The Commission and AARP share values and goals for protecting retirees’ health benefits. But AARP, after failing to work in good faith to offer a viable compromise, is now trying to block a Commission rule that would safeguard those benefits. The rule has drawn strong support from both the employer and labor communities as well as from Members of Congress on both sides of the aisle. The major teachers unions continue to urge the Commission to act because benefits of thousands of teachers nationwide are in jeopardy without the Commission’s rule.

Contrary Perspectives

Among those criticizing the move on Friday was an employer lobbying group that called it “short-sighted and contrary to the interests of retirees.”

“We strongly support the EEOC’s efforts to clarify the application of the age discrimination law to retiree health benefits and believe the rule will simply reassure employers that the valuable health benefits they provide today to retirees of all ages comply with federal law,” said American Benefits Council President James Klein in the statement.

>Mark Ugoretz, President of The ERISA Industry Committee, called the AARP’s move “an unconscionable interference with the regulatory process that will result in the further decline of employer provided retiree health benefits.”  “Retiree health benefits are fast becoming an endangered species as health care costs increase exponentially, especially for the elderly.  The AARP has had and has taken advantage of every opportunity to convince the EEOC, the Department of Labor, the Department of Health and Human Resources, and the Office of Management and Budget of their position.  Every agency with the expertise to decide this important policy decision has reached the same conclusion:  that it is reasonable, proper and sensible for employers to coordinate their retiree health coverage with Medicare.  This last ditch effort to subvert the regulatory process is unconscionable and should be rejected by the court,” Ugoretz said. 

Echoing those sentiments, the American Benefits Council’s Klein noted, “AARP is simply ignoring the fact that many retirees could lose coverage entirely if employers were told they must spend as much on health benefits for retirees who already have Medicare coverage as they spend on early retirees who have no coverage other than the health plan from their employer.”

>On Friday the AARP said it recognizes that rising health care costs pose challenges to all, including employers – and went on to acknowledge that over the past decade, employers have been reducing or dropping retiree health benefits because of rising health care costs.

>The EEOC’s Dominguez noted, “The new rule will help safeguard existing and future health benefits for America’s retirees by ensuring that the Age Discrimination in Employment Act (ADEA) does not impede employers’ ability to offer retiree health plans. Specifically, the rule will clarify that employers may continue to coordinate retiree health benefit plans with eligibility for Medicare or a comparable state health benefit without violating the ADEA. It does not change current employer practices or plans, nor does it affect any other legal obligations an employer may have. On the contrary, the rule removes an impediment to employers so that they may continue providing retirees with critical health care coverage.”

>The six retiree plaintiffs in the suit range in age from 76 to 81, five from Pennsylvania and one from New Jersey. According to the AARP, they all already have faced some downsizing of their health care benefits and, therefore, fear that their benefits could be eliminated under the new rule.  The Pennsylvania plaintiffs are Jack W. MacMillan of State College; Frank A. Wheeler of Philadelphia; Fred Dochat of Lancaster; Gerald Fowler of Mill Hall; and M. Elaine Clay of Blue Bell. The New Jersey plaintiff is Frank H. Smith of Columbus.