Court blocks rule easing retiree healthcare coverage

Last Updated: 2005-02-07 13:05:47 -0400 (Reuters Health)

By Joanne Morrison

WASHINGTON (Reuters) - An advocacy group for U.S. retirees said on Friday that it won a court order barring the government from allowing companies to drop older retirees from health care coverage while retaining coverage for younger retired workers.

The court ruling, issued Friday, temporarily blocks the U.S. Equal Employment Opportunity Commission from issuing a new rule that would allow companies, battling rising healthcare costs, to drop health insurance coverage when their retirees turn 65 and become eligible for Medicare coverage.

"We took this action to protect our members and all retirees from losing their rights under the age discrimination laws," said David Certner, AARP's director of federal affairs. "This would have put millions of retirees at great risk for losing their retiree health coverage."

The ruling, sought by AARP, a powerful nonprofit organization representing more than 35 million Americans 50 years and older, was issued by a U.S. District Court judge in Philadelphia.

Corporate employer groups, struggling to cover ever-rising healthcare costs, took a blow with the ruling. They warned that not being able to drop coverage when retirees become eligible for Medicare would ultimately create a disincentive for employers to provide health benefits for any retirees, such as those younger than 65.

"Certainly, employers are faced with a very difficult challenge to maintain health plans for their current workforce, nevermind their retired workforce," said Michael Eastman, director of labor law policy at the U.S. Chamber of Commerce.

VIOLATING RULES

The latest court ruling prohibits the EEOC from publishing for 60 days its controversial rule that would effectively allow companies to drop coverage for older retirees without violating U.S. age discrimination laws.

In addition, a hearing has been set for March 31, to hear arguments on permanently banning the rule.

The EEOC's rule was precipitated by a U.S. appeals court ruling in 2000 in which that court stated that Erie County, Pennsylvania, could not discriminate against retirees who are 65 or older by not offering them healthcare coverage if the county insures its younger retirees.

That ruling has had a chilling impact on employers, according to the Chamber of Commerce's Eastman.

Since then, many employers nationwide have not offered retirees medical coverage because of the uncertainty stemming from that 2000 appeals court decision, he said.

"The Erie County decision froze a lot of employers in their tracks," said Eastman.

In a statement issued Friday evening, the EEOC warned that any delay in implementing its rule will "endanger vital protections" for retirees. Vowing to defend its position, the agency said it was confident that it would ultimately be able to implement its rule.

"The rule removes an impediment to employers so that they may continue providing retirees with critical health care coverage," said Cari Dominguez, chair of the EEOC.

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