News

New Year''s Resolution: Lower Health-Care Costs

January 1st, 2008

The Equal Employment Opportunity Commission has finalized a rule that lets employers shift some of their health-benefit burden to Medicare.

A new federal rule affirms how companies can keep their post-retirement health-care costs down.

Employers that provide health benefits to retirees can coordinate those benefits with Medicare without violating the Age Discrimination in Employment Act (ADEA) under a finalized rule from the Equal Employment Opportunity Commission (EEOC) released this week.

Under the rule, retirees of all ages will continue to receive the same benefits. However, the cost to their former employers will decline once they turn 65 and become eligible for the government health-care benefit.

"By this action, the EEOC seeks to preserve and protect employer-provided retiree health benefits, which are increasingly less available and less generous," said Commission Chair Naomi Earp. "Millions of retirees rely on their former employer to provide health benefits, and this rule will help employers continue to voluntarily provide and maintain these critically important benefits in accordance with the law."

The EEOC proposed the rule in response to a controversial decision in 2000 by the U.S. Court of Appeals for the Third Circuit in Erie County Retirees Association v. County of Erie. In that case, the court held that the ADEA requires health insurance benefits received by Medicare-eligible retirees be the same -- or cost the employer the same - as younger retirees' benefits.

After the Erie County decision, labor unions and employers claimed that complying with the decision would force companies to reduce or eliminate their retiree health programs -- leaving millions of retirees age 55 and over with less health insurance, or no health insurance at all.

"The Erie County decision would have made most existing retiree health plans unlawful," said EEOC vice chair Leslie Silverman. "EEOC`s new rule will ensure that employers can continue to offer their retirees much needed health benefits."