(CNSNews.com) - The Supreme Court declined to hear an appeal of a federal policy that allows employers to reduce their health insurance expenses for retired workers once they turn 65 and qualify for Medicare.

The court turned down an appeal from the 3rd U.S. Circuit Court of Appeals in Philadelphia by AARP to undo a rule allowing employers to reduce medical benefits for retirees depending on their age.

On July 14, 2003, the Equal Employment Opportunity Commission (EEOC) proposed to exempt "the practice of altering, reducing or eliminating employer-sponsored retiree health benefits when retirees become eligible for Medicare or a State-sponsored retiree health benefits program" from the Age Discrimination in Employment Act.

Essentially, the EEOC rule allows employers to spend more on retirees under 65 years of age than those over 65 without running afoul of age discrimination laws.

"The Court's action clears the way for employers to discriminate by reducing or terminating benefits for older retirees simply because they've turned 65 years old," said David Certner, legislative policy director for the AARP, formerly the American Association of Retired Persons.

"This double standard, one tier of coverage for those under 65, and another lower tier for those 65 and over, is especially troubling because it comes from the EEOC, the federal government agency created to enforce anti-discrimination policies," he said.

"Beyond blatant age discrimination, the new policy is an ineffective band-aid for the bigger issue facing American employers and workers: the skyrocketing cost of health care," Certner said.

"By allowing employers to reduce or even eliminate health benefits for retirees when they reach age 65, this rule essentially shifts the costs of all retiree health care on to the backs of older retirees," he added.

Human resources organizations supporting the EEOC, however, say the previous system may be unsustainable.

"Although employer-sponsored retiree health plans provide critically needed benefits to millions of retirees, the continued availability of such plans is highly uncertain," said groups such as the Equal Employment Advisory Council, the HR Policy Association, and the American Benefits Council, which filed a brief on behalf of the EEOC.

"Rising costs of health care, together with increases in longevity and changes in accounting rules have placed employers under ever-increasing pressure to reduce expenditures for benefits such as retiree health care coverage," they said.

Because of these rising costs, the groups noted, "Of the employers that voluntarily extend group health insurance coverage to retirees, many take Medicare eligibility into consideration when designing their retiree health plans.

"Coverage serves either as a bridge benefit available to early retirees that terminates once the retiree becomes eligible for Medicare or, for those who become eligible for Medicare benefits, as a supplement to Medicare," they added.

"The EEOC correctly concluded that prohibiting employers from coordinating retiree health plans with Medicare would be contrary to the interest of older workers because it would result in a significant decrease, not enhancement, of health care coverage they would receive in retirement," they said.

Make media inquiries or request an interview about this article.



E-mail a comment or news tip to Monisha Bansal