Medicare Compliance & Reimbursement

An employer could offer less generous health coverage for older retirees eligible for Medicare or state-sponsored retiree health benefits than it does for younger employees, or even cut coverage entirely for Medicare-eligibles, according to a July 14 proposed rule from the Equal Employment Opportunity Commission..

In 2000, a federal appellate court determined that this practice violates the Age Discrimination in Employment Act, and the EEOC adopted as its national enforcement policy the holding of the U.S. Court of Appeals for the 3rd Circuit in Erie County Retirees Association v. County of Erie. But in Aug., 2001, the agency said it wanted to study the issue and repealed the portions of its compliance manual incorporating the Erie ruling.

The EEOC is now proposing to reverse its earlier policy by exempting from the prohibitions of the ADEA "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."

The rule would utilize the commission's power under the ADEA "to establish such reasonable exemptions to and from any or all provisions of the Act as it may find necessary and proper in the public interest."

In the preamble, the EEOC explains that its proposal is necessary to avoid accelerating the decline in retiree health benefits that is already underway. Given the increasing cost of health care, if employers are forced to offer the same coverage for Medicare-eligible and non-Medicare-eligible retirees, more are likely to cut coverage for the latter rather than increase coverage for the former.

Comments on the EEOC's proposal are due by Sept. 12.