Court decision pleases AARP

A federal court judge strikes down a regulation on retiree health care.
PHILADELPHIA (AP) -- A federal judge barred the government Wednesday from implementing a regulation that would have allowed companies to provide generous health care benefits to young retirees but less coverage to those old enough to qualify for Medicare.
The AARP, the nation's largest advocacy group for retirees, sued in February to block the change, saying giving differing packages to the young and the old amounts to age discrimination.
In her ruling in the AARP's favor, U.S. District Judge Anita B. Brody said the U.S. Equal Employment Opportunity Commission lacked the power to implement the rule. Brody said the proposed regulation also would violate an established legal precedent that companies may only offer different health plans to retirees of different ages if they are of equal value or provide equal benefits.
EEOC chairwoman Cari M. Dominguez plans to appeal.
"The agency remains confident on both policy and legal bases in its authority to implement the rule," she said in a written statement.
Initial intent
The EEOC had proposed exempting retiree health plans from age discrimination rules as part of an attempt to slow the trend of companies eliminating retiree health benefits altogether.
The proportion of companies with more than 1,000 workers offering health coverage to retirees dropped from 80 percent in 1991 to 57 percent in 2003, according to a study by the benefits consulting firm Hewitt Associates.
Large employers and some unions have argued that age discrimination rules were exacerbating the problem for people looking to retire before age 65.
Many companies now offer a type of "bridge" health insurance for retirees in their late 50s and early 60s who aren't old enough to qualify for government health programs and would likely find it difficult to pay for medical care out of their own pockets.
It is also common for the same companies to provide a less comprehensive package, or nothing at all, to workers once they turn 65 and qualify for free or low-cost care through Medicare.
Focus on the young
American Benefits Council President James A. Klein said companies increasingly see their prime responsibility as providing coverage for the younger group.
"Those are the people who need it more," Klein said. "Absent an employer-sponsored plan, those people would potentially have nothing, and they might have to postpone their retirement if not for our help."
That argument was rejected by the AARP.
"We recognize that there has to be some sacrifice here, but there has to be shared sacrifice," AARP lawyer Michele Pollak said. "You can't just arbitrarily decide that the oldest, frailest people will have their benefits reduced so that the less old can get a better package."
AARP associate executive director Chris Hansen said the EEOC's proposed rule would have permitted employers to reduce or eliminate health benefits for about 10 million retirees.
Ramifications
The case had ramifications for retirees like Fred Dochat, of Lancaster, one of the plaintiffs in the lawsuit.
Dochat, 76, worked for Armstrong World Industries for 46 years. He retired a few years short of his 65th birthday when the company downsized.
As a younger retiree, he enjoyed a health care plan similar to what he enjoyed when he worked full-time. Since then, his premiums have gone up and his benefits have been gradually reduced, but he still considers his coverage to be excellent.
When he had bypass surgery six years ago, Dochat said the company's health plan paid for his medications, which would not have been covered by Medicare.
"If they continue to give us older people the coverage very close to what we are getting, then I think we are going to be all right," he said before the court issued its ruling. Dochat said he would oppose any regulatory change that might make it easier for the company to cut its generous coverage.
"It would mean a lot of big changes for us," he said. "We would have to decide where we would have to make cuts."
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