Healthcare Federal Appeals Court Ruling Stirs Debate Main Menu
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JANUARY 2001 -
Can Insurance Plans Treat Medicare Retirees Differently? - Within retirement circles, attention has focused on a recent decision
handed by a federal court of appeals, stirring debate over its
potential impact on state and municipal health insurance programs here
in the Commonwealth. According to the 3d Circuit Court of Appeals,
health insurance plans, that provide greater benefits to younger
(pre-65) retirees than those eligible for Medicare, violate the federal
Age Discrimination in Employment Act (ADEA) unless they can show equal
costs for insuring both retiree groups.
Involves Erie County, PA In the case (Erie County Retirees Association v. County of Erie), retired employees of Erie County, Pennsylvania challenged the county's insurance plan which classified retirees into 2 groups - Medicare eligible and those who were not eligible. Medicare retirees, first argued in the federal district court that because of their age (65 being the age at which an individual becomes eligible for Medicare) the county was treating them less favorably than younger (pre-65) retirees and, therefore, violating the ADEA. While the lower (district) court did not accept their argument, the higher (circuit) court, on appeal, agreed with them, finding they had made a claim under the ADEA. Having reached that decision, the appeals court sent the case back to the lower court where it remains pending. Erie County must now prove that both of its retiree plans provide equal benefits or that the costs for both plans are equal. If the county can't prove either equal benefits or costs, then it could be found in violation of the ADEA. What Does It Mean For Massachusetts? It's important to note that the 3d Circuit's decision is only binding in the states of Pennsylvania, New Jersey and Delaware - not Massachusetts. Also, as reported above, the case is far from over with the prospects of an eventual appeal to the US Supreme Court. Regardless, this case has stirred up considerable attention and controversy because it marks the first time that a federal court has applied the ADEA to retirees in this manner. What the implications are for the Commonwealth and municipalities is being debated. As for municipalities, the group health insurance law (Chapter 32B) includes a local option provision which transfers municipal retirees, who are eligible, to Medicare upon reaching age 65. The law (Sec. 18) does require that, if a community adopts Sec. 18, these retirees be offered a Medicare extension plan and that this plan, plus Parts A and B (of Medicare), be of "comparable actuarial value" to the plan in which the retiree was enrolled when transferred. "Even assuming that the Erie County decision is adopted by other circuit courts, like the First Circuit here in Mass, at some point in the future, the 'comparable actuarial value' language in the state law may satisfy the ADEA's requirement that Medicare retirees receive benefits equal to those of non-Medicare retirees," comments Association Counsel Bill Rehrey. "Again, it's a long way down the road before we see if the Erie decision would be adopted here." Also, benefit experts point out that if the decision should be adopted, there would be a major push to change the federal law, particularly from the private sector where the ramifications could be disastrous.
State
retirees, who are Medicare eligible, are transferred to Medicare, upon
reaching 65, in accordance with the state group insurance law (Chapter
32A). Under the specific law (Section 10C), the schedule of benefits
for the Optional Medicare Extension (OME) plans may be related to the
schedules being offered under the non-Medicare plans. |
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