WASHINGTON – The Supreme Court on Monday gave employers a green light to reduce health benefits for millions of retirees who turn 65 and become eligible for Medicare. The justices turned away a legal challenge from AARP, the nation’s leading senior citizens lobby, which had contended that the lower benefits for older retirees violated the federal law against age discrimination.
The court’s action upholds, in effect, a rule adopted last year by the federal regulators that says the “coordination of retiree health benefits with Medicare” is exempt from the anti-age bias law.
Advocates for companies and labor unions openly disagreed with AARP and applauded the outcome. They said this compromise rule would encourage employers to maintain health coverage for their retirees. Otherwise, employers might drop all benefits for former employees, they said.
They said it would prove especially helpful to those younger retirees who were offered continued health care when they left full-time work.
The legal dispute highlights what some people say is a gap in the law. Employers are not required by law to pay for health benefits for their employees or their retirees. And in most instances, they are free to change their benefit policies or to drop coverage they had offered earlier.
Over the past decade, many employers have pulled back from providing these continued benefits to their retirees because of the high cost. But until Monday it had been unclear whether it was illegal to use a worker’s age – in this instance, 65 – to trigger a reduction in benefits.
“This is good news because it clears up the lingering doubts about the law,” said Rae Vann, general counsel for Equal Employment Advisory Council, which represents large companies. “From a practical point of view, it is also good for retiree health benefits. It means more employers will continue to provide these benefits.”
Bill Raabe, director of collective bargaining for the National Education Association, agreed that employers needed the freedom to adjust benefits for retirees who qualify for Medicare. “The practical effect of any law that requires employers to provide identical benefits for pre- and post-Medicare eligible retirees would be the erosion of post-retirement health care benefits for all,” he said.
AARP, which claims 39 million members, said it was “deeply disappointed” by the court’s rejection of its appeal. It predicted the decision would encourage more cutbacks by employers. 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,” AARP officials said in a statement.
David Sloane, AARP’s senior vice president, said the court battle showed the need for Congress to take up health-care reform. “We have an entirely voluntary system,” he said, one in which employers provide health care if they choose to do so. “This is the fundamental problem we are dealing with. One way to solve the problem would be for Congress to pass comprehensive health-care legislation.”
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