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Posted: January 02, 2008

Feds Free Companies to Drop Retiree Health Insurance Plan

The rights of retirees to retain health insurance benefits took a blow with a ruling by the Equal Employment Opportunity Commission that employers can drop coverage for retirees when they turn 65 and become eligible for Medicare benefits.
 
The EEOC policy, announced last week, enables companies to set up two classes of retirees to effect this change in coverage. It sets up one class for retirees under 65 who are not Medicare-eligible and retain healthcare benefits, and those over 65 who can lose them in favor of Medicare. A company can voluntarily choose to continue providing benefits to over-65 retirees, but they are not required to do so.
 
“This rule will help employers continue to voluntarily provide and maintain these critically important health benefits,” said Naomi C. Earp, the commission’s chairwoman, in announcing the policy change. She noted that more than 10 million retirees depend on health plans sponsored by their former employer as a primary source of coverage or as a supplement to Medicare sometimes called MediGap coverage.
 
Companies have felt the pressure to contain their health plan costs, as premiums have continued to rise, increasing their liability to retirees, who are in general living longer. Premiums from these plans rose 6.1% in 2007 and jumped 78% since 2001, according to the Kaiser Family Foundation.
 
Even before the EEOC policy statement, federal law has not required former employers to insure their retirees, or even current employees, for that matter. While this is the case, many provide insurance for current and retired employees, leading the commission, in its decree published in the Federal Register, to state: “The final rule is not intended to encourage employers to eliminate any retiree health benefits they may currently provide.”
 
Meanwhile, advocacy groups for seniors expressed dismay at the new policy. “This rule gives employers free rein to use age as a basis for reducing or eliminating health care benefits for retirees 65 and older,” Christopher G. Mackaronis, a lawyer for AARP, told the New York Times. “Ten million people could be affected -- adversely affected -- by the rule.”
 
AARP had sued in an attempt to block the EEOC’s policy statement.

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