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Analysis: Court allows retiree 'exception'

By OLGA PIERCE, UPI Health Business Correspondent

WASHINGTON, June 6 (UPI) -- Employers are now allowed to change the health benefits they offer retirees when they become eligible for Medicare.

In a surprise reversal of an earlier decision, the U.S. Court of Appeals for the Third Circuit ruled the Equal Employment Opportunity Commission, the federal body in charge of enforcing many laws against employment discrimination, could offer employers what it said was a narrow exception to federal anti-age discrimination laws.

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Groups in favor of the ruling say allowing employers -- straining under growing healthcare costs -- to reduce benefits when seniors join Medicare will prevent businesses from dropping retiree health coverage altogether. But a leading senior group said retirees will now lose important benefits without recourse.

Both sides say the decision will have a large impact on the breadth of federal agencies' powers to interpret federal statutes.

"Businesses will not be subject to age discrimination cases if they reduce benefits in keeping with Medicare benefits," said Robin Conrad, executive director of the legal arm of the U.S. Chamber of Commerce.

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With Medicare, seniors' benefits will stay constant, and businesses will be able to afford retiree coverage, she told United Press International.

The AARP, the original plaintiff in the case, said the ruling will hurt seniors.

"This decision will impact all retirees," said Laurie McCann, an AARP senior attorney.

"It basically means when you reach (age) 65, you are exempt from (age discrimination laws)," McCann told UPI.

Most older retirees are not able to buy insurance on the individual market and are also unable to start working at jobs that offer them health benefits, she said. Though they will gain Medicare benefits, "Unfortunately Medicare coverage is just not good enough.

"They could lose their benefits and have no recourse whatsoever."

The group is "seriously considering an appeal," she added, but no decision has been made.

The appeals court initially ruled in favor of the AARP, citing other cases that said federal agencies are subject to legal precedent. But then, in another case, the Supreme Court said agencies should have leeway to interpret statutes unless a court has already explicitly barred their view.

In light of the Supreme Court opinion, Third Circuit Judge Anita Brody reversed her own decision.

"The proposed exemption permits the narrow practice of coordinating employer-sponsored retiree health benefits with eligibility for Medicare and state-sponsored health programs for the necessary and proper purpose of encouraging employers to provide the greatest possible health benefits for all retirees," Restani wrote in her opinion.

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Usually the Equal Employment Opportunity Commission "doesn't want employers to deviate at all from statutory guidelines," said Kim Moore, a Dallas employment law attorney.

"This opinion is really interesting because (the commission) is stepping out a little bit to make an exception.

"This exception is exceptional."

Because of the ruling, employers will save money by only supplementing Medicare coverage, Moore told UPI. "Employers are really going to benefit."

Meanwhile, many more seniors will have a combination of Medicare and employer coverage, she said, but will not see substantial reductions in benefits.

But McCann of the AARP disagreed with the idea that the exception is narrow.

The decision sets the precedent, she said, for federal agencies to "disregard the intent of Congress and blow a hole in a statute."

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