Document: ERIC Debunks AARP Claim that Erie County Provision in Medicare Bill Would Eliminate Health Benefits for Seniors : ERIC

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ERIC Debunks AARP Claim that Erie County Provision in Medicare Bill Would Eliminate Health Benefits for Seniors

The ERISA Industry Committee (ERIC) warned Congress in a letter that stripping out Section 631 (the Erie County provision) in the Senate Medicare Reform Bill (S.1) and failing to include it in the final Medicare conference agreement would lead to the reduction or elimination of health coverage for pre-Medicare retirees. Opponents of the provision, led by the AARP, falsely assert that keeping the provision intact would allow employers to drop coverage for Medicare eligible retirees.

“AARP’s position that the Erie County provision in the Medicare bill would hurt retirees is completely exaggerated, fundamentally unsound, and runs contrary to the interests of older Americans,” said Mark Ugoretz, president of ERIC. “The provision would have the opposite effect – it permits the continuation of coverage that would otherwise have to be reduced or eliminated. If the Medicare conferees do as AARP suggests, the health benefits of retirees who are not yet eligible for Medicare will be reduced or eliminated.”

Section 631 prevents the Erie County court decision from retroactively changing the law, by clarifying that the Age Discrimination in Employment Act (ADEA) does not prohibit an employer from providing health benefits solely to pre-Medicare retirees or from providing different benefits to pre-Medicare retirees than to Medicare-eligible retirees. Without section 631, employers would be forced to follow the result in Erie County, which was a reduction of benefits for pre-Medicare retirees.

“Erie County provides a strong incentive for employers who provide retiree health benefits to pre-Medicare eligible retirees to cut back on or even eliminate those benefits completely,” said Ugoretz. “With escalating health care costs, it is highly unlikely that any employers, either in the private or public sector, will be able to increase benefits to Medicare-eligible retirees as opposed to reducing benefits to pre-Medicare eligibles in order to equalize the cost and comply with the Erie County decision.”

Section 631 has the support of the business community and labor unions, as well as bipartisan support in the Congress. Contrary to the claims made by AARP, enactment of Section 631 will not result in the reduction of benefits for Medicare-eligible retirees. Instead, failure to enact Section 631 would effectively force employers to reduce or eliminate coverage for pre-Medicare eligible retirees.

“Many employer-sponsored retiree health plans provide greater benefits to retirees who are not yet eligible for Medicare than they provide to retirees who are Medicare-eligible,” said Ugoretz. “This practice is a sensible and cost-effective means of meeting retiree health care needs by providing a ‘bridge’ that carries the retiree from the start of retirement until eligibility for Medicare.”

A COPY OF ERIC’s LETTER TO CONGRESS FOLLOWS.

Mark Ugoretz is available to comment further on Section 631 and other retiree health issues. Interviews can be arranged by contacting Doug Baj at (202) 789-1400 or dbaj@eric.org.

The ERISA Industry Committee (ERIC) is a non-profit association committed to the advancement of employee retirement, health, and welfare benefit plans of America's largest employers and represents exclusively the employee benefits interests of major employers. ERIC's members provide comprehensive retirement, health care coverage and other economic security benefits directly to some 25 million active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.

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November 12, 2003

Dear Senator/Representative:

The members of the ERISA Industry Committee (ERIC) urge your support for retaining section 631 of S.1, the Senate-passed Prescription Drug and Medicare Improvement Act of 2003, in the final Medicare conference agreement. Failure to retain this provision will leave in force an aberrant court decision that has the practical effect of forcing employers to reduce or eliminate health coverage for pre-Medicare retirees. Therefore, we urge you to support inclusion of section 631 in the final Medicare conference agreement to ensure that employers can continue to provide retiree health benefits to pre-Medicare retirees.

ERIC is a nonprofit association committed to the advancement of the employee retirement, health, and welfare benefit plans of America's largest employers. ERIC's members provide comprehensive retirement, health care coverage, and other economic security benefits directly to some 25 million active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their costs and effectiveness, and the role of those benefits in the American economy.

The Age Discrimination in Employment Act (ADEA) has for many years been understood to permit employers to provide health benefits solely to pre-Medicare retirees as a bridge to Medicare or to coordinate Medicare-eligible retirees’ health benefits with Medicare. This understanding of the law, which is supported by explicit legislative history, has been consistently relied on by employers, State and local governments, and unions. The Third Circuit’s 2000 decision in Erie County Retirees Association v. County of Erie disregards that legislative history, holding that pre-Medicare coverage provided to bridge the gap between retirement and Medicare eligibility violated ADEA. The result of the case was that the employer was effectively forced to reduce benefits for pre-Medicare retirees without any increase in benefits for Medicare-eligible retirees. Section 631 reiterates Congress’ original intent, and prevents the Erie County decision from retroactively changing the law, by clarifying that ADEA does not prohibit an employer from providing health benefits solely to pre-Medicare retirees as a bridge to Medicare or from providing different benefits to pre-Medicare retirees than to Medicare-eligible retirees.

The Equal Employment Opportunity Commission (EEOC) recently proposed a regulation that clarifies the law in the same way as section 631. The preamble to the proposed regulation very effectively explains the serious threat to retiree health coverage posed by the Erie County case. We support the proposed regulation, but recognize that the only way to permanently and clearly resolve this issue is through legislation.

ERIC strongly supports this provision because it preserves an employer’s ability to provide critical health benefits to pre-Medicare retirees. Contrary to the claims being made by opponents of the provision, section 631 will not result in the reduction of benefits for Medicare-eligible retirees. Instead, section 631 will prevent a large decrease in coverage among pre-Medicare retirees because additional employers will not be forced to follow the result in Erie County. We urge you to support inclusion of section 631 in the Medicare conference agreement.

Sincerely,

Mark J. Ugoretz
President

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