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Removing Retirement Benefits Treats the Symptom Not the Disease

by Jerry Flanagan, 9:35 a.m. PST, (415) 633-1320

The U.S. Equal Employment Opportunity Commission's (EEOC) decision last week to allow employers to drop health coverage for retirees when they become eligible for Medicare is a dangerous concession to an inefficient and wasteful health care system.

EEOC's pending rule change means that employers may cancel health benefits as former workers turn 65 while continuing to offer coverage to younger retirees. The result is that older seniors, many of whom rely on retirement benefits to supplement Medicare coverage, are left with increased out-of-pocket costs and fewer benefits.

A prior court ruling required employers to offer the same retirement benefits to all age groups. However, a loophole in the Age Discrimination in Employment Act of 1967 allows the EEOC to make "reasonable exemptions" to the law to protect the public interest.

The EEOC reasoned that, "in order to ensure that all retirees have access to some health care coverage, employers and unions may provide retiree health coverage to only those retirees who are not yet eligible for Medicare."

The problem is that letting employers off the hook for retirement benefits removes a powerful incentive for the politically important business community to engage in the debate for a more efficient health care system.

For the last several years, employers have dropped or significantly reduced retiree coverage across-the-board in response to skyrocketing health care costs being driven by waste, inefficiency and profiteering:

** Government data shows that health insurance overhead increased by a record 16.8 percent in 2002 and has eclipsed even prescription drug expenditures as the fastest growing component of health care spending over the last three years.

** A Harvard Medical School study found that health care administrative costs in the U.S. last year totaled $399.4 billion - more than enough to cover all of the uninsured and to provide full prescription drug coverage for everyone in the United States.

** Oligopoly control has ensured that drug companies continue to be the most profitable industry in the world.

The public interest would have been better served if the EEOC had challenged the root causes of the inefficient health care system rather than turn its back on seniors - who, following this decision, are even more vulnerable to rising health care costs.