Broken contract: EEOC ruling will cause some retirees to lose health coverage

Last month, the Equal Employment Opportunity Commission (EEOC) handed down a ruling that will allow employers to treat younger and older retirees differently. What once might have been seen as age discrimination is now OK, according to the EEOC.

What does this mean to the retirees? Well, some workers retire from their jobs with promises of ongoing healthcare benefits. This ruling allows employers to cut off those benefits (even if they were promised) for the older retirees who are eligible for Medicare.

Since there are some things that Medicare doesn't cover, it is often preferable for a retiree to stay on a company health insurance plan as long as possible. But the employers argued that the cost of covering older retirees is too expensive. Rather than cease providing health care to all retirees because of this cost, the employers successfully argued to the EEOC that they should be allowed to drop coverage for those eligible for Medicare (and who are typically the most expensive to insure).
Retirees who are transitioning from a company plan to Medicare will likely have to purchase a Medigap policy to supplement their Medicare coverage. Such policies costs between $100 and $300 per month, but the additional coverage is often worth the cost.

Groups like AARP are saying that all retirees should be treated alike, regardless of their age. Unfortunately, if that argument is successful, companies will very likely go the route of offering no health coverage at all to retirees in order to mitigate their costs.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.