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Access to Adequate Health Insurance: How Does the Equal Employment Opportunity Commission's Recent Rule Affect Retiree Health

Testimony Before the Senate Special Committee on Aging

Senator Craig, Senator Breaux, and members of the Special Committee on Aging.

Thank you for this opportunity to appear before the Committee. I wish to speak about the importance of retiree health benefits for all retirees, and the need for employers to treat both older and younger retirees equitably under the age discrimination laws.

For many years, AARP has been asking Congress - and many of the other groups and organizations represented at this hearing - to work towards an equitable solution to the age discrimination issues raised for retiree health benefits. An equitable solution is one that recognizes that all retirees, not just young retirees, need the health benefits that employers provide to their retirees. An equitable solution is one that addresses employers' concerns about escalating health care costs and makes it feasible and attractive for them to provide some level of health benefits for all its retirees.

An equitable solution is NOT one that denies benefits to the oldest and often sickest and poorest group of retirees, under the assumption that this will encourage employers to provide retiree health to younger retirees.

Unfortunately, this is the solution the EEOC, and the supporters of its rule, have chosen. Let us be clear what the EEOC rule says: It exempts employer-provided retiree health benefits from the federal Age Discrimination in Employment Act (ADEA). It explicitly permits employers to discriminate by terminating or reducing the supplemental health benefits they provide to older retirees. Regardless of its impact on younger retirees, this rule will risk millions of older retirees getting substantially fewer health benefits than they currently receive. The EEOC rule will encourage employers who currently provide health benefits to older retirees to consider dropping them.

The importance of retiree health benefits is clear. In the wake of a national debate on how best to improve health benefits, including employer-provided benefits, for Medicare-eligible retirees, it surely is not in the "public interest" to encourage employers to eliminate supplemental health benefits for these same people. In fact, the recently enacted Medicare prescription drug law included tens of billions of dollars of direct subsidies to employers to encourage them to maintain these very benefits.

Medicare covers only about half of a typical beneficiary's total health care costs. Medicare beneficiaries must pay out of their own pockets for the many health care services not covered by Medicare as well as for the deductibles, co-pays and co-insurance, and premiums that Medicare requires. Services not covered by Medicare include routine dental, vision and hearing care, long-term care, certain preventive services, and, most importantly, prescription drug benefits. Even after the Medicare prescription drug benefit takes effect, in 2006, beneficiaries will still be responsible for the premium costs, deductibles, and coinsurance associated with that benefit.

Persons receiving retiree health benefits typically have coverage similar to that of those who are still working. While a retiree's liability for the costs of health services under a retiree health plan varies from plan to plan, most include some drug coverage and caps on their annual out-of-pocket costs. Retirees who do not have access to employer-provided retiree health, or who lose it, must look to the private market. But, there is no assurance that the private market will offer a plan with benefits comparable to those that an employer provides; or that is affordable. Moreover, persons who lose their employer-provided benefits after their initial year of Medicare coverage have no guarantee of acceptance into any plan (unless a Medicare Advantage plan is available). This is, of course, a particular problem for persons who are disabled or otherwise have a pre-existing health condition.

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