Retiree Health Benefit Cost

[kmartin]

What is the name of your state? Michigan

My mother is a retiree from a large company. While I understand that this company does not pay for the health benefit costs as a condition of the retirement package, I beleive that they are discriminating the group of retirees based on their age. The cost of the benefit is at least 2 times what the COBRA cost would be to a worker who left the company.

My question is can a company legally discriminate against a group of employees by placing them in a "retiree" benefit group, whose premiums are then based on the claims history of a group, which is higher, as medical care is needed more as you age?

Why are these people being singled out to pay HUGE rates while a COBRA recipient pays much less...

This cannot be legal....

Help!

 

[CIAA]

kmartin,

It is perfectly legal and a wonderful benefit for most. I'm certainly surprised that it is 2x the COBRA cost, but it is an older group, many with health problems I'm sure. The only other alternative is private coverage or none at all.

 

[ALawyer]

Health insurance is not a miracle but a method of dividing up the costs to the group that is covered.

The total costs of health insurance include the actual fees paid by the plan for actual health care to members (doctor visits, hospitalizations, tests, prescription drugs, etc.), the costs of administration (staff salaries, costs of processing claims, investigating, computer costs, etc.), marketing and underwriting costs, possible reinsurance (to protect the plan or insurer if claims exceed certain targets), costs for state premuim taxes (often about 2%+), as well as a profit margin to the carrier for the risk it is taking.

The healthier the group, the lower the utilization of health care, the lower the costs for the group. Thus how a company allocates segments of its workforce and then absorbs, or charges back to the segment, the costs of insuring that segment can have a profound impact.

Unfortunately, the law is very murky on how a company, and its health plan, may treat the segments, and particularly murky when it comes to retired employees.

Lawyers have to look at issues such as these: What did the company promise -- explicitly or implicitly -- as part of its retirement plan, or to induce early retirements? When did the company promise it? Was there any agreement with the employee, or a union or any third party? Might there be a state or federal law that impacts what they can do?

This is something that a retiree association might best work on . (Vision a group of retirees together picketing the Comany headquarters or annual meetings with signs "X Co Rapes its Retirees", letters to editors of publications doing surveys on nice places to work, putting a measure in the proxy statement for equality, etc.) It sounds awful, but unfortunately I don't have a simple solution.