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Employer's Health Plan Modification May Constitute Age Discrimination


Employers these days are constantly looking for ways to reduce their health care costs. Older workers tend to push up premiums, so why not encourage them to leave so as to get those premiums down? One company tried that and got sued for age discrimination. The company won at the district court level, but the Eighth Circuit Court of Appeals reversed and found in part for the employee.

In the case, the employer, Associated Underwriters, was facing financial strain and considered lowering its health insurance fees as a cost-saving measure. In executing its plan to lower health insurance costs, the company urged employee Marjorie Tramp and another employee over the age of 65 to discontinue enrollment in the company's health insurance plan and to instead enroll in Medicare. Management then engaged in email correspondence with insurers concerning quotes for coverage, and those emails further revealed that the company anticipated that its costs would be lowered since many of the "older, sicker" employees had dropped off of the plan.

Tramp was eventually fired and sued the company for age discrimination, among other things.

The employer prevailed on summary judgment at the district court level, and Tramp appealed. The U.S. Court of Appeals for the Eighth Circuit reversed in part, finding that Tramp could feasibly pursue a claim for age discriminationbecause the employer's consideration and treatment of insurance premiums were not "divorced" from age. Further, the court held, a jury could find that considering age in conjunction with health care costs could be discriminatory. The court also pointed to the fact that the email correspondence reflected an insensitivity and crudeness about the relationship between age and health care premiums on the company's part, and those statements could very well demonstrate the employer's intent to lay off older, more expensive employees. Summary judgment was accordingly reversed on the age discrimination claim and Tramp was able to pursue her claim further.

The upshot: Employers are always making changes to their benefits programs, and in most cases, such changes are not discriminatory. But if the impact is to adversely affect a protected class of employees, such as older workers, then they may very well be crossing the line into illegality.

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