Erie County Retirees Ass'n v. County of Erie, Pa.

• Decision Date: 16 April 2001
• Docket Number: No. CIV. A. 98-272 Erie.,CIV. A. 98-272 Erie.
• Citation: 140 F.Supp.2d 466
• Parties: ERIE COUNTY RETIREES ASSOCIATION and Lyman H. Cohen, for himself and all others similarly situated, Plaintiff, v. The COUNTY OF ERIE, PENNSYLVANIA and Erie County Employees' Retirement Board, Defendants.
• Court: U.S. District Court — Western District of Pennsylvania

140 F.Supp.2d 466

ERIE COUNTY RETIREES ASSOCIATION and Lyman H. Cohen, for himself and all others similarly situated, Plaintiff, v. The COUNTY OF ERIE, PENNSYLVANIA and Erie County Employees' Retirement Board, Defendants.

No. CIV. A. 98-272 Erie.

United States District Court, W.D. Pennsylvania.

April 16, 2001.

MEMORANDUM OPINION

McLAUGHLIN, District Judge.

This matter comes to us pursuant to a remand order issued by the United States Court of Appeals for the Third Circuit. Plaintiffs are retirees of the County of Erie ages 65 and older (and therefore eligible for Medicare) who are receiving health care coverage from the County under Highmark "SecurityBlue," a coordinated health care plan provided by Keystone Health Plan West, Inc., a federally qualified health maintenance organization ("HMO"). Plaintiffs contended that the County violated the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621 et seq., by requiring them to accept coverage under this plan while offering younger retirees allegedly superior health care coverage initially under a traditional indemnity plan and thereafter under Highmark "SelectBlue," a "point-of-service" plan. Plaintiffs also asserted various state law theories of liability. On cross-motions for summary judgment, we held that the ADEA did not afford relief in the context of alleged discrepancies in health benefits offered by employers to retirees. Erie County Retirees Ass'n v. County of Erie, 91 F.Supp.2d 860, 880 (W.D.Pa.1999), rev'd, 220 F.3d 193 (3d Cir.2000). The Third Circuit disagreed, and remanded for "further proceedings consistent with [its] opinion, including giving the County the opportunity to establish its entitlement to a safe harbor under 29 U.S.C. § 623(f)(2)(B)(i)." Erie County Retirees Ass'n v. County of Erie, 220 F.3d 193, 217 (3d Cir.2000). For the reasons stated below, we find that the County is not entitled to a safe harbor under 29 U.S.C. § 623(f)(2)(B)(i).¹ Accordingly, we will grant Plaintiff's Motion for Partial Summary Judgment [Doc. No. 16] and deny Defendant's Motion [Doc. No. 26].

I. BACKGROUND

A full rendition of the facts is set forth in our first opinion, Erie County Retirees Ass'n v. County of Erie, 91 F.Supp.2d 860 (W.D.Pa.), rev'd, 220 F.3d 193 (3d Cir. 2000). Beginning February 1, 1998, Plaintiffs were required to either accept health care coverage from the County under SecurityBlue or forfeit coverage from the County altogether. SecurityBlue is different from a traditional indemnity plan "primarily in that the health care needs of each member are coordinated by his or her primary care physician ("PCP"), who is selected from a list of physicians provided in the SecurityBlue Provider directory." Id. at 863. In exchange for the loss of choice with respect to service providers, insureds pay no deductibles and there is generally little or no copayment obligation. The plan generally pays 100 percent of covered services, but no percentage of services that are not authorized. Id. SecurityBlue also differs from a traditional indemnity plan in that it covers pre-existing conditions without a waiting period, and provides benefits for eye examinations, dental visits and hearing aids. Id. In order to maintain coverage under SecurityBlue, Plaintiffs are required to continue to pay their Medicare Part B Medical Insurance Premiums.²

From February 1, 1998 to October 1, 1998, County retirees under age 65 continued to receive health care coverage under the County's traditional indemnity plan while Plaintiffs were required to accept coverage under SecurityBlue. From October 1, 1998 to the present, retirees under age 65 were covered under Highmark "SelectBlue," a hybrid "point-of-service" plan that combines the features of an HMO with the features of a traditional indemnity plan. Under SelectBlue, insureds select either the HMO option or the traditional indemnity option for each health care incident. Id. Pursuant to Highmark's underwriting criteria, eligibility for SelectBlue requires that individuals be ineligible for Medicare and live in the SelectBlue service area. Id.

A dramatic increase in the cost of health insurance coincided with the County's changes to its health care coverage policy. In its original brief, the County stated that it provides retirees with the least expensive coverage for which they are eligible:

Because SecurityBlue operates in conjunction with the Medicare program, Highmark charges premiums for SecurityBlue coverage which are far less than premiums for other plans. In 1998, the premium charged to the County for SecurityBlue participants was $0. Effective January 1, 1999, Highmark increased the monthly premium for SecurityBlue coverage from $0 to $47.00 for the same level of benefits coverage. Despite this significant increase in premiums, SecurityBlue remains the least expensive of the three plans utilized by the County. As such SecurityBlue was and continues to be the County's first choice among the three plans for coverage for eligible former employees. Because SecurityBlue coverage is limited to former employees who are Medicare eligible and live in the SecurityBlue service area, however, this plan is not available to all retirees.

The County's second choice for retiree medical benefits was the SelectBlue plan. Although more expensive than SecurityBlue, SelectBlue still represented a material cost savings to the County relative to the indemnity plan. Like SecurityBlue, however, SelectBlue was not available to all retirees. The County could not offer SelectBlue to medicare eligible retirees such as plaintiffs in this case because Medicare eligible retirees do not qualify for SelectBlue based on the underwriting criteria adopted by Highmark. In addition, the County could not provide SelectBlue coverage to retirees residing outside the SelectBlue service area. For those retirees who did not qualify for SelectBlue or SecurityBlue the County provided benefits under the traditional indemnity plan.

Defendant's Brief in Support of Cross-Motion for Summary Judgment (hereinafter "Defendant's Brief") at 7-8 [Doc. No. 27] (internal citations omitted). Plaintiffs allege that they are being treated adversely as compared to both active employees and younger retirees although, for purposes of their partial summary judgment motion, we are asked to consider the alleged disparity only between Plaintiffs and younger retirees. Complaint [Doc. No. 1] ¶¶ 39, 46.

As previously indicated, we concluded on our first examination of this issue that the ADEA, as amended by the Older Workers' Benefit Protection Act of 1990 ("OWBPA"), did not afford relief in the context of alleged discrepancies in health benefits offered by employers to retirees. Erie County Retirees Ass'n v. Erie County, 91 F.Supp.2d 860, 868-880 (W.D.Pa.1999), rev'd, 220 F.3d 193 (3d Cir.2000). In reversing, the appeals court found that the County acted in contravention of the ADEA by treating Plaintiffs differently with respect to their "compensation, terms, conditions, or privileges of employment, because of ... age." Erie County Retirees Ass'n v. County of Erie, 220 F.3d 193, 217. The Court also concluded, however, that the "safe harbor set forth in 29 U.S.C. § 623(f)(2)(B)(i) is applicable if the County can meet the equal benefit or equal cost standard." Id. at 216. The Court remanded the case on the safe harbor issue, and provided the following direction on the application of equal benefit/equal cost standard in this case:

In accordance with 29 C.F.R. § 1625.10(e), the "equal benefit" prong of the analysis should take into account equally both the Medicare-provided and the County-provided benefits which members of the plaintiff class receive. If the County cannot satisfy the "equal benefit" prong, the [district] court should then turn to the "equal cost" inquiry. The County argues that, in applying the "equal cost" analysis, the court should consider the costs which Medicare incurs on behalf of persons in SecurityBlue as well as the costs which the County itself incurs ... Clearly, the purpose of the equal benefit or equal cost standard is to encourage employers to spend equally on benefits for older and younger persons ... Accordingly, the district court should consider only those costs which the County itself incurs.

Id. at 216 (internal citations omitted).

II. STANDARD OF REVIEW

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R.Civ.P. 56(c). In order to withstand a motion for summary judgment, the nonmoving party must "make a showing sufficient to establish the existence of [each] element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In evaluating whether the non-moving party has established each necessary element, the Court must grant all reasonable inferences from the evidence to the non-moving party. Knabe v. Boury Corp., 114 F.3d 407, 410, n. 4 (3d Cir.1997) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). "Where the record taken as a whole could not lead a reasonable trier of fact to find for the non-moving party, there is no `genuine issue for trial.'" Id. (quoting Matsushita, 475 U.S. at 587, 106 S.Ct. 1348).

III. DISCUSSION

The "equal cost/equal benefit" rule is intended to "permit age-based reductions in employee benefit plans where such reductions are justified by significant cost considerations." 29 C.F.R. § 1625.10(a)(1). Specifically:

[w]here employee benefit plans do meet the criteria in section 4(f)(2), benefit levels for older workers may be reduced to the extent necessary to achieve approximate equivalency in...