220 F.3d 193 (3rd Cir. 2000), 99-3877, Erie County Retirees Ass'n v Erie County

Docket Nº:99-3877
Citation:220 F.3d 193
Party Name:ERIE COUNTY RETIREES ASSOCIATION and LYMAN H. COHEN, for himself and all others similarly situated v. THE COUNTY OF ERIE, PENNSYLVANIA and ERIE COUNTY EMPLOYEES' RETIREMENT BOARD Erie County Retirees Association and Lyman H. Cohen, as representative and on behalf of the class, Appellants (D.C. Civ. No. 98-272)
Case Date:August 01, 2000
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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220 F.3d 193 (3rd Cir. 2000)

ERIE COUNTY RETIREES ASSOCIATION and LYMAN H. COHEN, for himself and all others similarly situated



Erie County Retirees Association and Lyman H. Cohen, as representative and on behalf of the class, Appellants (D.C. Civ. No. 98-272)

No. 99-3877

United States Court of Appeals, Third Circuit

August 1, 2000

Argued May 11, 2000

On Appeal from the United States District Court for the Western District of Pennsylvania District Judge: Honorable Sean J. McLaughlin

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[Copyrighted Material Omitted]

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Attorneys for Appellants: Daniel J. Pastore (argued) The McDonald Group, L.L.P. 456 West 6th Street P.O. Box 1757 Erie, PA 16507-0757

Attorneys for Appellee The County of Erie, Pennsylvania: Richard A. Lanzillo (argued) Jennifer E. Gornall Knox McLaughlin Gornall & Sennett, P.C. 120 West Tenth Street Erie, PA 16501

Attorneys for Amicus Curiae Equal Employment Opportunity Commission: C. Gregory Stewart General Counsel Philip B. Sklover Associate General

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Counsel Lorraine C. Davis Assistant General Counsel Robert J. Gregory (argued) Senior Attorney Equal Employment Opportunity Commission 1801 L Street, N.W. Washington, D.C. 20507

BEFORE: GREENBERG and MCKEE, Circuit Judges, and SHADUR,[*] District Judge


GREENBERG, Circuit Judge.


This matter comes on before this court on appeal from an order of the district court entered September 30, 1999, granting partial summary judgment in favor of the County of Erie, Pennsylvania (the "County"), dismissing appellants' claim under the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. S 621 et seq. See Erie County Retirees Ass'n v. County of Erie, 91 F. Supp.2d 860 (W.D. Pa. 1999) ("Erie County"). We are called upon to address the applicability of the ADEA when an employer offers its Medicare-eligible retirees health insurance coverage allegedly inferior to the coverage offered to retired employees not eligible for Medicare. The district court held that the ADEA did not apply in such circumstances. For the reasons set forth herein, we disagree, and accordingly will reverse and remand the case for further proceedings.

A. Factual Background

In 1972, the County implemented a policy pursuant to which it provided its retired employees with health and hospitalization insurance benefits during their retirement. In 1987, the County began utilizing Blue Cross/Blue Shield of Western Pennsylvania, now known as Highmark Blue Cross/Blue Shield ("Highmark"), to provide the coverage. The County classified employees and retirees into three main coverage groups: one for current employees, one for Medicare-eligible retirees, and one for retirees not eligible for Medicare. Each group had separate but similar traditional indemnity coverage. Erie County, 91 F. Supp.2d at 861-62; App. at 10.

Faced with increasing health insurance costs, the Erie County Employees' Retirement Board (the "Board"), which administered the medical coverage, decided that employees hired after January 23, 1992, would not be eligible for continued health insurance benefits upon retirement. On December 12, 1995, the Board further restricted eligibility by declaring that persons the County hired prior to January 23, 1992, would remain eligible only if they fell into one of four groups: employees unable to continue their employment due to a disability and who otherwise were eligible for a disability retirement pension; employees who retired from the County government with at least 20 years of service and 55 years of age; employees involuntarily terminated from County government employment with at least eight years of service; and employees who retired from the County with at least eight years of service and 60 years of age. The plaintiff class in this action is composed of retirees who are aged 65 or older--and thus eligible for Medicare--who remain eligible for retiree health coverage under these restrictions. Erie County, 91 F. Supp.2d at 862-63; App. at 10.

In 1997, a change in government accounting standards prevented the County from continuing to use the "excess interest" generated by its pension funds to pay the premiums for retiree health coverage; instead, the County began to pay the premiums from its regular budget. That year, the County took over the Board's

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responsibility to select retiree health plans. In November 1997, pressure to reduce costs was enhanced when Highmark announced that it would increase the County's premiums for medical insurance coverage by an average of 48%. Erie County, 91 F. Supp.2d at 862-63.

In the fall of 1997, the County selected a plan called "SecurityBlue" for Medicare eligible retirees.1 Effective February 1, 1998, the County required all former County employees qualified for SecurityBlue to accept that program or lose all health coverage. The district court described SecurityBlue as follows:

SecurityBlue is a coordinated health care plan provided through Keystone Health Plan West, Inc., a federally qualified health maintenance organization ("HMO"), and a contract with Medicare. SecurityBlue is available to persons who have Medicare Part B Medical Insurance and who live in the SecurityBlue `service area' [which includes most of western Pennsylvania]. This Plan differs 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. The PCP is responsible not only for administering care, but also for making referrals to specialists and arranging for hospitalization. Some degree of individual choice is lost under this Plan inasmuch as a member's PCP must be selected from a list of physicians within the SecurityBlue network and coverage is available only for services provided or authorized by the insured's PCP. In most cases, the SecurityBlue Plan does not pay for services that are not authorized by the insured's PCP [with the exception of emergencies]. The trade-off for this loss of choice is that, unlike the traditional indemnity plan, the SecurityBlue Plan has no deductibles and little or no co-payment obligation; generally, 100 percent of the covered services are paid for. In addition, SecurityBlue covers pre-existing conditions without a waiting period and also provides benefits for some services--such as eye examinations, dental visits and hearing aids--that are not available under traditional indemnity plans or Highmark's SelectBlue point-of-service plan . . . . However, SecurityBlue members must continue to pay Medicare Part B Medical Insurance premiums.

Erie County, 91 F. Supp.2d at 863 (footnotes omitted).

The County selected a Highmark plan, "SelectBlue," for its former employees not Medicare-eligible and therefore not eligible for SecurityBlue. It placed those former employees in SelectBlue effective October 1, 1998. The district court described SelectBlue as follows:

The SelectBlue Plan differs from SecurityBlue in that it is a hybrid `point-of-service' plan which combines the features of an HMO with those of a traditional indemnity plan. Under SelectBlue an insured can, for any health care incident, select either the HMO option (and accept its benefits and limitations) or the traditional indemnity option. In order to be eligible for SelectBlue, a retiree must be non-eligible for Medicare and must live in the SelectBlue service area [western Pennsylvania].

Erie County, 91 F. Supp.2d at 863.

Retirees who did not qualify for either SecurityBlue or SelectBlue because they did not reside within the western Pennsylvania service area were offered traditional indemnity health insurance.

Appellants contend that SecurityBlue provides inferior coverage as compared to SelectBlue and the traditional indemnity coverage previously available to them, but

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they largely focus their argument on the comparison between themselves and SelectBlue retirees. The gravamen of this lawsuit is that the County violated the ADEA by discriminatorily placing members of the plaintiff class into SecurityBlue on the basis of their having attained age 65.

B. Procedural History

The Erie County Retirees Association and Lyman H. Cohen, on behalf of himself and all other similarly situated retirees of the County age 65 or over placed in SecurityBlue, filed this action on September 18, 1998, against the County and the Board. Count I of the complaint alleged that the County violated the ADEA by treating members of the plaintiff class less favorably on account of their age, as compared to (1) active employees and (2) retirees under age 65. As the district court pointed out, the claim of unequal treatment as between members of the plaintiff class and retirees under age 65 encompassed two time periods: (a) February 1, 1998, to October 1, 1998, during which the County required members of the plaintiff class to accept SecurityBlue coverage while retirees under age 65 remained covered under the traditional indemnity insurance plan, and (b) October 1, 1998, forward, during which members of the plaintiff class remained in SecurityBlue while retirees under age 65 were placed in SelectBlue. Erie County, 91 F. Supp.2d at 863-64. Count II of the complaint alleged state law claims for breach of contract, equitable estoppel, and breach of fiduciary duty against the County and the Board. The complaint alleged that the defendants represented that an employee who retired after eight years with the County would be entitled to health care coverage "on the same terms that that person had received health care coverage from the...

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