Erie County Retirees v. County of Erie, Penn., Civil Action No. 98-272.

• Decision Date: 30 September 1999
• Docket Number: Civil Action No. 98-272.
• Citation: 91 F.Supp.2d 860
• Parties: ERIE COUNTY RETIREES ASSOCIATION and Lyman H. Cohen, for himself and all others similarly situated, Plaintiffs, v. The COUNTY OF ERIE, PENNSYLVANIA and Erie County Employees' Retirement Board, Defendants.
• Court: U.S. District Court — Western District of Pennsylvania

91 F.Supp.2d 860

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

Civil Action No. 98-272.

United States District Court, W.D. Pennsylvania, Erie Division.

September 30, 1999.

Daniel J. Pastore, The McDonald Group, Erie, PA, for Plaintiffs.

Richard A. Lanzillo, Knox, McLaughlin, Gornall & Sennett, Erie, PA, John E. Cooper, Eric, PA, for Defendants.

MEMORANDUM OPINION

McLAUGHLIN, District Judge.

Plaintiffs, the Erie County Retirees' Association and Lyman H. Cohen, filed this action on behalf of Mr. Cohen and all other similarly situated former employees of the County of Erie, Pennsylvania, ages 65 and older, who are receiving health insurance coverage from the County under the Highmark "SecurityBlue" health insurance plan. Plaintiffs contend that the County violated the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. §§ 621 et seq., when it required Plaintiffs to either accept coverage under the SecurityBlue Plan or forego health insurance coverage from the County altogether. Plaintiffs commenced this action by filing a two-count complaint which asserts claims under both the ADEA and various state law theories of liability.

Presently pending before the Court are the parties' cross-motions for partial summary judgment on the ADEA claim.¹ Jurisdiction over this action is being exercised pursuant to 28 U.S.C. §§ 1331 and 1367(a). Because we conclude that the ADEA does not provide the specific protection sought by Plaintiffs, we will deny Plaintiffs' motion and grant partial summary judgment in favor of the Defendant.

I. BACKGROUND

Plaintiffs in this action are a class of retired employees of the County of Erie, ages 65 and older (and their spouses), who are currently receiving health insurance benefits from the County under Highmark's SecurityBlue health insurance plan. The gravamen of the complaint is that, because of their age, the Plaintiffs have been treated adversely with respect to their health insurance coverage as compared to those retirees under the age of 65. For purposes of context, we provide some background facts.

Effective January 1, 1972, the County implemented an official policy whereby persons employed by the County for at least 8 years would be entitled to hospitalization insurance benefits throughout their retirement. The policy was a change from the County's previous practice of providing hospitalization benefits only to active employees.

Beginning in 1987, the County began purchasing insurance coverage from Blue Cross/Blue Shield of Western Pennsylvania, now known as "Highmark Blue Cross/Blue Shield." Historically, health care benefits were provided to both active employees and eligible former employees through one of at least three different coverage "groups": the "00" group, consisting of current employees; the "01" group, consisting of "Medicare eligible" retirees; and the "02" group, consisting of "non-Medicare eligible retirees." These groups had separate but similar traditional indemnity health insurance plans.

Due to the dramatic increase in the cost of health insurance which ensued over the years, the County Employees' Retirement Board (hereinafter, the "Board" or the "Retirement Board") later re-evaluated the extent to which it was willing to provide continued health insurance benefits to former employees. The Board determined on January 23, 1992 that County employees hired after that date would not be eligible to receive any hospitalization benefits upon retirement. All of the class members in this action were hired prior to the January 1992 cut-off date and so remained eligible to receive retirement health benefits.

The Board further restricted eligibility for such benefits in a vote taken on December 12, 1995. On that date, the Board reaffirmed its decision that no employees hired after January 23, 1992 would be eligible for hospitalization benefits upon retirement. In addition, with respect to those employees (like Plaintiffs) hired prior to January 23, 1992, the Board determined that eligibility for such benefits would be restricted to the following groups:

(a) employees who were unable to continue as County employees due to a disability and who would otherwise be eligible for a disability retirement pension under the County Pension Code;

(b) employees who retired from the County government after having accumulated at least 20 years of service with the County and were 55 years of age;

(c) employees who were involuntarily terminated from County government after having accumulated at least 8 years of service with the County; and

(d) employees who retired from the County after having accumulated at least 8 years of service with the County and were 60 years of age.

All of the class members remained eligible for retirement benefits under these restrictions.

Up until October 1997, the entity primarily responsible for selecting health insurance programs for eligible retirees was the Retirement Board. Premiums for retiree insurance coverage had been funded up to that point by the "excess interest" generated by the County's pension funds.² However, in 1997, a change in government accounting standards eliminated "excess interest" as a source of funding for retiree insurance coverage. Accordingly, beginning in 1998, retiree insurance coverage became part of the regular County budget and the County assumed responsibility for the selection of retiree health care plans.³

Meanwhile, since at least 1996, County officials had begun exploring ways to further reduce the cost of providing health insurance to its retirees and employees. By late 1997 officials from the County and its Retirement Board, having engaged in a review and evaluation of the relative costs and benefits of the existing health care plans, decided that the changes would be mandated in the health benefits provided to retirees. In November 1997, Highmark announced its intent to increase the County's annual premiums for medical insurance coverage by an average of 48 percent. The prospect of this significant increase in medical insurance premiums heightened the perceived need for a re-evaluation of existing health insurance options.

Accordingly, in the Fall of 1997, the County determined that, effective February 1, 1998, it would provide coverage under the "SecurityBlue" Plan to all former employees of the County who were eligible for continuing benefits and who qualified for coverage under the SecurityBlue Plan. Essentially, these former employees had to either accept coverage under the SecurityBlue Plan or forego any retirement health insurance benefits from the County.

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."⁴ 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.⁵ 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.⁶ 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 (discussed below). However, SecurityBlue members must continue to pay Medicare Part B Medical Insurance premiums.

Despite the change in health care benefits for those retirees eligible under the SecurityBlue Plan, the County did not immediately alter the benefits available to its other retirees. For example, former employees still residing in Western Pennsylvania who were not Medicare eligible, and therefore not eligible for SecurityBlue coverage, continued to receive health insurance benefits under the old traditional indemnity plan until October 1, 1998, when they began receiving coverage under the Highmark "SelectBlue" Plan. 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.

Plaintiffs maintain that they have been discriminated against in violation of the ADEA as compared to retirees under the age of 65 who, Plaintiffs claim, have received superior health care coverage. This argument actually involves comparison of the two groups with respect to two different time periods: (a) February 1, 1998 to October 1, 1998; and (b) October 1, 1998 to present. With respect to the first period, Plaintiffs claim they received inferior health care coverage because they were essentially forced to accept...