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September 30, 1999


The opinion of the court was delivered by: 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.*fn1 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.


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.*fn2 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.*fn3

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."*fn4 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.*fn5 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.*fn6 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.


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 non-moving 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).


The ADEA broadly proscribes age-based discrimination in employment by (among other things) making it unlawful for any employer:

  (1) to fail or refuse to hire or to discharge any
      individual or otherwise discriminate against any
      individual with respect to his compensation,
      terms, conditions, or privileges of employment,
      because of such individual's age; [or]
  (2) to limit, segregate, or classify his employees in
      any way which would deprive or tend to deprive
      any individual of employment opportunities or
      otherwise adversely affect his status as an
      employee, because of such individual's age.

29 U.S.C.A. § 623(a) (West 1999).

Plaintiffs contend that the County violated the ADEA by maintaining a facially discriminatory policy whereby Plaintiffs were offered an inferior health insurance plan on account of their age. Plaintiffs further posit that the County's health insurance policy fails to comply with the requirements of the Older Workers Benefit Protection Act of 1990 ("OWBPA"), which, inter alia, amended Section 4(f)(2) of the ADEA, 29 U.S.C.A. § 623(f)(2) (West 1999).

As it relates to employee benefit plans, § 4(f)(2) currently provides that it "shall not be unlawful for an employer"

  (2) to take any action otherwise prohibited under
  subsection (a), (b), (c), or (e) of this section —
    (B) to observe the terms of a bona fide employee
    benefit plan —
      (i) where, for each benefit or benefit package,
      the actual amount of payment made or cost
      incurred on behalf of an older worker is no less
      than that made or incurred on behalf of a younger
      worker, as permissible

      under [29 C.F.R. § 1625.10] . . .

29 U.S.C.A. § 623(f)(2)(B)(i) (West 1999). The purpose behind § 4(f)(2) is "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) (1998). In such cases:

  benefit levels for older workers may be reduced to
  the extent necessary to achieve approximate
  equivalency in cost for older and younger workers. A
  benefit plan will be considered in compliance with
  the statute where the actual amount of payment made,
  or cost incurred, in behalf of an older worker is
  equal to that made or incurred in behalf of a younger
  worker, even though the older worker may thereby
  receive a lesser amount of benefits or insurance

Id. Section 4(f)(2)(B)(i) of the ADEA in its present form specifically codifies this "equal cost/ equal benefit" rule. 29 U.S.C.A. § 623(f)(2)(B)(i) (West 1999).

At this point, it is important to clarify the nature of the Plaintiffs' claims. In their complaint, Plaintiffs allege they are being treated adversely on account of their age as compared to both (a) younger (i.e., under age 65) retirees and (b) active employees of the County. However, for purposes of their motion for summary judgment, Plaintiffs are not presently challenging the disparity in County-provided health insurance benefits as between active and retired employees. Instead, for purposes of their instant motion, Plaintiffs ask the Court to focus only on the group of retirees eligible for continued health insurance benefits under the Board's December 12, 1995 resolution.*fn7 As to that group, Plaintiffs contend that the County has violated the OWBPA because, under the SecurityBlue plan, the County is actually spending less on health insurance benefits for older retirees and, at the same time, providing them an inferior health insurance plan. The County has essentially confined its response to the issues raised in the Plaintiffs' motion for summary judgment. We will likewise limit our focus to the alleged disparity being accorded to the two groups of retirees.*fn8

That having been said, the County contends that its policy does not implicate the ADEA, as amended by the OWBPA. According to the County, its decision to place Plaintiffs in SecurityBlue was based not on age, but rather, on consideration of three factors: (1) the insured's status as active or inactive; (2) cost; and (3) the availability of plans. Thus, a threshold challenge is raised by the County as to whether the Plaintiffs have even made out a prima facie case under the ADEA.

We must first attempt to clarify what the County's "policy" actually was concerning its placement of individuals into the various health plans. Plaintiffs suggest it was the County's policy to segregate former employees, ages 65 and older, and essentially force them to either take health care coverage under the SecurityBlue Plan or forego County-provided coverage altogether. Yet it is undisputed that the triggering feature for SecurityBlue coverage was, and is, eligibility for Medicare Part B Medical Insurance, coupled with the proviso that the insured must reside in the SecurityBlue service area. While age is one factor that triggers eligibility for Medicare coverage, it is not the only one, because individuals may be eligible for Medicare if they are disabled. In fact, the record shows that at least some retirees under the age of 65 were placed in the SecurityBlue Plan on account of their disability, not their age. The County also notes that Medicare-eligible retirees residing outside of the SecurityBlue service area are not eligible for SecurityBlue, and therefore remain covered under the former traditional indemnity plan.

We conclude that there is no genuinely disputed issue of fact as to the nature of the County's policy of providing health care benefits to its former employees. The undisputed evidence shows that former employees who were eligible for continuing health care coverage under the terms of the Retirement Board's December 12, 1995 resolution were offered coverage under the least expensive plan (that is, least expensive to the County) for which they qualified. Consequently, retirees who were Medicare-eligible were placed in SecurityBlue if they lived in the applicable service area. Those retirees who lived in the SelectBlue service area but who were not Medicare-eligible (either by virtue of age or disability) were placed in SelectBlue. Those retirees who did not qualify for SecurityBlue or SelectBlue (e.g., those who maintain residence outside of Western Pennsylvania) were offered health insurance under the traditional indemnity plan.

Based on these undisputed facts, the County contends that its policy does not implicate the ADEA at all. In short, the County asserts that age was not a determinative factor in its decision as to what health plans would be offered to its current and former employees. To the extent the ADEA is implicated here, the County asserts the Act's affirmative defense which applies where adverse employment ...

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