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The U.S. Equal Employment Opportunity Commission (EEOC) voted to approve a proposed final rule that would permit employers, under the Age Discrimination in Employment Act (ADEA), to lawfully coordinate retiree health benefit plans with eligibility for Medicare or a comparable state-sponsored health benefit. The new rule would allow employers to reduce health benefits for retirees when they become eligible for Medicare at age 65. A federal court ruling in 2000 said the practice violated the Age Discrimination in Employment Act.

According to Chair Cari M. Dominguez, "This rule is intended to ensure that the ADEA does not have the unintended consequence of discouraging employers from providing valuable health benefits to retirees." But what is does not do is prohibit employers from reducing or eliminating health care benefits entirely from the retirement benefits for the estimated 10 million retirees who currently have health benefits as a part of their retirement packages.

For the most part these employer provided health benefits pick up where Medicare leaves off providing preventive care benefits and prescription drug coverage that Medicare does not presently provide. They also bridge the gap with coverage for Medicare deductibles. Many retirees who presently have prescription drug coverage as a part of their retirement benefits fear that this rule will encourage their former employers to eliminate health coverage for retirees, especially with the passage of the Medicare bill in 2003. This bill provides prescription drug coverage for Medicare beneficiaries, but with higher out of pocket costs than most retirement benefits coverage provides for. Many seniors fear a significant hit to the pocketbook.

This rule change could also prove appealing to cash strapped state budgets; targeting health care benefits for retired state employees could return some monies to the coffers without having to cut services or raise taxes. More significantly it could especially affect those employees who wish to retire early, before they are eligible for Medicare. They could be left without health care coverage in the time between retirement and eligibility for Medicare, drastically changing some plans. A January study by benefits consulting firm Hewitt Associates and the nonprofit Henry J. Kaiser Family Foundation found that employers continued to slash retiree health benefits over the last year, with 10 percent of firms eliminating coverage for future retirees and 71 percent increasing retirees' contributions for their coverage. This rule change may prompt an increase in these numbers.

The seniors advocacy group AARP has issued a statement that voices their disapproval of the rule and calls for more discussion on the issue.