Why it matters: Evidence related to an employer’s conduct with regard to health insurance could form the basis for an Age Discrimination in Employment Act (ADEA) discrimination and retaliation lawsuit, a unanimous panel of the Eighth U.S. Circuit Court of Appeals has ruled, reversing summary judgment for an employer. “Certain considerations, such as health care costs, could be a proxy for age in the sense that if the employer supposes a correlation between the two factors and acts accordingly, it engages in age discrimination,” the court wrote. The plaintiff presented evidence that the employer sought cheaper health plans as a cost-cutting measure and negotiated with insurance companies by sending e-mails stating that, “[w]e have lost several of the older, sicker employees and should have some consideration on this.” The employer also suggested that the plaintiff and another over-65 employee use Medicare. The plaintiff claimed she was terminated not long after she declined and filed her ADEA suit in response. Although a federal district court granted summary judgment for the employer, the Eighth Circuit reversed, reinstating the case in a cautionary tale for employers. “Age and health care costs are not so analytically distinct if [the employer] presumed the rise in one necessitated a rise in the other,” the panel wrote.

Detailed Discussion

After changing hands in 2007, Associated Underwriters began operating at a loss. The new owners tried a reduction in force but still faced economic difficulties, including a significant increase in group healthcare plan premiums.

The owners began to solicit proposals from different insurance companies. One quote came back much lower than the others, and when the owner inquired, he learned that it excluded two employees over the age of 65, including Marjorie Tramp. The insurer explained that it doesn’t usually quote employees in the over-65 age group because they are Medicare-eligible. The readjusted quote including the two over-65 employees was much higher.

As the search process continued, the owners sent e-mail stating that two employees over the age of 50 had left the company and that “[w]e have lost several of the older, sick employees and should have some consideration on this.” The owner also sat down with Tramp and the other over-65 employee and suggested they utilize Medicare instead of the company’s healthcare plan. Both employees declined.

During this time, Tramp was formally reprimanded for poor performance and placed on a probationary period. The company underwent another reduction in force and both Tramp and the other employee over the age of 65 were let go.

Tramp then sued Associated Underwriters alleging violations of the ADEA. Relying on the U.S. Supreme Court’s 1993 opinion in Hazen Paper Co. v. Biggins, a federal district court granted summary judgment for the employer. In that case, an employee alleged that he was terminated just before his pension was set to vest and the Court held that it was “incorrect to say that a decision based on years of service is necessarily ‘age based’ in violation of the ADEA.”

But the Eighth Circuit reversed, finding the evidence related to healthcare costs could serve as a proxy for the employer’s age discrimination, establishing the but-for cause of the plaintiff’s termination.

Distinguishing Hazen Paper, the panel said the analysis employed by the Justices in that case was different for age and healthcare costs. “Associated Underwriters’ perception of insurance premiums is not divorced from age in the same sense that pension benefits are divorced from age,” the court explained. “Here, there remains at least a question of fact as to Associated Underwriters’ motivations for terminating Tramp. Age and health care costs are not so analytically distinct if Associated Underwriters presumed the rise in one necessitated a rise in the other.”

“Certain considerations, such as health care costs, could be a proxy for age in the sense that if the employer supposes a correlation between the two factors and acts accordingly, it engages in age discrimination,” the panel wrote. “Here, it is possible that a reasonable jury could conclude from the evidence that Associated Underwriters believed the two considerations were not analytically distinct.”

The owner’s choice of wording – that the company had lost the “oldest and sickest employees” and expected a rate decrease “from the group becoming younger and healthier” – could “be a manifestation of its discriminatory intent in the process used by Associated Underwriters to be rid of its older (and/or oldest) employees in general,” the court added.

At the very least, a question of fact remained as to the intent of the employer, the panel concluded, reversing summary judgment for Associated Underwriters and remanding the case.

To read the opinion in Tramp v. Associated Underwriters, click here.