The NYT reports on the lastest trend in corporate theft: cutting back or eliminating the health benefits of retirees.
Employers have unleashed a new wave of cutbacks in company-paid health benefits for retirees, with a growing number of companies saying that retirees can retain coverage only if they are willing to bear the full cost themselves.Scores of companies in the last two years, including the telecommunications equipment giants Lucent Technologies and Alcatel and a big electric utility, TXU, have ended medical benefits for some or all of their retirees and instead offered to let them buy coverage through a group plan. This coverage is often more expensive than many retirees can afford.
Experts expect that the trend, driven by the fast-rising cost of health care, will continue, despite the billions of dollars that the government will distribute to companies that maintain retiree health coverage when the new Medicare drug benefit begins in two years. In contrast to pension financing, companies are not obligated to set aside funds to pay for retirees’ health benefits, and the health plans can usually be changed or terminated at the company’s choosing, with no appeal available to the retirees.
The costs can be a shock. According to surveys by benefits consultants, companies that offer health benefits to retirees typically have subsidized about 60 percent of the premium. Losing that support all at once can mean hundreds of dollars a month in unexpected costs.
Moreover, in dropping their subsidies, many companies push retirees into insurance pools that are separate from those of younger, healthier workers, executives said. That lowers the company’s costs for insuring its current workers, while raising the premiums charged to retirees even further.
James Norby, president of the National Retiree Legislative Network, an advocacy group that is urging Congress to strengthen legal protections for retired workers, said companies that charged for formerly covered benefits had found “a clever way of getting out of the contract they made to people who had been retired for 15 or 20 years.”
Not as outrageous as the pension-theft that was big during the first Bush Admin, but slimy and unethical just the same. For companies like Lucent and Alcatel that are in deep financial difficulties (Alcatel lost $$4.5B$$ last year) retrenching their health insurance profile may be unavoidable. Unfortunately, just as in the pension-theft years, corporations that are in NO financial difficulty will steal from their retirees’ benefits for no other reason than that they can get away with it.
TXU, the Texas (surprise surprise) utility corp mentioned in the article, has revenues of almost $$$9B$$$ and a net profit of nearly $$$3/4B$$$*, yet despite this financial health Chairman and CEO Earl Nye, whose salary (minus benefits and stock options) is slightly less than $$8M$$/yr, apparently feels no compunction about violating his company’s contract with its retirees and forcing them to pay up to $800/m for their own health insurance. I can promise you that Earl’s contract for company payment of his health benefits will be honored even though he could easily afford to pay for them himself.
Of course, Earl insists that the new policy is a Good Thing for the retirees (even though he, himself, won’t be taking advantage of it).
Employers that are shifting costs to their retirees often present the change as a benefit: although the company is no longer subsidizing coverage, premiums are usually lower than for individual policies, and the retirees do not have to worry about being rejected by insurers because of their age or prior health problems.
Since the company was paying for 60% of the cost before, how exactly is a 700% raise in the cost of a retiree’s premium a “benefit”?
Eloise Bolt, 56, who took early retirement in October 2002 from her job as an information technology project manager at TXU in Dallas, said that she was “really hurt and really angry” when her monthly insurance premium — which also covers her self-employed husband — soared from the $100 she had paid when she was working.According to Ms. Bolt, TXU said that the $100 represented 20 percent of the total premium, and that on retirement after 24 years with the company, she would be paying 60 percent. But instead of rising to $300 or so, as she had expected, her monthly premium jumped to $659, and rose to $725 this month, with a higher deductible.
“The math does not work out,” said Ms. Bolt, who abandoned her retirement plans and took a $9-an-hour job as a secretary to pay for the insurance.
So much for “retirement” and the legitimacy of corporate contracts. Bolt was lucky enough to find a job; many retirees in Bush’s job-losing “recovery” won’t be able to. Earl and his fat-cat buddies could care less. Their healthcare costs are covered and they won’t have to go back to work after they “retire” in order to pay for them. I bet Earl doesn’t lose so much as a single night’s sleep over what he’s done to Bolt and his other retirees, though he may have a bad moment or two because it got Bad Press. Earl doesn’t mind doing it, he’ll just mind if people know he’s doing it. See the difference?
Of course as you might have guessed, retirees aren’t the only ones being shafted on their health benefits. Earl has taken Junior’s “ownership” propaganda to heart.
When TXU trimmed its retiree benefits at the start of 2002, the company announced that all employees hired since Jan. 1 of that year would have to pay the full cost of health benefits when they retired. Like other companies, TXU — which has 12,000 employees and 8,000 retirees — is encouraging younger workers to save for their future health costs. TXU is promoting participation in the company’s 401(k) retirement plan. It matches employee contributions up to 6 percent of their salary.
Wow. 6 whole %. That’s what?, like $500/yr? How generous. “Your health is your problem,” Earl would say, if asked. “Not mine. We’re out of it.” TXU only cleared $$$750M$$$ last year. Obviously they can’t afford luxuries like employee health care. Hell, that’s a mere 100X Earl’s meager salary. Poor Earl.
In line with Junior’s radcon philosophy, Earl is simply shifting costs from his corp to his employees, putting the burden on them. And TXU employees should be aware that this move means that those promises about how Earl will let them piggyback onto a group plan to keep their premium costs down when they retire ain’t worth the paper they’re printed on. If Earl’s profits slip 1/10th%, they’ll be on their own, probably without warning.
*Note: The NYT article (by Milt Freudenheim) doesn’t bother to mention TXU’s profits. Apparently he didn’t think it was important that an extremely profitable company was stealing from its employees’ health care and violating its own contracts with them when it wasn’t financially necessary or even justifiable for it to do so. So what else is new?
Look for Junior Bush to do…NOTHING. As usual.