Posted on 02/12/2003 4:03:03 PM PST by Willie Green
For education and discussion only. Not for commercial use.
PHILADELPHIA (AP) — The nation's persistent economic slump and rash of corporate scandals that have drained cash from pension plans and 401(k) accounts are eating into yet another piece of retirees' livelihood: their health benefits.
Thousands of retired workers who were promised lifetime health care coverage by their former companies have lost those benefits as a growing list of firms have folded or been sold.
By far the largest single group affected has been steelworkers. Nearly 200,000 retired steelworkers nationwide have lost health care benefits or will lose them in the coming months because of the bankruptcies of former giants like LTV Steel and Bethlehem Steel, according to the United Steelworkers of America.
In other industries, Polaroid, the maker of instant-film cameras, and Outboard Marine Corp., which made Evinrude boat motors, slashed health insurance for thousands of retirees when they went bankrupt in 2001.
Great Northern Paper Inc., which once ran the world's largest paper mill, in January asked a Maine bankruptcy court for permission to temporarily stop paying health care benefits for 677 retirees.
Now, some experts are concerned that struggling airlines could be the next to slash benefits for retired workers. US Airways has already announced plans to terminate its underfunded pension plan with its roughly 6,000 pilots.
``There is a great deal of concern that the entire pension and benefit system of industrialized workers is in dire straights,'' said Marco Trbovich, spokesman for United Steelworkers.
Unlike pensions, which are guaranteed by the government, retiree health benefits can be reduced or eliminated, almost at-will, by companies that have declared bankruptcy.
Doing so can slash billions of dollars in liabilities, with no real penalty and no effect on daily operations, said Randall Eisenberg, managing director at FTI Consulting and a specialist in company turnarounds.
``Normally, if you are not in bankruptcy, you have to sit down and negotiate with the unions, and that can be a big deal and difficult process. But if you are in bankruptcy, you can just terminate the contract, and it's over,'' he said. ``And when you look at this from a big picture standpoint, it is probably better to have some benefits cut, and have the company survive, than have the company not survive.''
But that's little comfort to retirees like Richard G. Sterner, who worked 32 years at Bethlehem Steel.
At age 60, Sterner is being cut off from his health benefits this spring and has another five years to go before he qualifies for Medicare, the federal health care program.
In the meantime, he is undergoing a rigorous and expensive treatment for bladder cancer. Come March 31, when Bethlehem Steel is scheduled to cut off health insurance to retirees, Sterner will likely have to go back to work, if he can find it.
``It is not easy running a jackhammer at age 60, but I did it last summer. I could do it again,'' Sterner said. ``I'm just going to get beat up.''
Around 22 percent of American retirees, or around 8.8 million people, get health insurance through a former employer, according to the Department of Labor.
In a survey of 435 large employers released in December, the Kaiser Family Foundation found that 5 percent considered themselves very or somewhat likely to terminate subsidized health care coverage for current retirees at some point in the future.
It's unclear how many retired workers already have lost their health care benefits. But during the last fiscal year, 144 failed companies with 187,000 retirees turned worker pension plans over to the federal government, up from 104 plans and 89,000 retirees the previous year.
The Pension Benefit Guarantee Corp., which took control of the plans, doesn't handle health care benefits for those workers, and didn't know how many of those firms also slashed medical benefits for retirees.
For those who lose health care benefits, options are limited.
Those over 65 qualify for some free health care through Medicare, although seniors who want comprehensive medical coverage must buy supplemental coverage that can cost hundreds of dollars a month.
A section of a new U.S. trade law includes a provision that allows retirees under age 65 to get a tax credit roughly equivalent to 65 percent of their health care premiums, but authorities are still trying to write regulations on how the credit would work.
``It is part and parcel of the whole health care crisis,'' said Mary Ellen Signorilli, an attorney with the American Association of Retired Persons. ``These people will need health care. Who pays for it? What do we do as a country?''
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On the Net:
United Steelworkers of America: http://www.uswa.org/
U.S. Department of Labor: http://www.dol.gov/
Employee Benefit Research Institute: http://www.ebri.org/
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