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Read Making a Killing

home / healthcare / in the media

The Los Angeles Times
Jan 15, 2004

by Debora Vrana & Vicki Kemper, Times Staff Writers

More Workers Are Likely to Retire Without Company Health Benefits

Increasing numbers of Americans are likely to learn in the next three years that they will retire without any health-care benefits, according to a survey of some of the largest U.S. companies that was released Wednesday.

Citing the rising costs of health care, 71% of 408 companies surveyed by the Kaiser Family Foundation and Hewitt Associates said they had made retired workers shoulder a bigger share of insurance premiums in the last year.

About 10% said they had eliminated subsidized health benefits for future retirees, and 20% said they probably would eliminate the benefits by 2007.

If employers follow that path, more Americans who retire could join the growing ranks of the underinsured.

"This is a retreat from the promise that companies have made to workers since World War II," said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights in Santa Monica. "It's an abrogation of a social contract."

Kaiser, a nonprofit health policy organization, and Hewitt, a consulting firm, didn't identify the companies surveyed but said they included 45% of the Fortune 100. Each of them has more than 1,000 employees.

In the survey, 86% of companies said they planned to increase retirees' health insurance costs in the next three years.

"This is something we are seeing with both retirees and employees," said Tricia Neuman, a vice president at Kaiser. "It's the same story -- costs are being shifted to both groups."

Companies across a number of sectors -- including SBC Communications Inc., the nation's second-largest local phone company; NCR Corp., a computer services firm; and Tribune Co., a large media company and owner of the Los Angeles Times -- are shifting more health costs to retired workers.

Last year, Bethlehem Steel Corp. won Bankruptcy Court permission to eliminate or reduce health-care and life insurance benefits for about 90,000 retirees and their spouses.

Another employer in bankruptcy proceedings, United Airlines' parent UAL Corp., said Wednesday that the carrier's 35,000 U.S. retirees would have to chip in more for their medical benefits to help the firm emerge from bankruptcy.

"We regret having to make this choice, but we need to exit Chapter 11 and we are trying to cut costs across the board," UAL spokeswoman Jean Medina said.

One union vowed to fight. "These retirees are very angry," said Sara Dela Cruz, spokeswoman for the Assn. of Flight Attendants, which represents 21,000 flight attendants at United. The extra health costs are "just not necessary."

Corporate health benefits have long helped many seniors fill the gaps in their Medicare coverage. Though the federal program assists with doctor and hospital bills, it has offered no coverage for prescription drugs.

As a result, about 12 million Medicare beneficiaries have relied on former employers for help with their medication costs.

The Kaiser-Hewitt survey was taken before Congress in November voted to require Medicare to begin offering drug coverage in 2006. In addition, $89 billion in direct subsidies and tax benefits were created to encourage employers to retain prescription-drug coverage for their retirees age 65 and older.

Deere & Co., the world's largest manufacturer of agricultural and forestry equipment, said those incentives were bright spots for businesses struggling to manage health-care costs.

"We applaud that effort as a step in the right direction," said Mertroe B. Hornbuckle, Deere's vice president of human resources.

According to the Kaiser- Hewitt survey, the cost of giving retired workers health benefits rose by nearly 14% to $20.6 billion in 2003. At the same time, the health premiums paid by employers climbed 13.9% last year.

It was the third straight year of double-digit percentage increases in premiums, according to another Kaiser survey released in September.

On average, active-worker contributions for health insurance rose 8% for individual coverage to $42 a month, and 13% for family coverage to $201 a month, according to the earlier Kaiser survey.

For retirees under 65, the average health-care-coverage payment increased 20% to $166 a month, while retirees age 65 and over paid an average of $129 a month, an 18% increase, according to the survey released Wednesday.

The surveys found that, on average, retirees in the U.S. paid 39% of their health-insurance premium costs.



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