Not a future they expected

As companies cut back on medical benefits, some retirees struggle to pay for care.

Los Angeles Times 10/18/04
Copyright 2004 The Los Angeles Times

It's been a difficult year for Estella Hyde.

In January, the degenerative muscle disease that's plagued the former nurse for more than a decade flared up and has left her unable to walk the length of a block. In March, her doctors broke the news that she had advanced breast cancer and would require chemotherapy and a mastectomy.

For Estella, the last nine months have been a medical merry-go-round of operations, doctors visits, group therapy meetings and twice-weekly treatments where she is hooked up to a machine that cleans her blood and slows the progress of her reinvigorated muscle disease, myasthenia gravis. Late this spring, she lost the last of her once-long auburn hair.

This summer, things took another unexpected turn for the worse when Estella's husband, James, received a letter from his former employer. It said the couple would soon have to pay for up to 40% of their medications, which now run $1,250 a month. The company, Michigan-based Arvin Meritor Inc., went on to say that it will continue phasing out coverage for retirees over the next several years, leaving potentially huge bills on the Linesville, Pa., couple's shoulders.

"We're totally caught now," says Estella, 58, whose cancer prognosis remains unclear.

The Hydes are among the growing ranks of retirees -- and future retirees -- being forced to confront a harsh new reality of rapidly rising health costs. Retiree medical coverage, which many people assumed was guaranteed for life, is dramatically shrinking.

Saying they can no longer sustain the huge bills, employers are swiftly raising retirees' insurance premiums and co-payments for services such as doctor visits and prescription drugs. They're axing benefits such as dental coverage and life insurance. A small number of companies are walking away from paying for their healthcare altogether.
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Future retirees won't fare much better. According to benefits consultant Watson Wyatt & Co., only 10% of companies are expected to offer any retirement health coverage by 2031.
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In a bet that now looks either foolish or smart, most put off paying higher salaries decades ago by offering generous pensions and health coverage down the road. That's an offer most now can't afford to fulfill. According to the Kaiser-Hewitt survey, the cost of giving retired workers health benefits rose by nearly 14% to $20.6 billion in 2003 for the companies in their survey.
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Following is a list of employers that have recently scaled back health benefits for retirees:

Aetna Inc.: Will stop subsidizing health insurance for employees who retire after 2007. In January, will stop funding all retirees' dental coverage.

Bethlehem Steel Corp.: Filed for bankruptcy protection in 2001. Canceled all health benefits for its 95,000 retirees last year.

Caterpillar Inc.: Starting in January, retirees will pay significantly more of their health insurance premiums, with costs ranging from $180 a month per individual to $370 per family.

Dupont Co.: Now charges pre-Medicare retirees higher health insurance premiums than it charges current employees.

Levi Strauss & Co.: Stopped subsidizing Medigap coverage (private insurance that covers services Medicare does not) for all retirees and raised deductibles on prescription drugs to as much as $50. Will stop subsidizing benefits for future retirees.

Lucent Technologies: In January, stopped covering dependents of employees who left after May 1990 if they made more than $87,000; level will fall to $65,000 next year.

Sears, Roebuck & Co.: Starting next year, all subsidies for retiree health benefits will be eliminated for new hires and employees younger than 40. Is also capping employer contributions to retiree health benefits at 2004 levels.

Tribune Co. (owner of The Times): Has stopped subsidizing retirement health benefits for those hired after March 2003.

Whirlpool Corp.: Beginning this year, retiring employees are paying 20% of their health insurance costs.