By Rick Byrne
If you’re retired and your former company is paying all or part of your health benefits-coverage you think you’ll have for life-then you might want to dig out your old paperwork, put on your glasses (while you can still afford them) and read the fine print. Why? It may depend on what your definition of lifetime is. More and more retirees are finding themselves in court to save the health benefits they thought they were promised. And, judging by the decisions returned in a spate of cases, fine print trumps all.
It’s a story that began in the 1989 when health costs soared and corporations moved quickly to protect their bottom lines by slashing benefits and shifting costs to retirees. Most companies can cut retiree benefits at will. For others, fine print in contracts makes it a little trickier, and this is where the latest plot twist is playing out in courts around the nation.
The dictionary definition of lifetime is: “The period of time during which an individual is alive.” Simple enough-if your company promised you benefits for life, you just need to be alive to receive them. But it’s a difference of opinion over the legal definition that is stirring up trouble for some former union workers. In recent cases, corporate lawyers are arguing that “lifetime” refers to the life of the contract, not the lifetime of the retiree. When those contracts expire, they argue, so does the promise of the benefits.
In light of that argument, Basil Chapman, a 60-year-old former worker at ACF Industries, a railcar manufacturer, calls what ACF did to him “a set up.” Chapman, a former union local president who headed a Steelworkers bargaining committee, says his union negotiated lower starting pay for new workers in exchange for lower monthly medical payments for retirees. When the company sued for the right to change the coverage, Chapman was stunned. To these retirees the agreement with their employer was more than just a promise, it was a contract.
“This story is part of a wholesale shift in risk from companies to families,” says David Brancaccio, host of the PBS newsmagazine NOW, which is featuring Chapman in a report on April 1. “Health-care costs are rising, but increasingly companies are insulating themselves from these costs with individuals left to shoulder the burden.”
With no place for promises on corporate balance sheets, companies are turning to the fine print with their eye on the bottom line. California-based GenCorp is relying on a sentence in an enrollment form their employees signed a decade ago to increase monthly premiums.
GenCorp, formerly the General Tire & Rubber Company, a tire manufacturer you may remember from its slogan: “Sooner or later you’ll own General,” has workers worried that sooner or later they’ll have to drop out of their coverage because it’s too expensive.
And while GenCorp is riding all over its retirees, they are not alone.
A Kaiser/Hewitt Survey on Retiree Health Benefits shows that a vast majority of large employers say they are “very or somewhat likely” to raise premiums and/or cost-sharing requirements in 2005, including 85% of companies surveyed predicting an increase in contributions to premiums by retirees. More ominously, 8% of employers surveyed eliminated subsidized benefits for future retirees in 2004, and 11% said they are likely to follow suit in 2005.
While most employers haven’t turned to the courts, the trend is on the rise and some are using tactics that are particularly aggressive. Just ask Basil Chapman, who was sued by ACF after he threatened to take the company to court when he learned he’d be charged for benefits that previously were free. Chapman’s attorneys say the preemptive move allowed company lawyers to shop for a court where they think they can win a favorable opinion.
As these cases make their way through the courts, there’s little risk for the companies, which if they lose, will simply have to resume paying the benefits. In the meantime, Chapman says, retirees who can’t wait will drop out, and for others it may just end up being a lifetime. “It’s disturbing and scary for older people,” he says. “They just die.”
For more on this important story, tune into the PBS weekly newsmagazine NOW, airing Friday, April 1, 2005 at 9 P.M. on PBS (check local listings).