Posted on 02/17/2004 7:39:27 AM PST by John Jorsett
OAKLAND -- After working 30 years for Kaiser Aluminum, Oakland resident Karen Wessenberg retired in 2000, ready to reap the rewards of a pension and low-cost lifetime medical benefits, just like her mom, who worked 27 years for Kaiser.
But the 53-year-old Wessenberg took a new job last month to help pay for her health insurance, which has skyrocketed since Kaiser Aluminum filed for bankruptcy in February 2002.
It's only getting worse. Kaiser Aluminum & Chemical Corp., a company once synonymous with Oakland that is now based in Houston and trying to emerge from bankruptcy, has reached an agreement to cancel medical and life insurance benefits for all retirees May 31. The decision, announced Feb. 4, affects more than 11,000 hourly and salaried retired employees and dependents,
including about 700 salaried retirees who live in the Bay Area, mostly in the East Bay.
"It's a big hit," Wessenberg said. "We've referred to it as the second shoe falling."
As a salaried early retiree, Wessenberg and her husband initially paid a $35 monthly premium for medical benefits. Shortly after Kaiser Aluminum filed for bankruptcy, their monthly premium jumped to $350. In January, it rose to $600. Wessenberg, a former salaried benefits administrator with a $1,100 monthly pension, is making ends meet by working in sales at an insurance broker.
But many are too old to work, like her 77-year-old mom and dad, Castro Valley residents who receive home health care. Kaiser Aluminum currently picks up half of the $5,000 monthly tab, but that could change after May.
Wessenberg said retirees feel blindsided. "There are many people with pre-existing conditions and for those it is difficult to get coverage," she said.
Kaiser Aluminum was founded in 1946 in Oakland by Henry J. Kaiser, the progressive industrialist who also started separately owned Kaiser Permanente, the nation's largest nonprofit health maintenance organization. By 1980, Kaiser Aluminum had grown to 26,000 employees and net worth of $1.4 billion.
But the company racked up losses in the 1980s and was bought in 1988 by Charles Hurwitz and Maxxam Corp., owner of Pacific Lumber. Kaiser Aluminum had some profits in the 1990s, but the bankrupt firm has lost more than $1 billion since 2001. Kaiser Aluminum no longer has facilities in the Bay Area.
Kaiser Aluminum was spending about $60 million a year in retiree medical benefits, company spokesman Scott Lamb said.
"We're trying to restructure the company," Lamb said. "We simply do not have the ability to make those kind of payments."
Now with about 5,000 employees, Kaiser hopes to emerge from bankruptcy in mid-2004 and focus on its aluminum fabricating business.
Meanwhile, it will cancel medical benefits for retirees May 31, pending final approval by union members, the company's board and Bankruptcy Court. Kaiser will offer retirees new medical benefits at a lower level under a Voluntary Employee Beneficiary Association (VEBA), which depends on its profitability. Kaiser retirees also could opt for costly federal COBRA coverage.
Also, Kaiser plans to end its pension plan. The federal Pension Benefit Guaranty Corp. will help, but while older retirees can expect similar pension payments, recent retirees and current employees will likely take big cuts.
The unions and other employee groups agreed to the cuts because they realize the seriousness of Kaiser's "very unfortunate" situation, Lamb said.
"This is by no means a perfect solution," said Dave Foster, a United Steelworkers of America district director and union negotiator.
Kaiser employees and retirees are angry and frightened, Foster said. The VEBA offers hope, but it still would involve significant cutbacks, he said.
Foster has seen worse -- 300,000 of his union's retirees have lost health insurance in the last 18 months.
"It's a real indictment of the employer-based system of providing health insurance in this country when the company that was the foremost proponent of it, Kaiser, has been reduced to bankruptcy," Foster said.
Salaried retirees already have had two health insurance hikes, while hourly ones have continued so far without monthly premiums.
"It's a difficulty for everybody. It's a true hardship for a number of our retirees," said Bob Irelan, spokesman for the 4,600-member Kaiser Aluminum Salaried Retirees Association.
The association has told retirees about options such as Medigap, said Irelan, a former Kaiser vice president of public relations. Many members already dropped their Kaiser coverage because they couldn't afford it, he said.
Moraga resident Evo Alexandre, 71, ran Kaiser's information systems before retiring in 1986. His late father also worked for Kaiser and his mom receives Kaiser medical coverage -- at least until May.
"These people are older and really need the insurance," Alexandre said. "To see the whole thing collapse is disconcerting at best. You wonder if better managers were running the place, perhaps (benefits) would still be in place."
If you hate that, you'll really hate what the government has in store for you.
While she may be referring to the cost, whoever reported this should have clarified the matter: under HIPAA, a currently insured individual with pre-existing conditions cannot be denied coverage based on those conditions.
This lady happens to be 53 years old, and it's a shame the promises her company made her can't be fulfilled. But her very generous retirement option is the problem to begin with.
And an fyi for anyone whose company provides medical benefits after retirement: don't count on it. It's no longer feasible, and companies are dropping such coverage everywhere.
syriacus
And the employer-based system of providing health insurance has been the keystone in the resistance to a national health care system. I wish we could find ways to be more supportive of the employer-bases system because the employers seem to want out of it.
We also need to go back to the old Federal Laws that required pension funds and medical benefits to be fully funded.
In the last 20 years, legislation has allowed companies to raid their pension funds and replace the assets with a promise to pay out of profits, if there are any.
So9
Why can't people band together for the sole purpose of purchasing a group policy? I guess it would be kind of like a coop of sorts or pooling resources together? I know there are kinks but why couldn't this work?
I'm not sure it couldn't work. Wouldn't it be nice to see a private sector solution just spring up from the grass roots like that? If the private sector is unable to solve the problem, I think I know what alternative is more or less inevitable. This is a test of the marketplace. If the private sector doesn't adequately solve the problem, the public sector will.
As it is, employers want out. ;-)
BINGO!!!
Why would ANYONE work for a private Company???
Not only that but how much money is a company supposed to spend on retirees' health care ?
Health insurance as structured is an entitlement that does not reward people for being healthy. Medical savings accounts that belong to the individual/family and catastrophic health insurance should be sufficient. They should be transferable throughout your career and be modeled after IRAs to encourage that you save for your own rainy day. If you don't need it you keep it or give it to your heirs. That should allow companies to invest more in future production rather than retirees' health care.
Well, they can. But the reason group plans are affordable is because they usually aren't loaded with people over 60 with pre existing conditions.
My employer pays premiums based on the prior year claims of its several thousand employees. In that mix are young women having children, old folks with heart problems, young men with no medical problems, children with asthma, etc.
Now, if all the healthy young men were to band together for a group policy, the per-insured cost would be much less than the larger group. But, the remaining larger group would have much higher premiums, because the insurer wouldn't have the steady premium income from the healthy guys.
So in other words, you can't benefit from a group policy if every member would face high premiums as individuals. Oh, you may be able to get some marginal discount, but nothing to put a dent in the monthly costs.
I disagree. I think the main reason is due to the common co-pay structure for routine health care. If people actually were held financially responsible for the routine stuff, the catastrophic coverage wouldn't be so high.
Sure, illegals are causing some of the problem. But when there is no disincentive for heading to the doc for a prescription or attaboy, costs will continue to rise. Right now, getting a runny nose looked at will cost you $10-$15 bucks and the insurer $80. If the insurer could pocket that $80 (make you responsible for it), they could lower premiums for the insurance we actually need.
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