CUT LOOSE.

• Author: Cusac, Anne-Marie
• Position: IBM, and other companies, appear to be breaking promises that were made in regard to health care for retirees

Companies Trick Retirees out of Health Benefits

Fran Asbeck worked for IBM for thirty-two years. He retired at age fifty-six in 1994, secure in the knowledge that IBM would cover health care for himself and his wife. "The thing is, we were promised all this would be free," he says. "They said we had all the deferred money coming on down the line-a fat pension with yearly COLAs [Cost,of-Living-Allowances], free lifetime health care. Those were the verbal promises made."

Two years ago, says Asbeck, IBM went back on its promises. "They just sent a letter saying, `You've got to start paying for it'" or get less coverage, he recalls.

Asbeck, a former computer programmer who lives in Boyds, Maryland, relied on the excellent health care insurance that IBM offered. But now it's not as attractive. "Since I retired, in order to keep it at zero cost, I have had to take lower and lower levels of health insurance," he says. So Asbeck moved out of what to him was an ideal plan into IBM's preferred provider organization. He no longer gets to choose his doctors freely.

Earlier this year, Asbeck discovered that accepting a lower level of health coverage for himself and his wife wasn't going to work anymore. Worried about the risks of emergency hospitalization, he decided to start paying $80 each month.

It sounds relatively cheap as far as health insurance goes. But Asbeck says he can't afford the cost, in part because his pension has not kept up with the cost of living. That's why he's had to get another job.

"I'm just going to have to work until I'm in the box and hear the dirt hit the lid," he says.

Many IBM employees share Asbeck's plight.

The retirees were told "in department meetings, by their managers, in handbooks, that they would have free health insurance for life," says Lee Conrad, an IBM retiree who is now an organizer with Alliance@IBM, which is connected to the Communications Workers of America and based in Endicott, New York. "Now they've got to pay. This has been a real culture shock for people."

IBM defends its practice. "Back in the early '90s, the company set a limit and a cap" on the amount it would pay for retiree health care and informed the retirees that it wouldn't pay more than that, says Jana Weatherbee, a spokesperson for IBM. "That limit has been reached."

Weatherbee says she "can't speak to any verbal promises. "However, she does say that the company repeatedly informed retirees in writing that, "once you reach this limit, you will start helping in the contribution for that coverage."

And the IBM insurance brochure does include this statement: "The company reserves the right, at its discretion, to amend, change, or terminate any of its benefits plans, programs, or policies, as the company requires. Nothing contained in this Enrollment Guide shall be construed as creating an expressed or implied obligation on the part of the company to maintain such benefits plans, programs, practices, or policies."

"They're covered legally," says Asbeck. But he feels betrayed. And he and other IBM retirees say they're suffering while IBM's Chairman and CEO Louis V. Gerstner Jr. is raking it in. Gerstner made $2 million in salary in 1999 and $5.25 million in bonuses, according to the company's 1999 proxy statement. The bonuses are based partly on cash flow and stock market gains. Companies can boost both by cutting retiree health benefits.

"Lou Gerstner has only been at IBM for seven years," says Conrad. "He's affecting the lives of retirees who put thirty, forty years in. They're the ones who built the company and created the wealth that Lou Gerstner is now pillaging. When you have people who are ill, on fixed income, the increased costs are going to create serious problems. That's unconscionable. How can you do this to people? IBM has their own personal piggy bank right now. And it's not their money. It's the employees' and the retirees' money."

Asbeck puts it another way: "He's getting fat on our blood."

It's not just IBM. Many other companies renege on health insurance promises made to retirees.

According to a December 2000 study by William M. Mercer, Inc., a human resources and benefits firm, only 31 percent of companies with 500 or more employees now provide health care coverage to retirees under the age of sixty-five (the age that people qualify for Medicare). This is down from 35 percent in 1999 and 46 percent in 1993. The number of larger companies covering insurance for seniors ages sixty-five and older also fell, from 28 percent to 24 percent. This was the seventh year in a row that...