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To: All members

October 13,2008
 

An NRLN member sent me a communication he received from the ABTR-Verizon retiree association officers speaking for the PAC organization. This communcation misrepresents NRLN intentions and my testimony in Washington and mischaracterizes the NRLN’s Maintenance of Cost Payment (MCP) proposal. The following paragraph and question and answer below were copied from that communication. The facts and NRLN responses are shown in red font.

 

Statement made: The recent hearing on H.R. 1322, the Emergency Retiree Health Benefits Protection Act, at which ProtectSeniors.Org was asked to testify, has brought much-needed attention to the issue of saving retirees' earned healthcare. In the past week, we have talked to many of our members and supporters who have been asking good questions about the bill, the process, and the politics of getting this done.

 

NRLN response: The NRLN was invited by Congress to testify to the House Committee on Education and Labor, at their hearing entitled “Safeguarding Retiree Health Benefits”. Our testimony did not conflict with HR-1322 and was purposely developed to offer a way to move HR 1322 forward by incorporating the MCP. Go to www.nrln.org and read the NRLN written testimony and extensive whitepaper submitted to the committee and draw your own conclusions.

 

Question : Why doesn't ProtectSeniors.Org support the Maintenance of Cost Payment I have heard about?

Answer: The Maintenance of Cost Payment (MCP) has been proposed as an alternative to H.R. 1322. It is not a current bill in either the House or the Senate. This proposal would immediately discontinue corporate retiree health insurance in favor of a one-time capped monthly stipend to retirees and require them to go out and buy their own healthcare insurance.

Unlike H.R. 1322, MCP will not restore previously reduced or cancelled health benefits; it will not make it illegal for companies to reduce or cancel the earned benefits of retirees; it does not provide inflation protection for healthcare costs; it does not allow for companies in poor financial health to receive a waiver; and it could cause retirees to see an increase in their taxable income. Therefore, ProtectSeniors.Org fully supports the principles of H.R. 1322 as the best and most expedient method to stop the flagrant reductions in earned retiree healthcare occurring all across the country.

 

Please examine these statements made:
 

Sentences 1 & 2 - The Maintenance of Cost Payment (MCP) has been proposed as an alternative to H.R. 1322. It is not a current bill in either the House or the Senate.

It is true that the MCP is not a current bill but the MCP proposal was NOT proposed as a replacement alternative to HR 1322! The NRLN was the original sponsor of HR 1322 and still supports its’ tenants today. However, after nearly eight (8) years, HR 1322 has only recently gained its first Republican co-sponsor. Even though it has roughly 100 of House Democrats signed on, laws of this type do not usually get passed by the 435 member House without some significant bipartisan support.

In 2005, after trying to gain co-sponsors for four years and being advised by members of Congress that the retroactivity terms in HR 1322 would never be approved, the NRLN board decided that HR 1322 must be modified. This decision led to the 2006 MCP proposal. The ABTR association disagreed with the vote of the 20 other NRLN associations and left the NRLN to support HR 1322 as is.

OVER THE PAST THREE YEARS, I PERSONNALY HAVE ASKED ABTR TO WORK TO ACHIEVE A COMPROMISE POSITION THAT COULD GET HR 1322 PASSED.

THEY NOT ONLY REFUSED TO CONSIDER THE MCP PROPOSAL, THEY REFUSED TO CONSIDER ANY NRLN INPUT OR DISCUSSIONS ON HR 1322.

If HR 1322 languishes much longer, the NRLN will be compelled to seek introduction of a bill like HR 1322 that will contain the MCP enhancement. . It is important to know that co-sponsorship is no guarantee that co-sponsors will vote for the bill if it goes to vote on the House floor. If voted out of sub-committee it must then get the 48 member House Committee On Education and Labor to pass it - they called for the September 25 hearing. If it is voted out of this committee, the bill would then have to be passed by a majority of the 435 House members. Consider also that no one in the Senate has yet to submit a companion bill and you can see why the NRLN has been trying to get the bill modified.
 

Sentence 3 - This proposal would immediately discontinue corporate retiree health insurance in favor of a one-time capped monthly stipend to retirees and require them to go out and buy their own healthcare insurance.

This is a mischaracterization of what the MCP does. Since 2004 – Raytheon, Monsanto, Lucent (1/1/09), EMBAQ, John Deere, Chrysler, Ford and many other company retirees, and lately GM (1/1/09) retirees over age 65, have lost all their coverage and retirees under age 65 have no guarantees.

At GM, Medicare eligible retirees were paying $152 a month for healthcare including catastrophic coverage for TWO PEOPLE and the company paid approximately $750; a total of approximately $900 a month. The national average is over $1,100 including catastrophic coverage. Starting 1/1/09 GM retirees will have to add another $400-$600 to their $152 to replace their coverage.

GM granted a $300 per month pension increase that will help but it is worth $255 after tax. The net effect is that after the pension increase they will still have to find another $400-$600 a month. Using the GM information, the $750 is the company cap or the limit GM now pays for health care for each retiree designated as eligible to be protected by this “cap”.

The MCP is this cap of $750 and it would be required to be paid to a retiree every month while retired. If GM retirees were to receive this MCP, they would be far better off than they are going to be. A majority of U.S. companies have invoked caps and make retirees pay the amount over the cap in the form of new or increased premiums, deductibles, co-pays or co-insurance. They call this cost sharing.

Each time a company cancels a coverage element, they lower your cap and if you want that particular coverage, say a Dental Plan or Dependent Coverage, the retiree pays 100% of the cost. They say this is cost sharing also. They pay nothing and you pay 100%. Well GM and Lucent retirees have been cost shared out of their health care effective 1/1/09 and their cap amounts will be “O”, nothing!

The Maintenance of Cost Payment proposal requires companies to maintain the cap ($750/ month in GM’s case) until death. That is enough to buy Medicare supplemental coverage and the MCP also provides the under age 65 retiree assurance that he can offset health care coverage costs. To combat further cancellations, the MCP proposal includes tax credits for companies that maintain their healthcare “cap” (MCP) at retirement and continue to offer their health care plans.

Therefore, the MCP proposal DOES NOT call for or encourage discontinuance of corporate sponsored health care!

 

Sentence 4 - Unlike H.R. 1322, MCP will not restore previously reduced or cancelled health benefits; it will not make it illegal for companies to reduce or cancel the earned benefits of retirees; it does not provide inflation protection for healthcare costs; it does not allow for companies in poor financial health to receive a waiver; and it could cause retirees to see an increase in their taxable income.

All but at few words of this paragraph are generally true but hinge on the hope that Congress would ever pass a bill that would make retirees whole, retroactively, to the day of retirement.

That is, HR 1322, as now written promises that cost sharing and cost coverage cancellations already in effect will be totally reversed (back 10 years?) and that you would get a back payment check that could somehow be calculated and could be taxable. I can find no one who believes that this will happen.

The notion that you can decide which small or large companies are in poor financial health is also very presumptive. On the other hand, bankruptcy laws could be changed to make the MCP a preemptive or superior liability. Every year, more retirees like those from Raytheon, Monsanto, Lucent, EMBAQ, John Deere, Chrysler, Ford, GM and many other companies lose it all.

These retirees would have been far better off with a $750 a month MCP guarantee. Qwest, Verizon, Prudential, Aetna or any other large group of retirees could be next. The NRLN will continue to support HR 1322 as is but will also again ask ABTR leadership to consider modifying HR 1322 to make it passable so that some of the bloodshed can be stopped. If this is not possible, and it remains clear that retroactivity is an unreasonable expectation, then the NRLN is committed to submit the MCP proposal as a stand-alone bill.

 

Bill Kadereit

President, NRLN