NRLN Update On New General Motors
Cutbacks of
Retiree Health Benefits

        Never let it be said that NRLN is behind the learning curve when it comes to detecting corporate fast shuffles involving retirees. Just a short while ago, NRLN reported that, in a surprise move, General Motors had solicited its retirees to urge Congress to immediately enact legislation that would provide greater access to cheap generic drugs and add a prescription drug benefit to Medicare. (See “NRLN Speaks Out On Legislation To Authorize Greater Access To Generic Drugs And A Medicare Prescription Drug Benefit” at this website).

         NRLN suspected that lurking behind GM’s sudden enthusiasm for retiree-friendly drug legislation was a two-fold “hidden agenda”; first, to herd all of its retirees into a generic drug concentration camp which would enable GM to walk away from its costlier regular prescription drug commitments; second, to dump all of its Medicare-eligible retiree drug costs on Medicare (and the taxpayers) even if that would mean replacement of superior GM drug coverage by inferior Medicare coverage. Bear in mind that the primary purpose of adding a prescription drug benefit to Medicare is to provide such coverage to those who lack it rather than to eliminate coverage for those who already have it.

        It appears that NRLN’s suspicions of GM’s motives were on target. Hardly was the ink dry on GM’s letters urging retirees to pressure Congress for new drug legislation, when GM’s Vice President for Global Human Resources, one Kathleen S. Barclay, wrote all of the same GM retirees to inform them that they would have to pay a new monthly increase in the contributions they must make to preserve their retiree health benefits coverage under the GM plan. These increases will range from $9 to $51 monthly. 

        Furthermore, the same retirees were informed that changes were being made to the retirees’ prescription drug program to “encourage” the use of generic drugs. These changes include a new prescription drug co-payment of $35 if non-generic medicine is purchased retail, a $50 co-payment for home delivery of a 3-month supply of non-generic drugs, and, in both instances, retiree responsibility for paying the difference in cost between the generic and non-generic version of the drug in addition to these new co-payments.       

Together with similar increases in co-payments and drugs for retirees enrolled in HMOs, and new monthly charges for retiree vision care benefits, it is estimated that GM’s retirees have been zapped with close to a 40% increase in out-of-pocket costs they must absorb in order to receive GM health insurance benefits in 2003. Moreover, there is no guarantee that additional charges will not be imposed for 2004. Down the road, it is possible that GM may decide to make its retirees responsible for financing virtually all of their health insurance benefits while GM stays on as a figurehead sponsor of these benefits.

 In defense of transferring more and more of its health insurance costs to its retirees, GM claims that “business and economic conditions are such that virtually all employers are sharing more of these [health insurance] costs with their employees and retirees” and that GM operates in an “extremely competitive industry”. But why should retirees – many of whom are saddled with serious illnesses and are living on fixed incomes without receiving any cost-of-living pension increases from GM – be forced to bail out GM because in the past the company made health benefit commitments to retirees without anticipating the recent rise in health costs. It was perfectly feasible for GM to specify the limits of its retiree health insurance promises before their employees retired and if they failed to do so they only have themselves to blame. 

Under existing federal law GM could not reduce or eliminate the pensions they already have provided to retirees even if after they awarded the pensions GM became unprofitable or was confronted with an “extremely competitive industry”. Why should it be any different for retiree health benefits, which no one forced GM to provide in the first place? 

In the final analysis, it is only because federal law does not safeguard retiree health benefits the same way it does pensions that GM, a profitable company, is able to get away with this latest assault on retiree health. NRLN urges GM retirees and all retirees to contact their Congressional representatives and their challengers ASAP and let them know that their vote in the November elections depends on whether the candidate supports the early enactment of HR1322 or S2904, the Emergency Retiree Health Benefits Protection Act. That bill would preclude companies like GM from decreasing or canceling retiree health insurance benefits after an employee retires and would protect such health benefits the same as pensions. 

        If retirees fail to unite and act now, the corporate onslaught on their health benefits will continue without letup. Write NRLN at P.O. Box 18757, Washington, D.C., 20036-8757, Washington, D.C. 20036-9998, call 202-659-0620. For further information or assistance on how you can help NRLN in its campaign to protect retiree health benefits.