[Congressional Record Volume 143, Number 2 (Thursday, January 9, 1997)]
[Extensions of Remarks]
[Pages E74-E76]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           HEALTH INSURANCE ASSISTANCE FOR THOSE 55 AND OLDER

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                       Thursday, January 9, 1997

  Mr. STARK. Mr. Speaker, in the 104th Congress, I introduced 
legislation to provide assistance in obtaining health insurance to 
those 55 and older. Today, I rise again to introduce the same 
legislation to make the COBRA health continuation program available to 
anyone between age 55 and the time they become eligible for Medicare.
  The 1990's have confronted us with many difficult issues, both 
foreign and domestic. One issue in particular impacts an everincreasing 
segment of our population. According to statistics from the Department 
of Labor, in 1988, there were 13.1 million private sector retirees and 
4.9 million had health insurance coverage. In 1994, the number of 
private sector retirees had risen to 17.4 million but the number of 
individuals covered by health insurance had declined to 4.7 million. In 
other words, the proportion of private sector retirees covered by 
health insurance from a former employer dropped from 37 percent in 1988 
to 27 percent in 1994.
  As the level of employer-provided insurance declines and as hundreds 
of thousands of older workers face early retirement because of 
corporate down-fixing, layoffs, and restructuring, the problem of 
health insurance for those not-yet-eligible for Medicare is becoming 
more and more serious.
  As Corporate America continues to focus on profit levels, often at 
the expense of providing health insurance benefits to workers, these 
individuals face an uncertain and frightening future in the health care 
arena. The steady decline in coverage among active workers translates 
into lower likelihold of retiree health benefits being available.
  The frightening reality of this situation will only get worse. In 
1994, almost 24 percent of retirees--4.1 million, were between the ages 
of 55 and 64. The pressure on retiree health plans will only increase 
as the number of persons over the age of 55 nearly doubles--from 55 
million today to nearly 100 million--by the year 2020.

[[Page E75]]

  There exist numerous examples that help demonstrate the significance 
of the situation to the older workers.
  In October 1996, Philips Consumer Electronic Co. gave about 2,000 
employees layoff warning notices. Union leaders involved contend that 
companies make these moves in part to get rid of older workers who cost 
more in wages and pension and health benefits and replace them with 
lower-wage, younger workers.
  In October 1996, the Massachusetts State Department of Employment and 
Training confirmed that 36.1 percent of people claiming unemployment 
checks in August of the same year were 45 or older--usually considered 
the most productive, reliable group of workers.
  In November 1995, Sunbeam Corp. announced that nearly 6,300 
employees, half of its total work force would be let go.
  At AT&T, 34,000 jobs had to be cut. Workers were to receive a lump-
sum payment based on years of service, up to 1 year of paid health 
benefits and cash to cover tuition costs or to start a new business--
but what happens to health coverage after 1 year?
  Two giant New York City banks, Chase Manhattan and Chemical recently 
combined and 12,000 jobs from the combined banks were subsequently cut.
  Since 1990, United Technologies has cut 33,000 jobs.
  In 1994, Scott Paper cut 11,000 jobs or 35 percent of their work 
force.
  A 1994 Nationwide study of 2,395 employers by A. Foster Higgins & 
Co., a New York-based benefits consulting firm, showed that among large 
companies--those with 500 or more employees--46 percent provide some 
form of coverage for early retirees, while only 39 percent provide 
insurance for Medicare-eligible retirees. Fewer than one in five large 
employers are willing to pay the entire cost of health care for their 
retirees, while 40 percent of the companies that do offer some form of 
health care coverage require the retiree to pay all of the costs. Those 
companies that do provide health care coverage for their retirees are 
increasingly requiring them to pay a share of the cost, especially for 
dependents.
  Group health insurance is, of course, much less expensive than 
individual policy insurance, and that is why the COBRA benefit is so 
vital and useful. The difference in cost for obtaining group versus 
individual health insurance can easily be several thousand dollars.
  Receiving help with the cost of this insurance is particularly 
important for those in their 50's and 60's because most insurance 
premiums rise sharply with age. For example, in the Los Angeles market, 
Blue Cross of California offers a basic, barebones in-hospital $2,000 
deductible plan. This plan is a PPO which restricts options for 
hospital usage. For a couple under age 29, the cost is $64 a month. For 
a couple between age 60 and 64, the cost soars to $229 a month.
  In order to ensure that the cost of COBRA continuation is not an 
excessive burden to business, my bill calls for age-55+enrollees to pay 
110 percent of the group rate policy--compared to 102 percent for most 
current COBRA eligible individuals and 150 percent for disabled COBRA 
enrollees.
  I realize that the cost of paying one's share of a group insurance 
policy will still be too much of a burden for many Americans. Many of 
them will be forced into the uncertain mercies of State Medicaid 
policies. But for many others, this bill will provide an important 
bridge to age 65 when they will be eligible for Medicare. I wish we 
could do more, but in the current climate, this bill is our best hope. 
We cannot allow the everincreasing ranks of early retirees to be 
without options in addressing necessary health insurance needs.
  The following November 3, 1996 Washington Post article provides 
further data on why we need to pass this bill.

           Retiring? Don't Assume Health Benefits Are Forever

                        (By Albert B. Crenshaw)

       For 14 years, James Murdock worked as a brewing supervisor 
     at Pabst Brewing Co., putting in long hours at the big 
     Milwaukee-based beer producer. But two years ago, when his 
     wife developed multiple sclerosis, he decided to take early 
     retirement to be with her.
       He checked the company's employee manual, which he said 
     ``guaranteed'' health care coverage until age 65, including 
     early retirees and their dependents.
       But after giving Pabst notice and even selling his home, 
     Murdock got a computer printout describing his benefits. 
     ``Near the bottom was a sentence that said in essence that 
     they had the right to modify, rescind, cancel and so on'' his 
     and his wife's health insurance, he recalled last week.
       ``It was the first I knew about it. By then it was too 
     late'' to halt his retirement. ``My replacement was there and 
     trained,'' he said.
       Company officials were reassuring. ``They said they never 
     canceled anybody's benefits before,'' Murdock said.
       But this time they did.
       Less than two years after his retirement, Murdock is 
     working part-time as a clerk in a hardware store to pay the 
     premiums on a policy for himself. His wife, Carol, is 
     uninsurable and has no coverage. The couple is praying her 
     health holds up until next May, when she becomes eligible for 
     Medicare because of her disability.
       ``That's going to be our oasis in the desert. I just hope 
     we can get there before there's any major problems,'' he 
     said.
       Murdock's is not an isolated case. Rising medical costs and 
     pressure for profits are driving more and more large 
     employers to end or sharply curtail health care coverage for 
     retirees. Others are boosting the share of the costs retirees 
     are expected to pick up.
       As recently as 1988, about 37 percent of retirees were 
     covered by health insurance from a former employer; by 1994 
     that share had dropped to 27 percent. And those who still 
     have coverage are paying more: In the same 1988-94 period, 
     the proportion of retirees with coverage whose entire premium 
     was paid by the companies declined to 42 percent from 50 
     percent.
       In thousands of cases, workers and retirees are being 
     caught by surprise, either because they assumed that the 
     benefits always would be there, or because materials given to 
     them by employers indicated that they would, but didn't 
     really promise.
       The courts are full of cases that turn on the question of 
     what was a binding promise and what was not. The Labor 
     Department is involved in lawsuits on behalf of about 87,000 
     retirees--including 800 from Pabst--whose benefits have been 
     eliminated or reduced.
       ``Employees very often are premising their entire financial 
     planning for retirement on the basis of the promises that are 
     made to them by their employers,'' Labor Secretary Robert B. 
     Reich said last week.
       ``Promises are made or assumed to be made and employees 
     rely on them and then suddenly discover that they are not 
     there. Retirees can be left holding the bag, can be in severe 
     difficulty,'' he said.
       Retirees aged 65 and older can fall back on the federal 
     Medicare program, but in most cases that covers only the 
     individual. Retirees with younger spouses or children will 
     have to find other coverage for them.
       Reich said the problem is growing as the number of retirees 
     rises. He said the department is considering seeking 
     legislation next year, assuming President Clinton is 
     reelected, that would at a minimum require ``clearer 
     disclosure so that workers know exactly what they are being 
     promised.''
       At the other end of the option range, Reich said, might be 
     legislation that would ensure that these promises ``are 
     treated like any other contracts. . . . If you have a 
     reliance interest then they are enforceable.''
       He said the 1974 Employee Retirement Income Security Act 
     sweeps these issues into the federal courts as pension issues 
     rather than contract disputes that would be handled under 
     state contract law. The federal courts have been ``all over 
     the place'' on the issue, he said, making it very difficult 
     for workers and retirees to determine whether their benefits 
     are guaranteed.
       In a number of cases, the company has seemed to guarantee 
     the benefits in one place in their benefit plan documents, 
     but has backed away from it somewhere else. In a case 
     involving former salaried workers at General Motors Corp. 
     whose benefits were cut, a federal appellate court has 
     allowed legal claims to proceed. At Pabst, though, a federal 
     district court ruled against retirees who lost coverage. Both 
     cases are still in litigation.
       Reich acknowledged that employers are not required to 
     provide health insurance for workers or retirees, and any 
     regulatory or legislative changes must strike a balance--
     protecting workers without discouraging companies from 
     offering the benefits in the first place.
       The Labor Department's Pension and Welfare Benefits 
     Administration has issued a brief advisory bulletin that 
     outlines steps you can take to assess your situation and to 
     try to protect yourself.
       The key step is to review your company's plan documents, 
     which describe the benefits offered, spell out eligibility 
     and give other details.
       First, look at your Summary Plan Description. This gives 
     the major features of the plan. It can be changed from year 
     to year or contract to contract, so make sure you get a 
     current one. The one in effect on the date you retire is the 
     controlling document--get a copy and keep it.
       There may be other documents as well, such as a collective 
     bargaining agreement or an insurance contract. Look at them 
     as well.
       In the documents, look for language that looks like a clear 
     promise to continue benefits or provide them for a certain 
     period. But also look for language reserving the right to 
     change or eliminate them.
       This ``reservation clause'' typically will say something 
     like: ``The company reserves the right to modify, revoke, 
     suspend, terminate or change the program, in whole or in 
     part, at any time.''
       It's likely to be there. Companies want to avoid open-ended 
     promises to workers and retirees.
       When both a promise and a reservation are there, it's not 
     clear what your rights will be. Some courts have refused to 
     enforce what seemed to be a clear promise if there was a 
     reservation clause; others have enforced a promise contained 
     in the summary even though there was a reservation clause 
     elsewhere in the plan documents.
       Hang on to any other communications your company or 
     supervisors give you. Courts sometimes take into account 
     informal communications in deciding rights.

[[Page E76]]

       If you are taking early retirement, check out the documents 
     concerning its terms. Special promises made in such deals can 
     override other plan documents.
       And don't be shy about protecting yourself. If you can 
     negotiate a personal promise of health insurance for yourself 
     and/or dependents in retirement, do it. If your company is 
     anxious to see you go, it may well agree.
       Talk to experts as well. If you're in a union, officials 
     there can be helpful. Or you may want to run the material by 
     a labor lawyer. There's a lot of money at stake.
       Free copies of the Labor Department bulletin are available 
     from the Pension and Welfare Benefits Administration's 
     publication hotline at 202-219-9247. It's also on the World 
     Wide Web, at http://www.dol.gov/dol/pwba/.

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