Hundreds of retirees sue for health benefits

November 22, 1992|By Thomas Easton | Thomas Easton,New York Bureau

In a sad reunion, former executives of Maryland Cup hav been trooping through Baltimore, the old company town, to give depositions on a lawsuit underscoring the tumultuous changes that followed the company's sale to Fort Howard Co.

The suit was brought by Robert Gable, a retiree whose fingers were cut severely in a 1989 household accident. With his severed fingertips wrapped in a towel, Mr. Gable was rushed to Carroll County General Hospital. There, fast-working surgeons reattached the pieces.

Taking care of the medical bills was far more difficult. Under a policy that had just been instituted by Fort Howard, Mr. Gable says, the bills were rejected because he had neglected to call the insurance carrier during his rush to the hospital.

Mr. Gable, who had depended on a substantial retirement health care plan, was outraged. " 'Betrayed' is about as good a word as I have for what happened."

That outrage has been channeled into U.S. District Court, in a class action lawsuit encompassing about 300 other Maryland Cup retirees and their spouses.

For two decades, Mr. Gable and hundreds -- if not thousands -- of white collar workers at Maryland Cup had been told about a substantial retirement health care plan. That plan was meant to cement the loyalties of workers, say former company executives who designed it.

But retiree health benefits have changed dramatically since Fort Howard bought Maryland Cup in 1983. Lifetime limits for a married couple, for example, have been cut from $1.5 million in 1983 to $60,000 today. Quarterly premiums have been added, causing some employees to drop coverage. Moreover, the reimbursement process has been altered, impeding and limiting claims payments.

The battle over Maryland Cup's health care benefits is hardly unique. To cope with soaring health care costs, many companies have reduced coverage, or have asked employees and retirees to pay more for coverage.

Whether the Maryland Cup retirees prevail will have little to do with the suffering caused by such moves. Rather, it will hinge on whether Sweetheart Holdings -- the company that evolved from Fort Howard's restructuring -- must honor Maryland Cup's health care plan.

Sweetheart's attorney, Virginia Barnhart, of Miles & Stockbridge, says that "what people were told, and what commitments were made is very much in dispute."

She would not comment on the company's strategy, but arguments already in legal filings and letters to employees provide some hints. Sweetheart asserts that the written assurances of lifelong health care made by Maryland Cup were merely an "outline of the benefits in effect at the time" rather than a contract. That's an important legal distinction.

Legal nuances aside, the document signed by retiring Maryland Cup employees was straightforward. Workers were told that benefits had a maximum limit. Spouses would lose benefits if they remarried. Otherwise, say former executives and employees, the plan was expected to remain in force, even after Maryland Cup's sale.

In letters explaining changes in coverage, Fort Howard said much of the cost that the company had previously promised to finance would now be paid by taxpayers through expanded Medicare and Medicaid. But under the government plans, several affected employees say they face higher deductibles, stiffer fee schedules and less latitude for the type of treatment.

As a result, many retirees have purchased additional coverage, an expensive arrangement. Harvey Spies, for instance, a 40-year Maryland Cup employee, spends nearly two-thirds of his $270 monthly pension on health insurance. Yet he faces the frightening prospect of even more expensive, and limited, coverage as he and his wife grow old.

The case will likely come to trial next year.

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