Retirees Lose Insurance

January 20, 1995|By Ross Hetrick | Ross Hetrick,Sun Staff Writer Staff writer Kim Clark contributed to this article.

About 668 retirees of the defunct Maryland Shipbuilding and Drydock Co. and their spouses have been stripped of supplemental medical and prescription insurance, despite a 7-year-old court order that the former owner of the shipyard continue the benefits.

"It's a life-threatening situation . . .," said Robert W. Pemberton, business representative for the International Association of Machinists-Shipbuilders, the union that represented some of the workers. "They can't afford to pay."

Lawyers for the retirees yesterday sought a temporary restraining order in Baltimore from U.S. District Judge Herbert N. Maletz to force Fruehauf Trailer Corp. -- a company created from former shipyard owner Fruehauf Corp. -- to reinstate the coverage.

A hearing was postponed until today to give the company's lawyers time to prepare a defense.

The case comes as more companies are trying to reduce retiree medical benefits to save money.

In October, two federal appeals courts upheld the actions of employers who modified or terminated retiree plans, despite promises of lifetime benefits. One of them was Sweetheart Cup Co., a Chicago-based paper cup and ice cream cone maker with a 2,000-worker operation in Owings Mills.

"It's pretty common," said Deborah Chollet, economist for the Alpha Center, a Washington-based health policy think tank.

Some companies have been forced to continue the coverage because of union contracts or implied or written guarantees that coverage would continue indefinitely, she said: "That's why nearly every employer has since changed its plan language. They've worded it very carefully to make sure they can amend or cancel the plan."

Many companies contend they would like to continue the benefits, but are being financially strangled by rising medical costs.

"Employees and retirees are finding themselves without health insurance and companies are finding themselves bankrupt because of the cost," said Warren Davidson, a Baltimore-based employment law specialist who represents management. "There's no real good answer."

Mr. Ward, the retirees' attorney, said Fruehauf Trailer stopped paying benefits Jan. 9 -- three days before he was notified. "They said they could no longer afford it," Mr. Ward said in court yesterday.

Stuart Carlisle, a spokesman for Fruehauf Trailer, said he did not have enough information to respond to questions.

The former Fruehauf Corp. first tried to end medical coverage for retirees in June 1985, about a year after it shut down Maryland Shipbuilding, a ship repair operation in the Fairfield area of Baltimore.

Retirees, contending that the benefits had been promised them, challenged the action. The company eventually agreed to three consent decrees in Baltimore and Detroit requiring it to continue providing medical and prescription coverage.

The retirees, many of whom still live in the Baltimore area, were confronted by hundreds of dollars in medical bills when the benefits were dropped.

"If I had to pay for it myself, it would cost me a fortune," said Calvert J. Lamke, 72, who has to take eight kinds of medicine daily for a heart condition.

Without the prescription plan, his monthly drugs costs would shoot up to $160 from $16 -- a big bite from his monthly income of about $1,000. "I would have to get into hock for everything I got," he said.

Charles "Buck" Shade, 76, recently had eye surgery and says he is afraid he might not be able to afford further treatments. "I don't know when I will have to go to the hospital," he said.

Fruehauf Trailer -- one of the companies created after Fruehauf Corp. went though a leveraged buyout in the late 1980s -- has not had a profitable year since 1990. It is one of the country's largest manufacturers of truck trailers.

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