GM's pain hits retirees

Automaker drops health coverage for ex-workers 65 and older, affecting hundreds in Baltimore

July 16, 2008|By Andrea K. Walker | Andrea K. Walker,Sun Reporter

When Charles Miller went to work at General Motors' Broening Highway plant in 1954, he was attracted to the company by its reputation for good salaries and stellar benefits.

He stayed for 31 years. Since he retired from his job as a data processor in 1985, he has gotten health coverage from the automaker, which helped pay for his heart surgery last year.

But now the 77-year-old Perry Hall resident and thousands of other white-collar GM retirees and their spouses or survivors, including hundreds in the Baltimore area, are losing that.

The automaker, hemorrhaging sales in its core U.S. market, announced yesterday deep cuts and other actions to raise cash that would generate $15 billion in savings through 2009. Among the casualties: health benefits for salaried retirees 65 and older.

GM is the latest big company to abandon retiree health coverage, though it will continue to pay for those younger than 65. Thousands of Bethlehem Steel workers in Baltimore and nationwide lost coverage after the steelmaker went bankrupt in 2003. General Growth Properties Inc., the Chicago real estate giant that bought Columbia developer Rouse Co., dropped company-paid health and life insurance for Rouse retirees in 2005.

And in March, the Supreme Court made it easier for companies to reduce health benefits for millions of retirees who turn 65 and become eligible for Medicare by turning away a legal challenge from AARP. The advocacy group had argued that lower benefits for older retirees amounted to age discrimination.

Eliminating retiree health coverage for those 65 and older was just one part of GM's latest cost-reduction plan. The automaker also said it would cut its white-collar expenses by 20 percent in the United States and Canada, slash thousands more blue-collar jobs by cutting truck production, sell assets and suspend its dividend for the first time since 1922.

Retirees worry

Yesterday's announcement has left retirees on fixed incomes like Miller wondering how they will cope when they lose their benefits in January.

GM said it will increase pension payments by $300 a month with money from its overfunded pension plan to help compensate. But nobody knows if that will pay for everything.

"They've been cutting for years, so I sort of knew this was going to happen someday," Miller said. "But I was hoping it would take longer. We're probably going to have to cut back on the amount of insurance coverage we have."

Already, Miller is wondering whether he will be able to afford the knee surgery he had planned for later this year.

Currently, GM pays retirees on Medicare $76.20 a month to help pay for supplemental coverage and also provides secondary coverage through CareFirst BlueCross BlueShield in Maryland. How much the company contributes depends on the plan a retiree chooses. Combined, the coverage helps pay for additional medical, dental, vision, prescription drug and extended care coverage.

Supplemental Medicare coverage can cost $800 to $3,000 a year, according to the Baltimore County Department of Aging. The CareFirst "Medi Gap" plans range in cost from $55 to $155 per month for people ages 65 to 69. The premiums increase with age.

Retirees will have to transfer their Medicare benefits in 63 days or risk not being covered for pre-existing conditions, said Arnold Eppel of the Baltimore County Department of Aging.

Benefits disappear

Workers at iconic American companies could once count on collecting health benefits well into their retirement years. But these benefits have increasingly become targets of cash-strapped companies.

A recent study by the Families & Work Institute, a nonprofit that researches family life, found that there were cutbacks in all categories of the "benefits pool" arena, from the number of companies contributing to 401(k) retirement accounts to the number cutting back on how much they contribute to employee premiums.

"This may seem like an individual problem for GM, but it's a much larger issue," said Ellen Galinsky, president of the institute.

Baltimore GM retirees said the company has been slowly chipping away at their benefits for years.

John Cullina worked at GM for 30 years, mostly as a supervisor in the car seat division at the Broening Highway plant. The Glen Burnie resident has health coverage through the military but worries about his colleagues.

"I think it's going to be a terrible blow," he said. "There are going to be a lot of people hurting.

"As salary people, we were always told that one of your benefits is health care," Cullina said. "Now, we're going to lose all that."

Ed Watts, 71, expects that he will have to eat out less and make other lifestyle changes in order to pay the additional health care costs.

"I'm going to have to give up some other things," said Watts, who worked for GM for 30 years as an engineer and later in labor relations. "It's going to change my budget."

What GM is doing

* Eliminating health coverage for salaried retirees 65 and older

* Cutting thousand of jobs through attrition, early retirement and buyouts

* Eliminating executive bonuses

* Reducing sales and marketing budgets

* Selling assets to raise $2.4 billion

* Suspending dividends

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.