Health benefits: A view from the real world
Richard D. Quinn
Employee Benefit News  June 1, 2005

It's not easy to place oneself in another's shoes, but after years of reading letters from employees and retirees, I thought I'd give it a shot.  Do you ever wonder what your retirees think?  I do, a lot (and increasingly more as I get nearer being one).  Here is one perspective to which we tend to turn a deaf ear.

Dear Former Employer:

I am a retiree of your company.  Actually, I retired from a company that your company acquired shortly after I retired.  You don't know me, and certainly you will not recognize my name, but I did work for you for more than 30 years.

I am writing not to ask for an increase in my pension, but rather in response to your recent letter regarding my health benefits.  As I understand it, the plan in which I am now enrolled will no longer be available next year.  In addition, my premium is going up considerably, and I will have to pay substantially more if I wish to continue to enroll my wife (she said I do).  That's quite a dose of cost-cutting, or I guess they call it cost-shifting these days.

Some of my friends who are also retired are thinking of writing to you as well.  They insist on pointing out the many years of dedicated service to the company and their right to benefits.  I have a different view, though.

While I tried to do my best while working for 30 years, I didn't do it for free;  I was paid for every minute I worked so we are even on that score.  It would be nice to have an increase in my pension, which is now worth about 50% of what it was when I retired, but I know that wasn't the deal.  After all, I did have a working lifetime to save, and shame on me if I didn't.

Health care, however, is a different matter.  While working, I remember hearing repeatedly the message of the hidden paycheck.  In theory, if we workers didn't have expensive benefits like health care, the company would have paid us more.  Well, not voluntarily, but if you wanted workers, you would have.  In other words, for those 30 years I was working, I was in a real sense paying for my future health care benefits.  I believe you call it deferred compensation.  And speaking of deferred compensation, I notice in the company proxy you can defer compensation and receive a handsome rate of interest while it is deferred.  And dare I mention the executive health benefits; what, you need help with the deductible?  Me, too!

As I recall, we were told over and over that the total compensation package was a percentage of payroll and that percentage included health benefits for both active and retired employees.  I believe I made an investment in my future security while I was working, and by the changes that you are making, you are threatening my security.  I kept up my end of the deal;  I gave up wages in return for current and future benefits.  I think you broke it.

You seem to forget that a corporation coping with expenses is an entity with many options, many resources and with many professionals like yourself who are being paid to anticipate, plan and otherwise deal with the fortunes of running a business.  I, on the other hand, am a person.  What appears as an accounting entry on your balance sheet appears to me to be less money I have to spend on some pretty basic stuff.  I have limited options to adjust and to plan, and I certainly don't see a long-term strategy in my future.

I have to wonder who comes up with these benefit changes for us retirees.  Let me guess:  their bonus is based on how much they save the company, they are 25 years away from retirement and have no clue of what it means, they just read an article on the latest trend in benefits management, they recently attended a conference and heard what everyone else is doing or their last name is Fasb.  No matter, someday they too will be writing a letter like this.

I know full well that health care costs are out of control, but I can't solve that problem and apparently neither can you, other than by asking people to pay more or do with less coverage (which is also asking them to pay more).

However, I must say you have tried.  I have lost count of the number of letters I received as an employee and now retiree telling me about the new health benefit program that was going to help control costs.  I'm afraid to open any more envelopes with the company logo.  Let me count the ways.

We started with a program that paid a fixed fee for services and I paid the rest if I didn't use a participating doctor.

Next we moved to something called UCR, and there was no fixed payment amount, you just paid the doctors more when they raised their fees.

Then there was the HMO and I agonized over changing doctors, but if it saved money what the heck?  Somewhere along the line I seem to recall a section one twenty something that was going to give me choice;  I'm not even sure I remember among what.

The HMO faded away and there was the POS and PPO and now it seems to be the OOL (out of luck).  In my day if we did our work that way, I never would have made it to retirement.

The problem, you see, is that when you ask me to pay more - much more - it is without regard to the impact on the individual.  If my pension were $80,000 a year, perhaps a $70.00 increase in my monthly premium would be modest, but my pension and many of my friends' pensions are more like $20,000 a year.  I'm sure you see the point.  It's like the reverse of your bonus based on a percentage of your base pay.

If you could not or did not plan to honor your commitments to those of us in retirement, then you should not have made them.  You sure had no problem making it easier for people to retire when it suited your needs a few years back.  The early retirement benefit was improved, and I seem to remember a special early retirement program (with health benefits) that helped boost earnings.  Let me see if I have this straight:  Encourage people to retire under one set of rules that include health benefits, and then when they are retired a few years change the benefits.  Do the words bait and switch mean anything?

As I said, I don't have the answer to health care costs, perhaps we just live too long, or expect too much.  I do have an idea, though.  Why don't we just give up with all these health plans and let the government take over and have one big Medicare plan for everyone?  It won't lower the cost of health care, but instead of paying premiums and having benefits cut each year, we will all just pay higher taxes and nobody will be the wiser.  Just a thought.

I expect to pay my fair share, but I also expect to be treated better than red ink.  Most of all, I expect my former employer to remember that those of us now retired paid for our benefits and that we are people, not annuitants or plan participants or depreciated human capital.

I'll be happy to give back my gold watch if that will help (it's broken).

A. Benefits Manager (retired)