Table Of ContentRETIREE HEALTH BENEFITS, INCLUDING PROPOS-
ALS TO EXTEND MEDICARE TO COVER EARLY
RETIREES AT AGE 60
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF BEPKESENTATIVES
ONE HUNDRED SECOND CONGRESS
FIRST SESSION
NOVEMBER
5, 1991
Serial 102-66
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
51-620 WASHINGTON : 1992
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDocuments,CongressionalSalesOffice.Washington.DC 20402
ISBN 0-16-037709-9
COMMITTEE ON WAYS AND MEANS
DAN ROSTENKOWSKI, Illinois, Chairman
SAM M. GIBBONS, Florida BILL ARCHER, Texas
J.J. PICKLE, Texas GUY VANDER JAGT, Michigan
CHARLES B. RANGEL, New York PHILIP M. CRANE, Illinois
FORTNEY PETE STARK, California DICK SCHULZE, Pennsylvania
ANDY JACOBS, Jr., Indiana BILL GRADISON, Ohio
HAROLD E. FORD, Tennessee BILL THOMAS, California
ED JENKINS, Georgia RAYMOND J. McGRATH, New York
THOMAS J. DOWNEY, New York ROD CHANDLER, Washington
FRANK J. GUARINI, New Jersey E. CLAY SHAW, Jr., Florida
MARTY RUSSO, Illinois DON SUNDQUIST, Tennessee
DON J. PEASE, Ohio NANCY L. JOHNSON, Connecticut
ROBERT T. MATSUI, California JIM BUNNING, Kentucky
BERYL ANTHONY, Jr., Arkansas FRED GRANDY, Iowa
BYRON L. DORGAN, North Dakota
BARBARA B. KENNELLY, Connecticut
BRIAN J. DONNELLY, Massachusetts
WILLIAM J. COYNE, Pennsylvania
MICHAEL A. ANDREWS, Texas
SANDER M. LEVIN, Michigan
JIM MOODY, Wisconsin
BENJAMIN L. CARDIN, Maryland
JIM McDERMOTT, Washington
Robert J. Leonard, ChiefCounsel and StaffDirector
Phillip D. Moseley, Minority ChiefofStaff
Subcommittee on Health
FORTNEY PETE STARK, California, Chairman
MARTY RUSSO, Illinois BILL GRADISON, Ohio
BRIAN J. DONNELLY, Massachusetts ROD CHANDLER, Washington
WILLIAM J. COYNE, Pennsylvania NANCY L. JOHNSON, Connecticut
SANDER M. LEVIN, Michigan RAYMOND J. McGRATH, New York
JIM MOODY, Wisconsin
BENJAMIN L. CARDIN, Maryland
(II)
RETIREE HEALTH BENEFITS, INCLUDING PRO-
POSALS TO EXTEND MEDICARE TO COVER
EARLY RETIREES AT AGE
60
TUESDAY, NOVEMBER 5, 1991
House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, D.C.
The subcommittee met, pursuant to notice, at 1:05 p.m., in room
1100, Longworth House Office Building, Hon. Fortney Pete Stark
(chairman ofthe subcommittee) presiding.
[The press release announcing the hearing follows:]
(l)
2
FOR IMMEDIATE RELEASE PRES8 RELEASE #22
MONDAY/ OCTOBER 21, 1991 SUBCOMMITTEE ON HEALTH
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OP REPRESENTATIVES
1102 L0N6W0RTH HOUSE OFFICE BBLD6.
WASHINGTON/ D.C. 20515
TELEPHONE: (202) 225-7785
SUBCOTMHMEITHTOENEOROANBLHEEAPLETTHE, SCTOAMRMKIT(TDE.E, OCNALWIAFY.S),ANCDHAMIERAMNASN,/
U.S. HOUSE OF REPRESENTATIVES, ANNOUNCES A
HEARING ON RETIREE HEALTH BENEFITS, INCLUDING PROPOSALS TO
EXTEND MEDICARE TO COVER EARLY RETIREES AT AGE 60
The Honorable Pete Stark (D., Calif.), Chairman,
Subcommittee on Health, Committee on Ways and Means, U.S. House
of Representatives, today announced that the Subcommittee will
hold a hearing on retiree health benefits, including proposals to
expand Medicare to cover early retirees. The hearing will be
held on Tuesday, November 5, 1991, at 1:00 p.m., in the main
Committee hearing room, 1100 Longworth House Office Building.
In announcing the hearing Chairman Stark said, "This hearing
will examine the impact of the new FASB requirements on corporate
liability and retiree health benefits. It will also explore the
impact of proposals to lower the Medicare eligibility age on
projected unfunded liability."
Oral testimony will be heard from invited witnesses only
.
However, any individual or organization may submit a written
statement for consideration by the Subcommittee and for inclusion
in the printed record of the hearing.
BACKGROUND
Retiree health benefits have become a major concern for
employers, employees and retirees in recent years. In 1988,
companies in the U.S. paid $9 billion for health care for
7 million retirees and dependents. According to the U.S. General
Accounting Office, in 1988 employers accumulated obligations of
$227 billion for retiree health benefits for current and retired
employees.
The Financial Accounting Standards Board (FASB) revised its
accounting rules in December 1990 to require companies to
disclose health liabilities for post-retirement benefits for
fiscal years beginning December 15, 1992. New accounting rules
issued by FASB require employers to recognize accumulated post-
retirement benefit obligations on the company's balance sheet.
Some have suggested that the FASB disclosure rules will have a
significant impact on corporate profits and stock market prices.
Retiree health benefits have become a prominent issue in
labor/management negotiations in recent years. From organized
labor's perspective, the implementation of the new FASB rules may
erode health benefits for current and future retirees. Employers
are pursuing strategies to modify obligations in order to limit
their financial liability. Some have cut benefits for current
retirees. Increasingly, employers are limiting their liability,
forcing employees and retirees to pay a greater share of health
benefits.
(MORE)
3
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Several bills, including H.R. 3205, the "Health Care
Coverage and Cost Containment Act of 1991," and H.R. 1444, the
"Medicare Eligibility and Expansion Act of 1991," would expand
Medicare eligibility to cover early retirees. Such proposals
could substantially reduce corporate liability for retiree health
benefits. At the same time, the bills would assure basic health
coverage for early retirees who may not have access to adequate
employer-sponsored benefits.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS
:
For those who wish to file a written statement for the
printed record of the hearing, six (6) copies are required and
must be submitted by the close of business on Tuesday,
November 19, 1991, to Robert J. Leonard, Chief Counsel, Committee
on Ways and Means, U.S. House of Representatives, 1102 Longworth
House Office Building, Washington, D.C. 20515. An additional
supply of statements may be furnished for distribution to the
press and public if supplied to the Subcommittee office, 1114
Longworth House Office Building, before the hearing begins.
FORMATTING REQUIREMENTS
:
EachstatementpresentedforprintingtotheCommitteebyawitness,anywrittenstatementorexhibit'submittedforthe
printedrecordoranywrittencommentsinresponsetoarequestforwrittencommentsmustconformtotheguidelineslistedbelow.
Anystatementorexhibitnotincompliancewiththeseguidelineswill notbeprinted, butwill bemaintained intheCommittee
filesforreviewandusebytheCommittee.
1. Allstatementsandanyaccompanyingexhibitsforprintingmustbetypedinsinglespaceonlegal-sizepaperandmaynot
exceedatotalof 10pages.
2. Copiesofwholedocumentssubmittedasexhibitmaterialwillnotbeacceptedforprinting.Instead,exhibitmaterialshould
bereferencedandquotedorparaphrased.Allexhibitmaterial notmeetingthesespecificationswillbemaintained inthe
Committeefilesforreviewand usebytheCommittee.
3. Statementsmustcontainthenameandcapacityinwhichthewitnesswillappearor.forwrittencomments,thenameand
capacityofthepersonsubmittingthestatement,aswellasanyclientsorpersons,oranyorganizationforwhomthewitness
appearsorforwhomthestatementissubmitted.
4. Asupplementalsheetmustaccompanyeachstatementlistingthename,fulladdress,atelephonenumberwherethewitness
orthedesignatedrepresentativemaybereachedandatopicaloutlineorsummaryofthecommentsandrecommendations
inthefullstatement.Thissupplementalsheetwill notbeincludedintheprinted record.
The above restrictions and limitations apply only to material being submitted for printing. Statements and exhibits or
supplementarymaterialsubmittedsolelyfordistributiontotheMembers,thepressandpublicduringthecourseofapublichearing,
maybesubmittedinotherforms.
4
Chairman Stark. Good afternoon. Today, the Subcommittee on
Health of the Committee on Ways and Means will turn toward
health benefits for early retirees. We will examine how a lower
Medicare eligibility age could reduce businesses' liability and im-
prove health coverage.
In December of 1990, the Financial Accounting Standards Board
revised its accounting rules for retiree health benefits. Beginning
in December of 1992, companies will be required to disclose their
health liabilities for postretirement benefits. While the conse-
quences of these new rules have yet to be determined, we are al-
ready beginning to see an erosion of employer-provided health
benefits.
Discussions of health care costs have moved up the corporate
ladder and are now being discussed at the highest levels. Employ-
ers, faced with annual cost incr—eases of over 20 percent, are cut-
ting, capping, and shifting costs cutting benefits for current and
future retirees, capping their own liability, and moving toward de-
fined contribution plans, and they are shifting costs to their em-
ployees. American workers and retirees are paying the price. The
majority of large firms increased retiree contributions between
1989 and 1991, according to a recent survey of large corporations.
Employees and retirees are being asked to pay a greater share of
their income for health care through higher premiums, deductibles,
and copayments. Some firms have eliminated retiree benefits
altogether.
Health benefit obligations are becoming a major issue in negotia-
tions between labor and management.
Proposals to lower the Medicare eligibility age would offer a
number of advantages for American businesses, their employees,
and their retirees.
First, lowering the age of eligibility to 60 would provide peace of
mind to current and future retirees whose health benefits are
threatened by rising health care costs.
Second, proposals to lower the age would offer enormous savings
to companies with substantial health benefit obligations. We will
hear today from the U.S. General Accounting Office that a lower
Medicare eligibility age could reduce total corporate liability for re-
tiree health benefits by as much as $100 billion.
Third, a lower Medicare eligibility age would, of course, ensure
health insurance to those uninsured Americans between the ages
of 60 and 64 who now are apt to fall through the cracks. To enter
one's sixth decade, as the Chair well knows, without health insur-
ance is a fear that no one should have to experience.
Let me share with you just one case that illustrates the problem.
I recently heard from Mr. Knox who is 64. He lives in DeLand, FL.
On October 1, he received word that his retiree health benefits had
been canceled 10 days earlier. He must now go to his local insurers
and try to get insurance for himselfand his wife.
Unfortunately, his wife, age 62, has Parkinson's disease. Local in-
surance companies tell Mr. Knox that they doubt anyone will write
a policy to cover her, and it will be 3 long years before she will be
covered under Medicare. I have attached a file of similar stories
that I have received from around the country that describe the fear
and financial disaster that can await those who retire before 65.
[The information referred to follows:]
6
Dear Chairman Stark:
I read an article in the ChicagoTribune today about "EarlyRetirees Tell of
Insurance Nightmare." I too have a story to tell.
I worked 35 years atthe "X"National BankinChicago and retired at age 62 on
April30, 1989. After 18 monthsonCOBRA,I was droppedby the newowners
of the Bank and had to find my own insurance to cover me for the remaining
18 months until I reach age65 onApril 13, 1992. Ihavebeen a widow since
1969.
The Insurance Industry considered me uninsurable because of prior health
problems. I had two insurance men working to getme insurance as of
November 1, 1990. The only thing I could do was to continue on with the
Blue Cross-Blue Shield policy that the Bankhad except as a private customer
,
and pay insurance premiums of$621.00 per month for the next 18 months.
This money must come out ofmy IRA, which is my pension. I have the
amount of$11,178.00 in my pension. People don'tbelieve me when I tell
them my story. Ijust hope I do nothave an increase next November. I have
been covered sinceNovember 1, 1990, and was told atthattime,by the Bank,
that the premium would be $590.00 per month butwhen I received the bill it
was for$621.00 permonth. When Icalled, Iwas told thatwe had an increase.
Not too many people can afford that amount and I am grateful that putting
money away in my IRA worked out for me. Ihope you can do something for
the people who can't do anything for themselves. Itis a crime that after
working so hard tosave money to keep offthe reliefrolls that we have to put
up with this.
It seems like everything changed after I retired. We no longerget the same
deductions and must use our pensions to exist at this time in our lives.
Thank you for tryingtogethelp for the people who need it. Good luck!
"A woman from Illinois"
7
Dear Congressman:
I am62 and ahalfyears old andonSocialSecurity. Iretired at62because I
had trouble getting work.
My income is $665 per month from Social Security and $140 per week from
part-time work. My hours were cutfrom37.5 to30, and I earn $5.35 per hour
as aFull-Charge Bookkeeper. This is a low-pay area anditis always tough to
get ajob. I moved here because mybrother and family live here. I formerly
lived in Miami.
I was forced by economics to cancel my health insurance-combined policies
were $165 per month. Myemployer is small and does not offer hospital
insurance. Blue Cross will not insure me at regular individual rates and it
would cost too much tobuy private or State Risk insurance. I have a history
ofblood clots,highblood pressure,obesityandIbrokemyupperback.
Myfamily doctor,whom Iseldomgo to, prescribed drugs forhighblood
pressure that cost$50 permonth. I cannotafford this expense,soI take cheap
water pills instead. I don'tknow ifthese pills are doing anything for the
problem,because I cannotafford to gobacktothe doctor. Ifanythinghappens
to me now, I will have to applyfor food stamps, health care, and perhaps
housing.
Ifwe are the greatest nation on earth, how come we can't afford universal
health care or Medicare for people less that65 years old? All industrial
countries except South Africa and the United States have it, and many are
poorer than we are. We give many breaks to other countries and many
freebies;butnothingfor us. (Ipaid-in45 years worth ofincome taxes up to
now.)
INSTEAD OFMAKING WAR & GIVE-AWAYS,HOWABOUTMAKING
PEACE&HEALTHCARE!
" A woman from Florida"
8
Dear Representative Stark:
I am 60 years old and I have been employed as a publishers representative for
many years with a large company, HarcourtBrace Jovanovich. Theybecame
victims ofa hostile take-over and I watched a distinguished company break
down under the weightofexcessive debt.
Aboutfour years ago I developed a heartcondition, whichwasbeing treated
for medically and I was able tofunction without anyhandicap inmy work.
Three years ago, a smaller firm, "XYZ", made me the proverbial "offer that
can't be refused" and I joined them with their full knowledge ofmy heart
problem.
Ayear later,my doctor advised aby-pass operationwhichwentwell and after
aboutamonthIwasback atwork. One yearlaterIwaslaidoffdue to "a
slowdown in the economy." I can only speculate on the real reason but, it
followed a letter explaining that the company's self-insurance plan would not
allow additional expenses for myheart condition. Thank all ofyou for
COBRA, which now covers me until March, 1993, (at a costofover
$6000/year). I can only hope the by-pass will lastuntil someother coverage
canbe found.
The pointofall this is: what happens now? As asixtyyearold "cardiac case",
I have had not onejob offer, although many people wantme to work for
them as a "per-diem" or independent sales representative. I'll probably resort
to this, but having talked to many insurance companies, including the
company which offers the group policy for the National Association for the
Self-Employed, they all say I'm uninsurable. This means that regardless of
whether I can afford insurance or not, I can'tgetit and that leaves me and my
family vulnerable for years, until I reach 65 and Medicarebecomes available,
(assuming you can keep the wolves awayfrom it and itstill exists in 1996).
After talking with neighbors and colleagues, I find I am notalone in this
problem. There seems tobe an increasingnumberof55 to65 yearolds, who
are laid offfor weak reasons, and find themselves very much alone and
without a spokesman.
" A man from Texas"
