Changes to GE health plans leave retirees stunned

BY HUGH BAILEY
Hearst Connecticut Media

Working as a secretary at General Electric in the 1960s, Gail Zorpette would occasionally hear co-workers complaining about theirÂ pay.

From her perspective, working at GE was about much more than a paycheck. “It’s not just the salary you’re getting paid; you have to add everything else into that figure,” she said, including the feeling that GE was the kind of company that would look out for its workers, now and into theÂ future.

“I said, ‘You know, you should look in the newspapers and see what you can get that’s better than GE,'” said the Stratford resident, now 74. “I bought the company line because I thought of myself very much as a GEÂ person.”

Today, Zorpette finds herself one of thousands of GE retirees who have seen the company eliminate its supplemental health insurance plans. Instead, GE is offering access to a private exchange of insurance providers and a $1,000 annual reimbursement to coverÂ expenses.


Gail Zorpette, who worked for GE for almost 30 years, poses at her home in Stratford. Photo by Christian Abraham

According to GE documents and regulatory filings, the changes will save the company hundreds of millions ofÂ dollars.

“They’re giving us a thousand dollars and washing their hands,” ZorpetteÂ said.

Beyond the expense and inconvenience of finding a health plan on her own, she said, is the feeling that the company has turned its back on itsÂ people.

“GE is making out very well by reducing its liability numbers, which is what some of us have become,” she said. “I don’t like to be thought of as a liability. I worked hard when I was there, and I enjoyed it. I really was a GE booster. This is veryÂ disappointing.”

A GE spokesman responded to a request for comment by pointing to a statement released last year. It reads: “Starting in 2015, GE will provide former salaried retirees with access to a private health-care exchange, and will help pay for eligible expenses. The change in our program is consistent with trends among large companies. It allows GE to offer greater choice in coverage while striking a balance among our obligations to employees, retirees andÂ shareowners.”

GE in January reported operating earnings of $5.6 billion, or 56 cents a share, up 6 percent from the fourth quarter ofÂ 2013.

Details

Changes have come in two waves. In September 2012, the company announced that plans would no longer cover retirees who had not turned 65 by Jan. 1, 2015. Last year, the company said it would terminate the plans altogether and give retirees the option of purchasing supplemental coverage through a privateÂ exchange.

GE has offered counseling to help people enroll and held a series of town hall meetings across the country to explain theÂ changes.

Under the previous system, retirees paid up to 10 percent of the monthly cost of insurance. The share the company paid amounted to an average of about $1,500 annually, retireesÂ say.

By offering $1,000 yearly, the company will see substantial savings. According to GE’s 2012 annual report, available online, the first round of changes saved the company $832 million in future benefit obligations. After the second round of changes last year, a filing with the federal Securities and Exchange Commission noted that the company’s obligations had been reduced a further $586Â million.

And the changes aren’t over. To date, the altered benefits have affected current and former salaried employees, totaling about 65,000 people nationwide. Changes for a similar number of hourly workers are likely in the offing; union negotiations are to be held later thisÂ year.

As noted in its statement, GE is not alone in dramatically changing its retiree healthÂ benefits.

“We’ve seen a steady effort on the part of large companies to reduce their financial liability for retirees,” said Tricia Neuman, senior vice president at the Kaiser Family Foundation, a nonprofit that studies health careÂ policy.

Among companies that employ more than 200 people and offer health insurance to active workers, about 66 percent offered retiree health benefits in 1988. By last year, that number was down to 25 percent, according toÂ Kaiser.

For retirees, Medicare remains the primary source for health coverage, but it has its limits and doesn’t coverÂ everything.

Neuman said those facts are lost on many people. “Medicare provides basic coverage, but it has relatively high cost sharing, which is what employers were filling in with their health plans,” she said. Medicare does not have a limit on out-of-pocket spending, while many employer plansÂ do.


Joe Zorpette brings out the health care file for his wife, Gail, who worked for GE for almost 30 years. Photo by Christian Abraham

Changes in national health policy have also made a big difference. “In the past, people before they turned 65 were not eligible, so for the retiree, this was the bridge to getting them to Medicare,” she said. With the passage of the Affordable Care Act in 2010, allowing anyone to buy health insurance on publicly run exchanges, there are more options, which may play a role in companies’ decisions, sheÂ said.

But while GE is not alone in making changes, it hasn’t come without push-back. A federal lawsuit filed last year claims the company acted illegally when it changed its benefit plans. Dennis Rocheleau, who retired from GE in 2004, splits his time between FairfieldÂ ”“ home of GE’s world headquartersÂ ”“ and Waupaca, Wis., where he filedÂ suit.

In December, a judge rejected a request for a preliminary injunction, which would have stopped GE from changing the plans while the suit was in progress, and is now considering a motion from GE to have the suitÂ dismissed.

“They’re saying we don’t have a claim,” Rocheleau said. “We believe weÂ do.”

TheÂ suit

Rocheleau, who was former chief labor negotiator at corporate headquarters, represented the company for decades as chief spokesman in national negotiations withÂ unions.

“I was shocked to find out in 2012 the company was going to reduce benefits,” he said. “I thought it wasÂ unconscionable.

“I contacted some of the executives I had worked with and suggested we chat about it. They weren’t much captivated by that prospect. I spoke at a number of annual shareholder meetings to try to put out the facts as I saw them and see and if there was room for compromise. In fact, what we saw was an extension of the policy. At that point, I concluded that I had run out of real estate in an effort to talk sense, and filed the lawsuit,” heÂ said.

GE’s assurances that people will still be able to find quality health plans does not sit well withÂ him.

“The company has asserted that 78 percent of people could buy coverage for less money and be better off,” he said. “Of course you can buy lower-priced insurance, but you’re generally going to get less coverage. A lot of people who never had to make these choices will be forced to make them, and they may not make themÂ properly.”

The lawsuit rests in part on the question of whether the health benefits wereÂ guaranteed.

“There’s a fundamental argument about whether these plans were vested,” Rocheleau said. “Your pension is protected by lawÂ ”“ if they said you’ll have it, it cannot be diminished after you’re retired. The argument about health care benefits is, are they vested? They can be. What we’re contending is the company’s behavior and traditions and language suggest that people would have these kinds ofÂ coverage.”

The other issue is one ofÂ timing.

In July and August of 2012, GE distributed a handbook on retiree benefit plans that included pro-forma language that said GE “expects and intends” to continue offering its plans “indefinitely,” while reserving the right to terminate the programs. That September, the board of directors announced that salaried retirees and spouses who have not reached age 65 before January 2015 will no longer be eligible for theÂ plans.

In declining to issue an injunction, District Judge Lynn Adelman cited that issue. “The timing of the issuance of the handbook (July 2012) and the announcement of benefit changes (September 2012) suggest that when it issued the handbook, the defendant did not expect or intend to continue the plansÂ indefinitely.”

This led the judge to conclude the retirees suing GE “have a better than negligible chance of prevailing on a breach of fiduciary dutyÂ claim.”

‘Uber-ization’ of theÂ economy

Michael Tucker, a professor of finance at Fairfield University who serves on the school’s health care committee, said these types of changes can leave retirees in a difficult position. “It’s similar to what happened with retirement,” he said, referring to a broad shift in recent decades from defined pensions to 401(k)-styleÂ plans.

“The individual has to figure out where to invest, and people are not very good at it. A similar thing may happen here, where people choose bad plans that don’t work out, and they’re left with very high bills. You’re putting the burden on individuals who are not as sophisticated as HRÂ departments.”

He said the decline in benefits could have long-termÂ impacts.

“The bond people have with a company is not what it used to be,” he said. “It’s been going on for 20 or 30 years now, and people don’t feel a sense of loyalty because the company is not loyal to themÂ anymore.”

He described the push away from benefits and toward a greater use of contract and temporary workers as the “Uber-ization” of the economy. Uber, a ride-hailing service, relies on independent drivers who are not directly employed by theÂ company.

“You need people working together. Companies need that kind of glue, and they may be losing that,” Tucker said. “If you’re just throwing people out in the cold, you’re not going to get any kind of loyalty. People who have great ideas, they may justÂ leave.”

The impact goes beyond those directly affected. “Current workers see how retirees are treated, and it has an effect on them, as well,” heÂ said.

For longtime GE employees like Zorpette, the sting goes beyond a change in healthÂ insurance.

“It’s an unfortunate decision as far as retirees go, because we were promised it,” she said. “They tell us to call this number, that they would have this group that would guide us through the new process. You could choose from six or eight plans, which of course I couldn’t understand. Many people make this decision like a stab in theÂ dark.”

She said her experience with the new system has been difficult. “GE assured us at one of the meetings that these people knew exactly what we were getting, and it would be a smooth and seamless transition,” she said. “The person I got the first time I called, it was a terrible experience. I just felt like they had washed their hands ofÂ us.”

Her opinion of the company has changed dramatically, sheÂ said.

“There’s a group of us retirees who meet often, and I think the GE people I worked with have been the best. They’re great people, caring people. Today, it seems like a different company, that they were just looking for something toÂ cut.

“I don’t know how a company of that standing could promise something and then just turn around and say, ‘No, here’s your thousand dollars ”“ now beÂ quiet.'”

Hearst Connecticut Media includes four daily newspapers: Connecticut Post, Greenwich Time, The Advocate (Stamford) and The News Times (Danbury). See ctpost.com for more from this reporter.