Chesterton Tribune

The other shoe drops: Bethlehem Steel seeks to cancel retirees health care life insurance

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Sixteen months after Bethlehem Steel Corporation filed for Chapter 11 bankruptcy protection, the other shoe has dropped.

And landed right on the heads of the company’s 95,000 retirees and their dependents.

In a letter to the U.S. Bankruptcy Court dated Thursday, Bethlehem proposed to terminate the health-care and life-insurance benefits for the whole of its retired workforce, effective March 31. In a statement released late Friday, Bethlehem estimated its total benefit obligation—its so-called legacy costs, calculated over the expected lifetimes of its current retirees—at $3 billion, and said that it can no longer afford the $19 million average monthly payment which the company has continued to make since filing for bankruptcy Oct. 15, 2001.

“(W)e cannot pay the obligations for retiree health and life insurance now or in the future,” Bethlehem Chair and CEO Robert “Steve” Miller Jr. said. “Due to our financial obligation and our impending sale of substantially all of our assets to International Steel Group, we must seek the court’s approval to terminate these benefits. We find this decision extremely difficult, but unavoidable, and sincerely regret that circumstances have led us to this decision.”

Miller added that Bethlehem has paid more than $300 million in retiree health-care bills since Oct. 15, 2001, while many other companies cancel health-care coverage “immediately after” seeking bankruptcy protection.

Miller may consider the termination of those benefits “unavoidable,” but the United Steelworkers of America is calling it “morally callous.”

“For a bankrupt company that is doling out millions in golden parachutes to top executives to say that it must cut off the health-care benefits of people who worked a lifetime in the mills is a disgrace,” USWA International President Leo Gerard said in a statement released Friday.

For his part, Local 6787 President Paul Gipson characterized the proposed termination as “premature” and compared it to the Pension Benefit Guaranty Corporation’s termination of Bethlehem’s pension plan, effective Dec. 18. Bethlehem “made that move rather quickly and I don’t know if it was necessary,” he said. “They could have waited two more months. . . . Taking the health care is going to frighten a lot of people. And rightfully so.”

Now that Bethlehem’s Board of Directors has approved an asset-purchase agreement with International Steel Group, Gipson noted, the company’s locals should have a newly negotiated labor agreement with ISG ready to ratify by the end of April. The very least that Bethlehem could have done, he said, is wait until then to terminate. “It’s just a terrible thing. It’s going to be tough. It’s terrible.”

The union is not alone in blasting Bethlehem. “I join the steelworkers and condemn the move,” U.S. Pete Visclosky, D-1st, told the Chesterton Tribune today. That termination—if approved by the bankruptcy court—will have “a huge and significant impact” on retirees and their families, he said. And it points up the legal—as well as the moral—obligation of the government to provide health-care coverage to retirees stripped of their benefits as the result of bankruptcies precipitated by illegal steel imports.

The retirees’ plight remains “at the forefront of our attention and efforts,” Visclosky said, and will be the subject of yet a third bill which he intends to introduce in the 108th Congress. Two earlier bills, both of which would have provided some measure of legacy relief to steelmakers staggered by their retiree obligations, stalled and died.

Under Bethlehem’s proposed termination of its retiree benefits, retirees 65 or older and recipients of Medicare would not lose the entirety of their health-care coverage. But they would lose that coverage which Medicare does not include—prescription drugs, for instance—and they would themselves become responsible for that portion of their health-care costs which Medicare does not cover.

For retirees aged 55 to 64, on the other hand, and whose pensions are being paid by the PBGC, legislation enacted last year by Congress provides for a 65 percent tax credit for health-insurance costs. Under a refundable credit mechanism in that legislation, the U.S. Treasury would make advance payments directly to providers of qualified health insurance. Visclosky noted, however, that the tax credit is awarded on a “case-by-case basis,” and that the legislation “doesn’t begin to address the fundamental issue.”

Retirees might see some measure of health-care relief down the road, in the form of a benefit trust which ISG is expected to establish in any new labor agreement which it negotiates with Bethlehem’s locals, along the lines of the one included in ISG’s not-yet-ratified contract with LTV’s former locals. Under that contract, ISG has agreed to make contributions to a trust based on its profits, with those contributions becoming larger as ISG makes more money.

But how much money will ever be available in that trust and when that cash can be accessed are questions which no one right now can answer. “We do not yet know how much money this will involve,” the USWA says on its website, “and it will be some time before enough is collected to actually start providing benefits. But it is our hope that the trust will accumulate sufficient funds to provide at least some kind of medical and/or drug plan for LTV” retirees.

Meanwhile, Bethlehem said that it’s currently soliciting proposals from health-care vendors for a voluntary group plan through which retirees might be able to obtain “affordable” medical and life insurance. “Although Bethlehem would not be contributing any moneys to such new coverages,” Miller said, “we believe the size of our retiree population will help us find affordable rates for those persons interested in purchasing those plans.”


Posted 2/10/2003