300 will lose perk: GMAC to stop paying retirees’ insurance costs [Winston-Salem Journal, N.C.]

June 24--Retirees of GMAC Insurance Personal Lines are finding out this week that the new owner of local operations will end their health- and life-insurance programs on July 31.

The news has many of the estimated 300 retirees worried about costs as they begin the search for alternatives.

GMAC sent a letter to the retirees telling them of the changes planned by American Capital Acquisition Corp., the owner of the local operations since March.

"This includes any basic coverage for which GMAC was paying premiums, or any supplemental coverage you may have purchased," GMAC said in the letter.

GMAC said it was offering a lump-sum payment of up to $5,700 related to the loss of the life insurance, even though "it was under no legal obligation to do so."

It is not clear exactly how many retirees are affected by the decision. Retirees who contacted the Winston-Salem Journal yesterday said that it could be as many as 300, counting those from GMAC and Integon Insurance, which General Motors Corp. bought in 1997.

Although Bob Girard, age 76 and a 21-year retiree, said he was shocked and upset by the decision, it was not unexpected given GMAC's decision in November 2006 to eliminate future retiree health benefits for employees.

"I don't have any other insurance outside Medicare, so I will have to go out and find some that likely will be expensive," Girard said.

He said that the biggest cost will be with his eight prescription drugs, for which he now pays $56 every three months.

"I imagine my cost will go up to $400 every three months, if I can get it at that price," Girard said.

Lew Bowman, a spokesman with Blue Cross and Blue Shield of North Carolina, said that some retirees may be eligible for a special enrollment period for Medicare D plans so that they do not lose coverage.

GMAC joins an expanding list of local companies that have ended health coverage for retirees in recent years.

Unlike pension plans, retiree health benefits are voluntarily offered by companies in most instances.

The most notable example came in 2007 when Hanesbrands Inc. initially cut, then eliminated, its contribution to retirees' health-insurance premiums for those younger than 65.

Others that have either eliminated or reduced health benefits for current retirees or new hires include US Airways Group Inc., VF Corp., International Textile Group Inc., R.J. Reynolds Tobacco Co., and Lucent Technologies Inc. Media General Inc., the parent company of the Journal, scaled back retiree health benefits for employees hired after Jan. 1, 1992.

The erosion of retiree benefits is happening across the country. A 2008 study by the Kaiser Family Foundation found that only 31 percent of companies with more than 200 employees offer retiree health benefits, down from 66 percent in 1988.

What has many retirees frustrated is that the benefits have been used to sweeten severance packages in company restructuring aimed at encouraging employees to retire early.

However, as the first wave of baby boomers nears retirement, benefits are being cut by corporations facing intense pressure to lower product costs and expenses, or by municipalities struggling with tight budgets.

"Ending retiree health benefits tends to be the third of three steps taken by companies," said Tricia Neuman, a vice president and head of the Medicare Policy Project for the Kaiser Family Foundation.

"They first decide to not make them available for new hires, then cut them from current employees, and then from retirees. It's more difficult from some employers to take something away they've pledged than to not give it in the first place."

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