Health care cap creating 'bleak' view, advocate says

Jeff Smith, Rocky Mountain News

Published December 16, 2006 at midnight

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Mary, or Mimi, Hull lives comfortably in a condominium near downtown Denver. Cuts in her retiree benefits aren't likely to change her lifestyle in the immediate future. But they do have an effect.

As it is, her pension is $21,180 a year and, like other retirees, she hasn't seen an increase for 10 years. She left U S West before she was eligible for a full pension and took a 26 percent penalty.

Her life insurance is being slashed from $84,000 to $10,000.

"I don't have a spouse, but I did want to provide something for my grandchildren," she said. "That's all wiped out."

And, she said, there's no way of predicting the long-term impact of Qwest's decision to cap its contribution to post- 1990, nonunion retiree health care. She noted Qwest already has been shifting more costs to the retirees.

"First they told us they were doing an 80-20 split; now it's at 71-29," Hull said. With the cap, "it will get to be a more and more bleak picture."

Hull, as president of the Association of U S West Retirees, is a strong advocate for retirees and often speaks on their behalf at annual stockholder meetings. She sees Qwest as a company that is "putting the squeeze on retirees who don't have the opportunity to increase their income."

"My hot button," Hull said, "is that (executives) are doing it to retirees and not doing any contributions themselves. It's just unfair. If there needs to be pain, there needs to be pain everywhere."

The benefits cuts actually are coming at a time when Qwest is generating more than $1 billion in cash.

"That's why we're chalking it up to greed," Hull said.

Greed too, retirees group officials say, because the cuts also are coming at a time when top Qwest executives have been cashing out chunks of options - making more than $50 million combined in the process.

"I think it rubs salt into the wound," Hull said, "I think it was very insensitive at best."

Qwest said CEO Dick Notebaert would be donating the after-tax profits of his $18 million stock-option gain to charities.

"Charity begins at home," Hull responded.

Hull also doesn't buy the argument that Qwest must do this for competitive reasons.

"Let me tell you, it's not happening at the new AT&T. It's not happening at Verizon," Hull said. "Comcast probably doesn't have as many retirees, but I'd like Mr. Notebaert to be more specific about who are the competitors."

Shrinking benefits

• Qwest is the only former regional Bell to eliminate its stockholders dividend. It did so under former Chief Executive Joe Nacchio in 2001. Retirees traditionally have relied in part on dividend-paying stocks. Many retirees also lost tens if not hundreds of thousands of dollars when Qwest stock plummeted in 2001 and 2002.

• Retirees haven't had a pension increase for 10 years.

• Qwest has required post-1990 nonunion retirees, about 9,000 of them, to pay 20 percent of their health care premium since 2004. Some retirees say the figure now is closer to 30 percent, though Qwest won't comment.

• Starting Jan. 1, Qwest will cap its contribution to health care premiums for post-1990 nonunion retirees - that means that group will have to pay for all increases. Post-1990 union retirees likely will face a similar cap in 2009, while pre-1991 retirees are protected by a court agreement.

• Starting Jan. 1, Qwest will cap life-insurance benefits of all 48,000 retirees at $10,000. Previously, the benefits were equal to a retiree's last year's salary, sliding down to a half- year's salary for some groups.

• Qwest threatened to eliminate the death benefit - a benefit payable to the surviving spouse when a retiree dies. The benefit, which comes out of the pension trust, is equal to a year's pay at 1993 rates. The issue is in litigation.

Qwest's expenses

• Qwest pays a significant amount on retiree health care, $383 million in 2005, according to a regulatory report. But that was down from $391 million in 2004.

• Post-1990 nonunion retirees contributed $26 million to Qwest toward health care premiums in 2005, and a union health care trust provided a reimbursement of $206 million. Qwest also received a Medicare subsidy of $38 million. Those reimbursements or contributions total $270 million.

Mary Hull

Age: 63

Residence: Denver

Career: Worked in benefits and training at Mountain Bell / USWest for 25 years, leaving in 1995.

Costs: Will lose $74,000 in life insurance. Paid $120 a month for health care and dental in 2006, will see that increase to $161 in January.

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