Instead, companies have substituted these expenses with a smaller quantifiable amount that no longer is included as a health care liability and presents the illusion that health care is no longer provided.
If we look at GM, for example, despite the withdrawal-of-health care announcement, salaried retirees or their surviving spouse at 65 will receive a discretionary taxable increase to their pension of $300 per month. This gives a retiree complete flexibility as to where they spend this money and has been said by some to be more than fair as it represents a significant health care subsidy.
As another approach, both Chrysler and Ford retirees over 65 receive an allowance that is paid into a pooled Health Reimbursement Arrangement. This fund is administered on behalf of the company and the retiree and operates as a source of reimbursement of health care expenses. As the account is shared, either spouse can have their medical bills reimbursed from the HRA, to the limit of the balance in the account.
So, headlines aside it seems that in reality companies are continuing to provide health care, albeit in a different form. This may not satisfy the affected retiree but it is significantly better than the alternative.
Legal Action Failed
Despite legal action by the
Equal Opportunities Commission
challenges to the removal of health care from retirees over 65 on the basis that it discriminated against them have failed.
In March, the Supreme Court upheld earlier decisions that it is legal to discriminate against older retirees who are able to obtain health coverage through Medicare. This decision removed the possibility that companies would have simply withdrawn coverage for the most vulnerable of retirees, those under 65, rather than offering coverage to all.