Big Companies Reduce Health Benefits

With corporations like General Motors, Delta Air Lines, and Coca-Cola capping healthcare benefits, some concerned students wonder who will  pick up the tab when they join the workforce.

“A cap can be ‘a fixed annual amount per retiree,‘a per-retiree average or-‘a fixed sum for a group,’” allianceibm.org stated.

This way, according to the website, companies “face only limited impact from the increases” in healthcare benefit payments and leave retirees footing the rest of the bill.

“I don’t want to get to a certain point in my life [where] I need all this healthcare and I can’t afford it,” said Jennifer Steele, a senior majoring in music business at Howard University. “So many people are sick because people just can’t afford healthcare.”

An accounting rule, adopted almost 16 years ago, allows companies to gain instant income while reducing a liability (something, in this case health care benefits, that is owed to another person.)

The rule required employers that provided retiree health benefits to “estimate what it would cost to pay that benefit over the lives of the retirees,” which made the total a liability, allianceibm.org stated.

According to the website, when a company reduces a liability, in accounting, it generates a gain.

Washingtonpost.com reported General Motors (GM) capping benefits for thousands of retired workers. In 2007, the auto giant plans to cap healthcare benefits for “salaried retirees.” 

Retirees “will face higher monthly contributions-and higher prescription-drug bills” once the limit is reached, GM told the Washington Post.

For April Edwards, a senior majoring in criminal justice at the University of the District of Columbia, the increases in health insurance and medication prices are scary.

“You never know what may happen in the near future [when] you actually need these drugs,” Edwards said. “But [then the prices are] too outrageous and there’s no healthcare-stable [enough] for you to get aid from.”