November 4, 2006
To LRO Members:
Lucent management retirees have begun receiving Lucent’s health care enrollment information for 2007. The enrollment packet in the big yellow envelope answers the question that had concerned many management retirees for months following a Lucent executive’s statement that after 2006, the majority of management retiree benefits become discretionary to the company.
Through this message, the LRO seeks to provide to our members, and others who share their interests, some clarity and commentary regarding your healthcare and prescription drug benefit options. I hope this message will help you better understand the underlying issues which impact these options but that, at times, may not be as clear as they could be when taken directly from Lucent’s enrollment materials.
While Lucent will continue to provide healthcare and prescription drug plan options for management retirees and some dependents for 2007, the enrollment information shows that costs will increase significantly. Based on reports from some LRO members who have received their enrollment packet, the cost increases appear to be much higher than the 7.8 percent that Hewitt Associates projected in news articles on October 8, 2006 concerning premiums and out-of-pocket cost increases for healthcare in 2007. Since Lucent employs Hewitt Associates to administer the company’s self-insured healthcare and prescription drug plans with various insurance carriers, retirees do not understand why the costs exceed Hewitt’s projections.
The LRO does not have any information on discussions or decisions that may have taken place between the unions and Lucent with regard to 2007 healthcare and prescription drug plans for formerly represented retirees. We hope the status of those benefits will soon become clear.
The LRO Board understands that the enrollment information is being received by many retirees with a mixture of anger, frustration and despair. Anger, because we were led to believe during our decades of service that solid healthcare benefits would be available to us at reasonable costs during our retirement years. Frustration, because while healthcare benefits costs are spiraling upwards, the compensations for Lucent executives are at record high levels (not commensurate with performance), and the company continues its lackluster performance. Despair, because more and more of the value of our pension is being eroded by increased payments to Lucent for healthcare and prescription drug coverage.
Months ago, the LRO Board asked Lucent for information about its healthcare and prescription drug coverage intentions for 2007, but Lucent maintained its pattern of not sharing advance information with us. As of November 4, we know that many retirees still have not received their personalized enrollment packet. Those who received their enrollment information in late October or early November, have the first specific information on the 2007 costs for healthcare and prescription drug plans. Thus, retirees must decide during the enrollment period from November 6 at 8:00 a.m. (Eastern Time) through November 17, 2006, at 6:00 p.m. (Eastern Time) whether to stay with the Lucent plans or change to “outside” plans. The short time frame leaves little time for comparing plans from other insurance companies and gaining medical certification when it is required. Some important points to keep in mind regarding the 2007 open enrollment for benefits are provided below.
Remember, if you decide you need to take any action during the open enrollment to change your default plan or to re-enroll in a Lucent plan, you will need to have your PIN number. If you have questions about your PIN number, contact the Lucent Benefits Center online at http://resources.hewitt.com/lucent or call 1-888-232-4111. Be sure to allow enough time to receive your PIN so that you can complete your enrollment during the specified enrollment timeframe. Lucent has clearly stated that “even if you do not have your password/PIN, your enrollment deadline will not be extended.” Lucent has also stated that “if you request a new password/PIN but do not think you will receive it before the end of the annual open enrollment period, call the Lucent Benefits Center at 1-888-232-4111 to discuss your alternatives.”
If you enroll online, remember that “The Save As Draft” feature will not be available for this enrollment. You must complete the election process completely and you must confirm your elections by clicking the confirm button while on the website. Remember to print and review the “Completed Successfully” page. You may go in more than once to change your elections during the enrollment period, but you must select your entire coverage each time.
It is important to note that you can waive Lucent’s coverage at any time during the year; that is, you don’t need to wait until annual open enrollment or until you have a qualified status change. However, you will only be able to re-enroll for Lucent’s coverage during the annual open enrollment or due to a qualified status change.
As with the health care insurance options, the prescription drug benefit remains in place, but costs have increased considerably. As Lucent states in the enrollment information
"... in some circumstances, your current prescriptions may be classified under a new level that now makes the drug more expensive." You will need to check the formulary guide that you will receive at your home from Medco in late December for more information.
As you make your decision about prescription drug benefits, keep in mind the notice you received from Lucent states that “...the prescription drug coverage options(s) listed in the Creditable Coverage Section of this notice is, on average for all plan participants, expected to pay out as much as the standard Medicare prescription drug coverage will pay and is considered Creditable Coverage...” If you are thinking about buying Medicare Part D coverage, keep in mind how important that is in relation to the Medicare Part D deadline, and the need to compare information about the cost tier structure within the Lucent plan for the prescriptions you, your spouse and any other dependents may need. If all the information you need isn’t available to coincide with the Medicare Part D deadline, you will have to make the most informed decision you can.
Your LRO Board advises that each circumstance is individual. What we advise is that information about alternate coverage be sought from insurance carriers you decide are reliable. Network the subject by talking to friends and fellow retirees. Networking is an effective way to find out what others have done. Postings from members on the LRO website message board are another good way of beginning your personal comparison.
Some of you and your dependents may be uninsurable by alternate carriers, and the decision to exit the Lucent plans may have an adverse affect as described in the Lucent brochure you received. If you are uncertain, discuss with family and friends any proposed alternate coverage compared with the best information available from Lucent and Hewitt Associates. Only you and an insurance expert can determine what is the right course for you. If you have a "grandfathered" class II dependent and are considering leaving the Lucent plan, keep in mind that in the enrollment information Lucent states that "Retirees may also drop coverage or dependent(s) from Lucent medical and/or dental coverage at any time during the year. However, remember that if you drop your non-grandfathered or grandfathered class II dependent(s) from your coverage at any time, you will never be able to re-enroll them in Lucent coverage again."
For those of you who are presently covered under Medicare, our research indicates that Medigap policies are available without turndown for medical reasons only in the event that Lucent, or its successor, Alcatel were to send you a notice of plan coverage cancellation, such as you received when the dental coverage was cancelled. Should you ever receive such a notice, there is a short window of opportunity, generally 63 days, whereby Medigap coverage is available without medical turndown. Be sure to check with Medicare on this.
For those of you who will become eligible for Medicare Part B coverage, note that immediately following your eligibility there has been a 6-month window to purchase Medigap insurance without medical turndown. Check with Medicare when you reach eligibility for whatever rules are in effect at that time.
As to future healthcare benefits, there is an ominous declaration by Lucent in the enrollment packet that states: “We expect that there will be more changes made in 2008 and beyond, as Lucent further evaluates affordability for retiree healthcare. Unfortunately, this means retirees will have to continue to bear more of the rising costs in the future. This is difficult news to share with the people who helped build this company. These changes, simply put, are necessary to ensure the long-term financial health and stability of the company. As we did with the pre-enrollment materials, we are sending this communication well in advance so you can look into 2008 benefits alternatives for you and your family. Lucent will communicate more details early in 2007. We hope this will give you adequate time for planning before changes become effective in January 2008.”
The LRO is vitally concerned that, regardless of its reduced size and pending ownership by a foreign entity, Lucent meet its legal obligations to provide healthcare and prescription drug benefits. It is also the ethical course of action. In light of this belief, the LRO is strongly supporting the healthcare benefits lawsuit that retirees have filed against Lucent. As we recently announced, on October 27. 2006, the judge denied Lucent’s motion to dismiss the case. The judge has given the fiduciaries of the Lucent plans until December 31, 2006, to provide the Court with their input on the “substantive matters presented by the plaintiffs in this case,” including but not limited to “the timeliness of such claims [and] whether deductibles and co-pays were charged in violation of Plan terms, and the impact, if any, on Plan participants.” While the Court’s Order and Opinion allowing the case to proceed does not necessarily translate to any particular outcome for the Plaintiffs, Lucent now will be required to confront the consequences of its conduct in a legal setting and turn over documents and submit to oral questioning of company witnesses.
The LRO is also working with the National Retiree Legislative Network (NRLN) to get legislation passed that will be beneficial to retirees. Here are some of the ways we think retirees can be helped through legislative action in Congress.
Retiree Maintenance-of-Cost Payments (MCP) - Proposes ERISA legislation requiring Maintenance-of-Cost Payments (MCP) to retired employees effective from 1st day of retirement. This ERISA change would establish and protect a monthly per-capita earned MCP as a pension income component that may be used by retirees to purchase healthcare benefits for themselves and /or dependents.
Currently, costs are shifted to retirees when plans are modified or dropped. Retirees must pay for dropped coverage, increased premiums, co-pay amounts and other out of pocket costs from their fixed income pension payments and other fixed income sources. This ERISA amendment would fix a monthly earned subsidy at the time of retirement that can be used to pay for company provided plan benefits or could be used to purchase coverage from third parties if a plan is modified downward or cancelled. Companies would avoid the cost of ongoing healthcare inflation, offset by minimal plan administration costs.
Retirees eligible at enactment would be entitled to a monthly per-capita earned subsidy equal to the cost of their healthcare coverage in place as of that date. Those who retire subsequent to enactment would receive an MCP determined by the cost of healthcare coverage in effect on the date of retirement. Employers would be obligated to continue to make available and pay administrative costs for self-insured or contracted group plan coverage. Retirees would pay the cost of coverage with their MCP dollars.
Revision of Medicare Part D - Support S.334 (Dorgan / McCain) and continue to work with Members of Congress seeking to enact legislation allowing the importation of prescription drugs; 2 - Initiate competitive bidding legislation for Med-D; the VA model is in place and has worked without jeopardizing competition. Democrats initiated VA system support. 3 - Increase Part D subsidy/incentive for employers who offer coverage more generous than Part D, and/or agree to maintain current their current plans. 4 - HR 4685 – support this Dingell / Baye bill that prevents in-year interruption of Med-D Prescription Drug coverage and restricts formulary changes. Also, sets an appeal process. 5 - S.2810 / HR 5399 – support these bills that suspend the 2006 Med-D late filing penalty.
Acceleration of Generic Drug Approvals - Propose legislation for government funding for the express purpose of clearing the generic drug approval backlog and to maintain a minimum backlog of not more than three months. This proposal will also specify that manufacturer “user fees” may not be solicited or accepted as a substitute for FDA funding for generic drug testing.
Deductibility of Health Care Costs - Propose legislation enabling healthcare premiums and out-of-pocket costs to be fully tax deductible, similar to the way that health insurance premiums for self-employed individuals are deductible. This bill would also set aside the 7.5% Adjusted Gross Income (AGI) limit for healthcare premiums and out of pocket costs not covered by individually purchased plans.
Healthcare Savings Accounts - Propose legislation enabling tax free and penalty free
rollover transfers from 401k, IRA, SEP and other individual retirement accounts to Healthcare Savings Accounts (HSA’s) and would permit the tax-free use of such accounts to pay for healthcare premiums and healthcare costs not covered by healthcare insurance. Those who do not own assets in one of the above accounts would also be allowed to fund an HSA with pre-tax dollars in accordance with IRA contribution limitations. HSA funds could not be used for other than healthcare purposes. Non-spousal inheritance of HSA accounts would create a taxable event.
The entire NRLN 2006-2007 Legislative Agenda is available at: http://www.nrln.org/current-top-priorities.htm .
The LRO would like to receive information from Lucent retirees about how the increases in Lucent healthcare and prescription drug premiums have caused financial hardships. For example, what percent of your pension will go for healthcare and prescription drug premiums in 2007? With your permission, this information may be posted on the LRO website and provided to the press. Please email your personal story with your name, phone number and city where you live to Ed Beltram, LRO Communications Director, at firstname.lastname@example.org. (Your phone number and email address is to provide to reporters who might want to interview you. They will not be published on the LRO website.)
In closing, I want to offer the LRO Board’s empathy and best wishes to each of you as you make the necessary healthcare and prescription drug decisions for what is best for you and your dependents given your personal circumstances.
Ken Raschke, LRO President