3M stopping retiree medical

[M Paquette]

?? Okay. Hey, it's one procedure that is fully covered under all plans and requires no co-pay.

I just can't stand the thought of another round of "Death Committee!" and "Get the Government Out of Medicare!", and another March for Innumeracy.

 

[traineeinvestor]

Reintroducing slavery would have much the same effects. No slave ever complained about not having a job. Investors loved it.

From an investor's perspective slavery is a bad idea. Slaves have no incentive to work hard or efficiently, you have to make much more substantial investments in security and have the risk of an uprising disrupting production. There is even the very real risk of a complete revolution. A free labour market works much better.

With respect, there is no rational reason for employers to make payments for people who no longer work for them. The recent and largely American experience is, historically, an aberration which is not seen in other countries or other periods of history. Loading costs onto employers may be politicaly popular with politicians up for re-election and employees who don't want to bear the cost of the services they use, but it is a good way of reducing employment opportunities and adding to the incentive for companies to shift jobs offshore.

 

[samclem]

With respect, there is no rational reason for employers to make payments for people who no longer work for them.

Historically, in the US there has been a rational (given the circumstances) reason. Due to tax laws and the nature of the insurance products, employers could buy health insurance much more cheaply than employees could buy it. Similarly, employers could buy it less expensively for their retirees than the retirees could buy it for themselves. So, it was a cost-effective retention tool. All of this was because of govt-induced distortion (dating back to WW-II) of the normal market and pricing mechanisms for health insurance in the US.

Loading costs onto employers may be politicaly popular with politicians up for re-election and employees who don't want to bear the cost of the services they use . . .

Of course, the employees pay for all these costs anyway. It's all bundled into "compensation," and if the employer weren't paying for health care, then the takehome pay would be higher (given a competitive and free labor market.) But, that won't fit on a bumper sticker.

An even bigger cost of employment-linked health care is the reduction in the mobility of the labor force. Lots of people are locked into jobs that don't fully use their talents, or which they hate, because it's the only way they can get coverage. As a whole the US economy will be more productive if the labor market is more efficient and if the workforce is more mobile.

In some cases I think individual employers have benefited from the present setup. They can get (and trap) highly qualified employees because they are able to provide health coverage at far lower cost than the employee can get it themselves. Do these companies have to pay as much? No way. Do they know that they can make very large demands and offer very low pay to Ernie Employee because, if he quits, there's no way Ernie can afford to self-fund his wife's dialysis treatments? You bet.

 

[Emeritus]

From an investor's perspective slavery is a bad idea. Slaves have no incentive to work hard or efficiently, you have to make much more substantial investments in security and have the risk of an uprising disrupting production. There is even the very real risk of a complete revolution. A free labour market works much better.

With respect, there is no rational reason for employers to make payments for people who no longer work for them. The recent and largely American experience is, historically, an aberration which is not seen in other countries or other periods of history. Loading costs onto employers may be politicaly popular with politicians up for re-election and employees who don't want to bear the cost of the services they use, but it is a good way of reducing employment opportunities and adding to the incentive for companies to shift jobs offshore.

Sorry, the multi quote is not working
Better provide a cite for your comment on slavery. People were actively investing in slaves right up to the civil war. Owners also paid vast sums to recover runaway slaves. Of course you could argue that rich southern white males were complete screaming idiots who could not add or think , and there would be historical evidence to support it. but the facts in general are against you.

There are lots of reasons to pay workers who no longer work there. they are called contracts. What workers did not know was that what they thought was a "contract" was actually a target painted on their backs. I fully agree that they were stupid to trust in the integrity of corporations and theri "promises" , as were the scottish clansmen to trust in the integrity of the Lairds who enclosed the clan lands

Over in Europe Workers have actual real contracts. here most are day laborers, admittedly one step above peasants.

 

[traineeinvestor]

Historically, in the US there has been a rational (given the circumstances) reason. Due to tax laws and the nature of the insurance products, employers could buy health insurance much more cheaply than employees could buy it. Similarly, employers could buy it less expensively for their retirees than the retirees could buy it for themselves. So, it was a cost-effective retention tool. All of this was because of govt-induced distortion (dating back to WW-II) of the normal market and pricing mechanisms for health insurance in the US.

Of course, the employees pay for all these costs anyway. It's all bundled into "compensation," and if the employer weren't paying for health care, then the takehome pay would be higher (given a competitive and free labor market.) But, that won't fit on a bumper sticker.

An even bigger cost of employment-linked health care is the reduction in the mobility of the labor force. Lots of people are locked into jobs that don't fully use their talents, or which they hate, because it's the only way they can get coverage. As a whole the US economy will be more productive if the labor market is more efficient and if the workforce is more mobile.

In some cases I think individual employers have benefited from the present setup. They can get (and trap) highly qualified employees because they are able to provide health coverage at far lower cost than the employee can get it themselves. Do these companies have to pay as much? No way. Do they know that they can make very large demands and offer very low pay to Ernie Employee because, if he quits, there's no way Ernie can afford to self-fund his wife's dialysis treatments? You bet.

Yes, there was a time when American companies faced (i) a shortage of skilled labour and (ii) an absence of meaningful competition from abroad and (iii) greater obstacles to shifting costs overseas. For many (if not most) industries those days are long gone and are very unlikely to come back. The rational for offering extensive benefits (including ones which extend beyond the termination of employment) is not what it once was. Rising unemployment at a time when the work force is (arguably) better qualified than at any time in history supports this view. I would expect that there are an awful lot of people who would rather have a job without health benefits than no job with health benefits.

As to it being cheaper for companies to take on the cost and factor it into compensation packages, this is true BUT from the companies' perspective, the logic breaks down when the cost marches relentlessly upwards without matching gains in productivity AND the ability to use lower cost labour in another market becomes easier by the day. If the costs were stable and/or reasonably predictable over at least the medium term, the retention effect argument would be stronger. When workers are mor easily replaceable (as they are today), the argument gets progressively weaker. (This is for the bulk of employees. There will always be a very small group of people whose skills or other attributes make the additional cost of retention worthwhile.)

I agree with you on mobility - as a whole we are better off if people have the flexibility to move as they wish. Life long benefit arrangements (including many defined benefit pensions and health care) are an obstacle to workplace mobility.

 

[Texas Proud]

With respect, there is no rational reason for employers to make payments for people who no longer work for them. The recent and largely American experience is, historically, an aberration which is not seen in other countries or other periods of history. Loading costs onto employers may be politicaly popular with politicians up for re-election and employees who don't want to bear the cost of the services they use, but it is a good way of reducing employment opportunities and adding to the incentive for companies to shift jobs offshore.

If you are only talking about health care... then you are correct... most countries have state run health care so the companies do not pay even when employed.... if you are talking payments in general, you have not looked at other countries much....

It was well know that in Japan they paid workers who were not productive to just sit around.. forget what the term is.... but very common... In a bunch of European countries it is very common that people are hard to fire and there are examples in Italy where they are paid five years and have not shown up for work....

Here in the US, it is very common to just let people go with little to no severance.... especially if a small company... Megas are different... I got about 8 months when I was let go from mega... but if I had been working in the UK my severance would have been over 1 year... (I worked there for a year and know this for a fact)....

 

[traineeinvestor]

Sorry, the multi quote is not working
Better provide a cite for your comment on slavery. People were actively investing in slaves right up to the civil war. Owners also paid vast sums to recover runaway slaves. Of course you could argue that rich southern white males were complete screaming idiots who could not add or think , and there would be historical evidence to support it. but the facts in general are against you.

There are lots of reasons to pay workers who no longer work there. they are called contracts. What workers did not know was that what they thought was a "contract" was actually a target painted on their backs. I fully agree that they were stupid to trust in the integrity of corporations and theri "promises" , as were the scottish clansmen to trust in the integrity of the Lairds who enclosed the clan lands

Over in Europe Workers have actual real contracts. here most are day laborers, admittedly one step above peasants.

I should have added some emoticons to my (obviously) unsuccessful attempt at humour. But since you asked for a cite: http://cniss.wustl.edu/workshoppapers/whitepaper.pdf

Adam Smith's writings on the subject also make interesting reading (as do the comments on his work).

A contract is a binding agreement. Either you have one or you do not have one. If there is a binding agreement to pay then, absent a restructuring on insolvency, of course companies should pay and the courts will normally enforce such contracts. If there is no binding agreement then expectations have either been mismanaged or raised unrealistically high (either by management or by the employees or both).

As to Europe, a daily read of the financial news is enough to convince me that the only part of Europe's economic policy that is working well is the French and German efforts to help their very succesful exporters through competitive devaluation (which is the effect of joining the Euro on the Eurozone's stronger economies).

This is not about what is right/wrong or what is fair - subject to any legal overlay, it is about the economics. Investors will send their money to the companies which they see as providing the best return on their investments - which will often be the ones with the lowest overheads. Companies with the lowest costs will have better prospects for survival and growth - including job creation - than those with higher costs. As a simple example compare an established company with a long history of paying benefits to its growing ranks of retirees and a newer company without those historical legacy costs. Which company will make the better investment? Which one will be able to sell its goods/services more cheaply without going broke? Which company will be better able to invest in growing its business? Which company is more likely to survive during an economic recession? Which company will be able to offer greater job security? Which company will have the potential to attract the best and brightest workers? I know which company I would invest my money in and which one I would prefer to work for.

It's ugly (very ugly) for people who were expecting or hoping to receive such benefits, but in today's competitive and global economy providing such benefits comes with a very high price tag.

 

[Emeritus]

A contract is a binding agreement. Either you have one or you do not have one. If there is a binding agreement to pay then, absent a restructuring on insolvency, of course companies should pay and the courts will normally enforce such contracts. If there is no binding agreement then expectations have either been mismanaged or raised unrealistically high (either by management or by the employees or both). .....

This is not about what is right/wrong or what is fair - subject to any legal overlay, it is about the economics. Investors will send their money to the companies which they see as providing the best return on their investments - which will often be the ones with the lowest overheads. Companies with the lowest costs will have better prospects for survival and growth - including job creation - than those with higher costs. As a simple example compare an established company with a long history of paying benefits to its growing ranks of retirees and a newer company without those historical legacy costs. Which company will make the better investment? Which one will be able to sell its goods/services more cheaply without going broke? Which company will be better able to invest in growing its business? Which company is more likely to survive during an economic recession? Which company will be able to offer greater job security? Which company will have the potential to attract the best and brightest workers? I know which company I would invest my money in and which one I would prefer to work for.

It's ugly (very ugly) for people who were expecting or hoping to receive such benefits, but in today's competitive and global economy providing such benefits comes with a very high price tag.

I must need a tutorial on the multi quote

Obviously in the short run the best return on investment goes to the firms who can lie the best to their employees and give them the impression that they have a certain benefit while in reality they get nothing. That is why I put "contract" in quotes. I have law classmates who specialize in such "disappearing parachutes". In the state of Maryland some legislatures want to take away retiree health benefits that were earned over 30 years of service with the claim that the state is "immune" to any claims of morality and ethics and only has to do what is strictly required by the constitution

Professional and business ethics are/were a substitute for a rather inefficient legal system. When the ethics break down you get law, unless of course you allow the corporations to buy the political system too.

The next step is screwing investors. that was the heart and soul of the CDO scandal. Investors were sold stinking garbage packaged as AAA bonds.

the same folks who sold out employees sold out investors.

 

[Bimmerbill]

Back when I worked for Lucent (were they a mega corp?) in 2000/01 I remember getting a letter saying they were stopping health care unless you had 10 or 15 years in already.

 

[Delawaredave5]

Back when I worked for Lucent (were they a mega corp?) in 2000/01 I remember getting a letter saying they were stopping health care unless you had 10 or 15 years in already.

Very helpful. Thanks.

 

[Bimmerbill]

I think they cancelled/froze their pension shortly after (I really don't remember!). But I got laid off in 2001 so was able to cash my pension out. I only worked there 2 years, but they added 5 years "bonus" time for getting laid off. So, think I got $15K or so in 2006 when I rolled it into my TSP.

 

[obgyn65]

You may find some useful information here Find Insurance Options

Wonder if this is the first of more to come. Right now, medical coverage is part of my Megacorp pension - not sure for how long...

 

[chinaco]

The problem with healthcare (retirement funding... pensions, 401k, etc), is that we have gradually creeped from the old model to "no model". The new approaches were not thought out and crafted, but the result of abandoning corporate costs.... not trying to address the problems and issues or head in a direction that works for people.

 

[Htown Harry]

The problem with ____________ is that we have gradually creeped from the old model to "no model". The new approaches were not thought out and crafted, but the result of_______, not trying to address the problems and issues or head in a direction that works for people.

Save that, Chinaco. It can be used as a posting on any number of subjects related to Congress and the Federal government.

 

[traineeinvestor]

Save that, Chinaco. It can be used as a posting on any number of subjects related to Congress and the Federal government.

+1

Actually, the approach being taken does address the fundamental problem that the current approach does not work and is unsustainable (as well as having the other issues identified in previous posts).

 

[Emeritus]

Save that, Chinaco. It can be used as a posting on any number of subjects related to Congress and the Federal government.

It's not just the government. Read the value jet crash reports and you see exactly the same problem in companies.
Or you can read the TITANIC inquiries and see exactly the same thing.

"System drift" is a near universal phenomenon

 

[samclem]

To some extent, there's a lot of fond remembering of "systems" and models that never were.

What was the old retirement "model"? At no time have 50% of Americans been covered by DB plans. For most of American history, and certainly most of human history, people just worked until they couldn't anymore, then depended on their families. It takes a pretty liberal definition to call that a "model," and it's certainly not a system

Healthcare--same thing. We've got a patchwork of various care provision mechanisms and a separate set of payment mechanisms, but they are largely uncoordinated. They always have been.

Having a system that is designed top-down is often not the best answer. Sometimes systems and models that evolve in response to the market are far better than the ones that are "designed." The Soviet Union had a carefully planned agricultural system. US agriculture has very little centralized planning--just a bunch of farmers, suppliers, wholesalers and retailers looking out for their own individual interests. It's a very complex system with tremendous interdependencies, but no one planned it and no one controls it. I think everyone knows the relative productivity of the two systems, and how that story ended.

 

[Emeritus]

'US agriculture has very little centralized planning--just a bunch of farmers, suppliers, wholesalers and retailers looking out for their own individual interests. It's a very complex system with tremendous interdependencies, but no one planned it and no one controls it. I think everyone knows the relative productivity of the two systems, and how that story ended. "

Which agriculture are you describing? Certainly not the USA

[FONT=Arial,Helvetica,Geneva,Swiss,SunSans-Regular]Impact of U.S. Subsidies[/FONT] [FONT=Arial,Helvetica,Geneva,Swiss,SunSans-Regular]Efforts to decipher the causes of the present crisis have cast a spotlight on one of the U.S.’s most visible and, for most, egregious examples of hypocrisy and double-speak: the extremely high level of U.S. government payments to farmers while simultaneously encouraging other countries to reduce domestic agricultural supports. Although these payments have technically fallen within our support reduction commitments under the World Trade Organization (WTO), they have risen dramatically since 1996 and stand as a testament to U.S. admonitions to “do as I say, not as I do,” when it comes to trade liberalization. The severe drop in farm income that would have occurred in the absence of this compensation has been cushioned by these payments, which exceeded $20 billion annually for the last several years.....[/FONT]


[FONT=Arial,Helvetica,Geneva,Swiss,SunSans-Regular] Subsidies are U.S. government payments made directly to producers. Most critics of these payments, which nearly tripled since the key turning point of 1996, point to their role in increasing production, thereby glutting the market and forcing prices lower. Instead, this study provides evidence to show that the relationship is far from a linear one, with the reality far more complex than many would have us believe. U.S. production of the eight major crops [/FONT][FONT=Arial,Helvetica,Geneva,Swiss,SunSans-Regular](3)[/FONT][FONT=Arial,Helvetica,Geneva,Swiss,SunSans-Regular] increased as land previously idled by government set-aside programs was brought back on-line. In the absence of traditional supply management and price support tools, prices declined sharply. Faced with drastic impacts on net farm income, the U.S. government responded by paying farmers compensatory sums to help close the gap. [/FONT]

Rethinking U.S. Agricultural Policy by Daryll Ray, Daniel De La Torre Ugarte, Kelly Tiller / Rural America / In Motion Magazine[FONT=Arial,Helvetica,Geneva,Swiss,SunSans-Regular]
[/FONT]

 

[clifp]

SamClem is right that US agriculture is extremely efficient. Which is probably why it is way to easy for the US farmer to produce too much stuff. Even relatively modest surplus of commodities like corn or wheat result in huge drops in price causing large drops in farmer income. Cause there is only some much, corn on the cob, corn flakes, corn bread, and of course the ubiquitous corn syrup the US consumers can consume, even with some of us doing more than our fair share. This is why we started the agricultural subsidies during the New Deal.

I don't pretend understand how the system works but I think any resemblance, between US agriculture and free market/free trade is pretty tenuous.

 

[aggie]

Just wait until the middle class finds out their health insurance will cost $1500/month come 2014.

Well, its been $1350/mo for my wife and me since 2007...so I'm looking forward to 2014!

 

[Rich_by_the_Bay]

Well, its been $1350/mo for my wife and me since 2007...so I'm looking forward to 2014!

+1

 

[dgoldenz]

Well, its been $1350/mo for my wife and me since 2007...so I'm looking forward to 2014!

For every winner like yourself, there will be a lot more losers out there. The amount of people who can afford $1500/month is between slim and none. One of my clients is paying $3000/month right now, which is just crazy....but they don't really have a choice because they've both racked up millions in claims and they wanted the best group policy available. Still, I would guess the number of people who can afford $1500/month is less than 2%.

 

[MichaelB]

Well, its been $1350/mo for my wife and me since 2007...so I'm looking forward to 2014!

+2

For every winner like yourself, there will be a lot more losers out there. The amount of people who can afford $1500/month is between slim and none. One of my clients is paying $3000/month right now, which is just crazy....but they don't really have a choice because they've both racked up millions in claims and they wanted the best group policy available. Still, I would guess the number of people who can afford $1500/month is less than 2%.

Due away with cost shifting, business and tax subsidies. Let everyone see and pay the real cost of health care insurance. That’s not losing, that’s enabling.

When everybody sees and has to pay the real cost then there will be broad public support for reform.

 

[dgoldenz]

+2

Due away with cost shifting, business and tax subsidies. Let everyone see and pay the real cost of health care insurance. That’s not losing, that’s enabling.

When everybody sees and has to pay the real cost then there will be broad public support for reform.

Yeah, but that's not the type of legislation we got....so unless it's repealed, that's not happening.

 

[GregLee]

Let everyone see and pay the real cost of health care insurance. That’s not losing, that’s enabling.

So making people pay more is not losing them anything? Is that what you're saying? It's a little counter-intuitive.