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    Highlights—September 23, 2006

  • Boston Globe: Visions of the golden years dim as pension promises fade. By Robert Gavin. (Editor's note: This Boston Globe article is lengthy, but well worth the time to read in its entirety. The excerpts shown here, although extensive, are a small subset of the entire article.) Excerpts: After the collapse of Digital Equipment Corp. cost him a 16-year career, Larry Millette started over, taking an entry-level factory job at the IBM plant in this Vermont village.
    The pay wasn't great. But to Millette, then in his late 40s, IBM offered something more valuable: a generous pension. By working another 15 years or so, then cobbling together his IBM and Digital pensions, Millette figured he could yet enjoy a decent retirement.
    But Millette's hopes have vanished in recent years as IBM all but abandoned the pension first promised to him. Today, after 11 years of 12-hour shifts, Millette has just $30,000 in his IBM pension account. He also has a new retirement strategy: "Work until I can't work anymore." [...]
    The shift comes as both corporate profits and executive pay soar. Combined profits of the nation's 500 biggest public corporations are at record levels, having grown at double-digit rates for three years, according to Thomson First Call, a Boston research firm that surveys stock analysts and tracks corporate earnings. In about the same period, the average compensation of chief executives at these companies jumped more than 40 percent to $11.7 million a year, according to the Corporate Library, a research firm in Portland, Maine.
    At IBM, for example, profits rose 7 percent in 2005, while Chief Executive Samuel J. Palmisano's pay jumped 29 percent to $11.4 million, including salary, bonus, and incentives, according to Securities and Exchange Commission filings. Palmisano, 55, who has worked more than 30 years at IBM, will receive a pension of about $4 million a year when he retires. [...]
    IBM once epitomized the old social contract of employee loyalty and corporate paternalism, refraining from layoffs during the Great Depression. The company promised lifetime employment, cradle-to-grave benefits, and a relationship built on the principle "Respect for the individual."
    But in the tumultuous 1990s, battered by changing technology and fierce competition, IBM began to reduce pensions and to redefine its relationship with workers. During a major pension redesign in the late 1990s, company memos described the need to "eliminate the concept of retirement to the extent possible" and "not create long-term incentives to remain at IBM." [...]
    Millette knew the world was changing when he joined IBM. His layoff from Digital had taught him that. Still, during his orientation at IBM, which included an entire day to explain benefits, Millette was assured he could yet find security. "They kept telling us, 'If you're a good employee, a loyal employee, and you do your job, you're going to get all these benefits'," Millette said. "Then someone signs a paper, and you get almost nothing." [...]
    Millette never had big plans for retirement. He just looked forward to puttering around his home in Milton, Vt., tending to the tomatoes, cucumbers, and peppers in his garden; pruning the fruit trees he planted; making wine from his home-grown fruit. He thought he'd see more of his four grandchildren, and maybe even take a trip with his wife of 31 years, Rose. "You know," he said, "just enjoying whatever time we had left." [...]
    Thomas J. Watson Sr., a one-time traveling salesman, built IBM from a struggling conglomerate that made scales, time clocks, and mechanical accounting machines. Assuming the company's leadership in 1914, he forged IBM into a progressive employer, offering good pay, reasonable hours, safe conditions, and even vacations in an era before such policies were common. He once lectured executives that their prime duty was to employ people.
    His son and successor, Thomas Watson Jr., brought the company into the computer age, stressing his father's principles of loyalty, dedication, and corporate responsibility. "I wanted IBM to be recognized as one of the most generous employers in America," the younger Watson wrote in his memoir.
    Watson Jr. retired as chairman and CEO in 1971. By the 1980s, IBM and its core product, the mainframe computer, were under assault from new technologies and new competitors, such as Microsoft Corp. [...]
    Gerstner, the first outsider to lead IBM, arrived via RJR Nabisco Inc. He engineered what became a legendary turnaround. He also re-engineered the relationship with workers. In 1997, IBM launched a redesign of the employee pension plan that cut benefits, laying the groundwork for further reductions later.
    As a February 1998 IBM draft memo explained, new retirement policies should "move away from entitlement focus; eliminate the concept of retirement to the extent possible;" and "not create long-term incentives to remain at IBM."
    The memo was one of many filed as evidence in an age discrimination lawsuit brought by employees after IBM completed the pension redesign in 1999. A federal appeals court in Chicago recently ruled IBM's plan did not discriminate, but plaintiffs plan to appeal to the Supreme Court. [...]
    The problem with IBM's pension plan, an undated memo argued, was that it provided "benefits that substantially exceed" IBM's competitors while continuing "to reflect a lifetime employment model, which is no longer presumptively the right model." Instead, IBM needed to expose its workers to market forces, so they would "share in the rewards and risks, along with IBM's shareholders," according to the February 1998 draft memo.
    IBM executives also said they were competing for talent, and the portability of cash-balance would appeal to younger workers who didn't expect or seek lifetime employment. But, they acknowledged, it wouldn't be so good for older employees -- particularly those with short tenures, such as Millette, who could lose nearly half their benefits.
    IBM officials declined to comment on the memos because the case is still in court. But generally, said Randy MacDonald, IBM's senior vice president for human resources, the company has changed benefits as the competition and workforce have changed. [...]
    Executive pay soars. With a job at IBM, Larry Millette's life had at last stabilized. His performance ratings were high. Raises followed. His benefits seemed solid. He was perfectly content working on the manufacturing floor. As he settled onto IBM's production line, taking less than one sick day a year, Millette had no idea executives were embarking on a course that would cut his promised pension in half. There was little reason to suspect it. [...]
    Gerstner's turnaround strategy had succeeded. Profits totaled about $20 billion from 1997 to 1999, and IBM's stock price hit new highs. The pension fund was healthy, too. At the end of 1997, shortly after IBM began efforts to cut pension costs, the fund had a surplus -- $8 billion more than needed to cover obligations.
    The pension fund, in fact, was generating profits for IBM. Under accounting rules, pension fund investment returns that exceed current and some previous costs increase a company's earnings, just as investment returns that fall short of such costs reduce earnings. By 2001, excess returns grew to 13 percent of IBM's profit, up from 8 percent in 1999, when the cash balance plan was put in place.
    The impact of pension income on IBM's bottom line was important to company executives, whose compensation was increasingly based on IBM's financial performance. Gerstner believed executives should face the same risks as shareholders, and tied compensation to profits and stock price through bonuses, stock options, and other incentives.
    During his tenure, the top five executives, Gerstner included, were awarded options for around 6 million shares, valued at the time between $300 million and $900 million, depending on possible appreciation, according to SEC filings. These executives received the most options in 1997, just as the project to cut pension costs got underway.
    Gerstner, through an IBM spokesman, declined to be interviewed. MacDonald, the human resources executive, said potential stock gains for executives never played a role in pension changes. "To suggest a quid pro quo is completely irresponsible," he said.
    Still, surging executive pay in boardrooms across America has likely played a role in the erosion of traditional pensions, said Alicia Munnell, director of the Center for Retirement Research. Employee pension plans cap benefits at about four times average wages to qualify for federal tax breaks. But as CEO pay soared to nearly 400 times average wages, these benefits became inconsequential to executives.
    "The conventional pension system is really not something they relate to," Munnell said. Many companies, including IBM, created separate executive pension plans to provide retirement benefits above the cap, further disconnecting corporate officers from employee pensions, Munnell said. In Gerstner's case, his $1.1 million-a-year pension was negotiated in his contract, and unaffected by changes to the employee and executive pensions. [...]
    On top of his pension, he was granted 125,000 shares of IBM stock, with an estimated value of about $14 million, and a 10-year consulting contract that gives him access to IBM perks, such as corporate cars and aircraft. As a consultant, he gets daily fees based on his final salary of $2 million a year. He also held nearly $150 million in unexercised stock options. [...]
    IBM unveiled the cash-balance plan in 1999, but it sparked such outrage among employees that the company allowed those over 40, with at least 10 years of service, the choice of keeping the old pension. Millette, with only four years at IBM, didn't get the choice. He was 52.
    Today, seven years later, Millette's pension is changing again, and he's not sure it's for the better. In January, IBM said it would freeze pension benefits at the end of 2007 and put in place one of the nation's most generous 401(k) plans, more than doubling IBM contributions to employee accounts.
    The company projects that that move and changes in other countries will cut pension costs by as much as $3 billion through 2010. MacDonald, the human resources executive, said IBM faces competitors from Asia and Latin America with far lower costs. If IBM fails to control costs, MacDonald said, the company risks the fate of US steelmakers, automakers, and airlines, which have plunged into or near bankruptcy, slashed tens of thousands of jobs, and, in some cases, abandoned pension obligations altogether. [...]
    When the IBM pension freeze goes into effect at the end of next year, Millette will be 60. Using his current earnings of about $40,000 a year, and assuming an annual rate of return of 8 percent, Millette would have to work at least 12 more years before IBM's additional 401(k) contributions equal the benefits he would have received at 65 under the pension he was first promised. That would make him 72.
  • Boston Globe, Letter to the Editor. By Frank O'Dette. Full excerpt: YOUR SEPT. 17 story on broken pension promises ("Visions of the golden years dim as pension promises fade," Page A1) brought back memories of my own career at IBM, mostly in the Waltham office. The feelings of betrayal still hurt. I joined IBM with promises of a good pension and retirement healthcare if I put in my 30 years. Twenty years in, IBM told me "Oops, we changed our mind," and dropped many of us from the traditional retirement health and pension plans. What was an employee to do?
    I had picked the company I was going to work for after evaluating various offers. I never suspected that 20 years down the road those promises would be broken. Can someone give me a time machine so that I can go back 20 years and pick a different company?
    I no longer work for IBM. I was forced out when my department was sold to an upstart Internet company, which subsequently offshored our jobs to India. But that's another story.
  • BusinessWeek: IBM to open software center in India. Excerpts: IBM Corp. announced Thursday it will establish a new software development center in the eastern Indian city of Calcutta, creating 3,000 jobs. The center is expected to deliver Web-based technologies and business consulting, the company said in a statement. It didn't say when the center would be fully operational or how much IBM plans to invest in it.
    IBM Corp. has been aggressively expanding its Indian work force, growing from 38,500 workers in December 2005 to 43,000 in June this year, the statement said.The Calcutta center will house IBMs second-largest pool of workers after Bangalore, India's key information technology hub in the southern state of Karnataka. [...]
    IBM will also launch its Appropriate Continued Education Program for the first time in India, enabling science graduates in West Bengal state to train with the company to receive a masters degree.
  • Workforce Management: Firms Unmotivated to See That Workers Earn Match. By Jessica Marquez. Excerpts: Employees can’t rely on 401(k) plans to pay for their retirement, according to a recent paper published by the Center for American Progress, a Washington, D.C.-based think tank. In fact, the current 401(k) model offers no incentive for employers to make sure their employees are contributing enough of their compensation to receive an employer match, according to "Future Retirement Income Security Needs Defined Benefit Pensions." [...]
    "Between 2002-2004, if all eligible workers participated in the employers’ 401(k) plans, employers would have had to contribute 26 percent more—for an annual total of $3.17 billion," the paper says. This is why 82 percent of plan sponsors don’t offer automatic enrollment, according to the paper, which was written by Teresa Ghilarducci, a professor at the University of Notre Dame.
  • Beyond Delay: Report documents 25 'most corrupt' in Congress. Excerpt: new report on political corruption in Washington offers exhaustive documentation of the unethical and possibly illegal activities of the 25 "most tainted" members of Congress. Five of the names on the list are currently under federal investigation: Senators Conrad Burns (R-MT) and Bill Frist (R-TN) and Representatives Jerry Lewis (R-CA), William Jefferson (D-LA), and Alan Mollohan (D-WV). Others have come under scrutiny for ethical lapses involving campaign contributions, conflicts of interest, improper relationships with lobbyists, and failures to meet disclosure requirements.
  • CNET News: Perspective: Bring back the HP Way, Mr. Hurd. By Charles Cooper. Excerpts: OK, start by imagining what Bill Hewlett and David Packard might have done in a similar situation. I suppose that does require a leap of faith because HP's co-founders never would have authorized a covert surveillance operation to spy on company employees or journalists. These were old-school guys who believed what they said. Packard even left behind a valuable primer that should be must-reading for any CEO. In his chronology of the company's history, "The HP Way," Packard stressed how important he and Hewlett felt it was to treat individuals with consideration and respect. It's safe to assume he would have said "pretexting" fails that test.
    You can't turn back the clock, but this is the time to clean up the stables. Your PR minions have given up trying to sanitize this affair because the "Patricia-gate" mess stinks to high heaven. Every bizarre new disclosure is the equivalent of another slap in the face to the tens of thousands of people who built HP into a world-class company. Even Wall Street, which until now has tried hard to ignore the unfolding scandal at HP, is starting to worry about where all this is heading. In recent days, investors have sold off HP shares because of the gathering clouds over the company.
  • Human Resource Executive Online: France to curb executive stock options. Excerpts:
  • Yahoo! message board post by "mr_quarkwrench". Excerpts: I retired in 1997 and have never, never, never received an increase in my retirement pay. Never. Did I mention that I've never gotten any kind of raise?
    I have received an annual cut in net benefits due to the constant yearly increase in my 'company paid lifetime medical' benefits.
    But no raise. Never, ever, ever. Nada.
    However, I did take a buyout in 1993 with a bridge to retirement and my retirement benefit was cut between 1993 and 1997. That is my retirement was reduced even though the selling point for taking the buyout was to lock in my retirement benefit.
    Did I mention that I've never received an increase in my retirement pay since I started drawing it in 1997? Well, I haven't.
  • Washington Post: Retirement, Squeezed As Traditional Plans Decline, Workers Face a Less Certain Future. By Kathleen Day. Excerpts: Sean Schuback, a 15-year veteran of Verizon, arrived at work one morning last December to unsettling news: A company e-mail sent the night before announced that the telecommunications giant was freezing its pension plan. In a instant, Schuback, 33, who joined the company as a phone operator right out of high school, saw the $469,286 pension payout he was told he could receive by working another 15 years sliced to $245,494, where it would stay no matter how many more years he put in. [...]
    What happened to Schuback's pension is part of a long-running trend, as otherwise healthy companies -- not only Verizon Communications Inc., but also International Business Machines Corp. and, most recently, DuPont Co. -- freeze, terminate or alter the terms of their employees' retirement packages. Most of these companies increased other retirement offerings, which don't include fixed payouts. [...]
    Retirement experts say workers often underestimate what they need. A paper published last week by EBRI concludes that an old rule of thumb that retirees need 75 percent to 85 percent of their pre-retirement income to live comfortably is outdated. A person today probably needs closer to 100 percent, said VanDerhei, the paper's author, because people are living longer and they need to include money for health care not covered by Medicare.
  • Yahoo! message board message sent to, and posted by, Lee Conrad, president of the Alliance@IBM. Full excerpt: IBM is just another company. The days of the superior reputation as an employer have long since passed. IBM did this to themselves, with large layoff actions, pension cuts, and practices that made it difficult, if not impossible for layed off employees to rejoin the company.
    I noticed a change in culture in IGS over several years. The best way i can describe it as mercenary, much different that the community and people based organization I joined. Long time IBM'ers are leaving, my Manager of many years, and one of the best Project Exec's I know, just felt they did not know the company that hired them.
    This is not to say it is a bad place to start a career or even a bad place to work, as compared to other places. But since you are looking at the company for the values articulated by your associates, I would say that you will be disappointed.
  • Chicago Tribune, courtesy of the Monterey Herald: Flexibility for older workers. Companies offering options for those nearing retirement. By Barbara Rose. Excerpts: Dawn Olson, a manager at Mercy Health System in Janesville, Wis., took her laptop with her when she and her husband flew south to spend the month of February in Florida. The 51-year-old wasn't lugging her work along on vacation. Instead, she enjoyed a vacation-like lifestyle -- golfing and boating -- while also working remotely at the part-time job she and her boss designed to allow her to spend more time with her retired spouse.
    With information technology support from the hospital, "I was able to work my full schedule," Olson said. "When my staff had an issue they couldn't resolve, they'd call."
    Mercy, which tops AARP's annual list of best employers for over-50 workers, illustrates the flexibility some employers are offering older employees to keep them on the job. The health system offers options such as seasonal employment with full-year benefits, flexible hours and compressed work schedules, telecommuting and formal phased retirement programs.
  • Jim Hightower: Old Mr. Greed at American (Airlines). Excerpts: I'm a very frequent flier on American – a multimillion-miles man. One major reason is that their front-line people (from clerks to flight attendants to pilots) are overwhelmingly competent, courteous – and helpful when you need it. Indeed, it's this rank & file spirit that saved the corporation from the brink of financial ruin after 9/11, putting it on a successful course to recovery.
    In the dark days, top executives and labor agreed to a revival program called "Pull Together/ Win Together." They put the uniting ethic of the common good to work. Employees took billions of dollars in pay cuts and suffered thousands of job losses, and executives agreed that everyone – including them – would get annual raises of only 1 1/2 percent.
    In July, however, the executive suite unilaterally decided to abandon the common good and separate their own good fortunes from the well-being of the many. The CEO gave himself a 23 percent pay raise and split millions of dollars in bonuses with the other top brass.
    To add insult to injury, American Airlines also created a new "Operational Excellence" program to "reward" pilots and others for their sustained sacrifice. How nice. Do the employees get bonuses, too? Ha! No, their reward is a nifty lapel pin and some good-performance stickers for their kit bags. A corporate vice president sneered at employees who were aghast that management would grab cash for themselves while stiffing the people who literally make the airline run. He said that common workers get upset only "because they don't understand management compensation."
  • The Register (United Kingdom): AT&T insources 2,000 jobs. Takes one for the union. By Drew Cullen. Excerpt: AT&T's Bill Blase, executive veep in charge of labor relations, hailed the company's working relationship with the Communications Workers of America, which has "recognized the mutual importance of creating these jobs with competitive wages and benefits that enhance the company's ability to compete while creating good jobs".
  • Yahoo! message board post: Variable pay or bonus for this year? By "sby_willie". Excerpts: Prepare yourself for lower variable pay or bonus (or whatever IBM decides to call it now) for this year. It has been invariably going down, generally year-to-year, overall so why should it be any different again this year? Despite some record or near record profits posted in 2006, it's not clear why the variable pay or bonus employees receive is less and less. We are never told the REAL METRICS of this plan that determine one's payout, nor do I think we ever will. We are always told each in each quarterly scorecard memo letter "to work harder and get the deals closed and delivered" but no matter how hard we work or how many deals get closed the only thing constant it seems is less of the bonus pay.
    These scorecard letters are not geared toward the INDIVIDUAL employee who reads it so why should executive management post these memos in the first place? When I read these letters I continually ask myself "ok, if I do over and above my part of doing my job and delivering for the business WHAT AM I GOING TO GET FOR IT? We know what the business units will get: more bonuses and better stock option returns to exercise. But what about us? It certainly is not proving to get more bonus pay, or even a raise for that matter!
  • Washington Post: Seeking Guidance For Our Savings. By Martha M. Hamilton. Excerpts: It's been kind of a kick being on the leading edge of the baby boom. Wherever I went -- into the protests, into the workplace, into parenthood and into middle age -- millions followed. And now, turning 60, I'm on the leading edge of a mass of workers hurtling toward retirement in an era in which we're expected to save and invest for our own futures -- whether we know anything about investing or not. The truth is, despite 27 years as a business writer and editor, I don't know whether I have enough money or whether I'm doing the right things with my savings. [...]
    When my parents approached retirement, they had a pretty clear picture of where they were headed. They both had pensions, so they knew how much income they would have, and they both had retiree health insurance to pay for their medical needs. Their mortgage was paid off, and their kids were on their own. That left them free to enjoy the savings they had. Now 92, my mother lives quite comfortably on two pensions, two generous retiree health-care plans, Social Security, Medicare and the dividends from the Exxon stock my daddy bought over the years. He was a machinist at their Baytown, Tex., refinery. My mother was a high school English teacher. [...]
    But I face a much more uncertain future in retirement. And I'm not alone in that. Most of us do, and the younger you are, the greater that uncertainty is. Your own savings and investments will probably be all you have in retirement. Monthly pension checks are a vanishing reality. Ditto retiree health insurance. And who knows what the future holds for Social Security and Medicare? [...]
    And what about our children? On top of financial obligations, they will face the challenge of increased life expectancy. Turning 30? If you retire when you reach 63, you have a 17 percent chance of living 32 more years (to age 95) if you're male and a 24 percent chance of living that much longer if you're a woman, according to Ron Gebhardtsbauer of the American Academy of Actuaries. That's a long time to make the money last.
    So what to do? I'm not going to simply tell you to save early and often. Theoretically, it's good advice. But then, so is consuming fewer calories than you burn and buying low and selling high. It's just that it's not as easy as it sounds. And besides, when the oldies stations are playing the songs your kids used to listen to, it may be a little late. So that's why I'm writing this column. I'll be asking detailed questions -- including your questions (send them to hamiltonm@washpost.com ) -- that will help us get where we need to be. My goal is to slowly build a sense of mastery to substitute for the dread that usually attends trying to deal with something that seems overwhelming. We're in it together.
  • Washington Post: What's Really Propping Up The Economy. Since 2001, the health-care industry has added 1.7 million jobs. The rest of the private sector? None. Excerpts: If you really want to understand what makes the U.S. economy tick these days, don't go to Silicon Valley, Wall Street, or Washington. Just take a short trip to your local hospital. Park where you don't block the ambulances, and watch the unending flow of doctors, nurses, technicians, and support personnel. You'll have a front-row seat at the health-care economy. [...]
    Perhaps most surprising, information technology, the great electronic promise of the 1990s, has turned into one of the biggest job-growth disappointments of all time. Despite the splashy success of companies such as Google (GOOG ) and Yahoo! (YHOO ), businesses at the core of the information economy -- software, semiconductors, telecom, and the whole gamut of Web companies -- have lost more than 1.1 million jobs in the past five years. Those businesses employ fewer Americans today than they did in 1998, when the Internet frenzy kicked into high gear.
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • New York Times: Luring Customers From Medicare. By Milt Fruedenheim. Excerpts: For years, private insurers have offered alternatives to the federal Medicare program that are meant to give patients lower-cost options than the government coverage provides. More than 7 million people now subscribe to such plans, out of a total Medicare population of 42.5 million.
    But suddenly a type of private insurance plan is gaining ground that looks very similar to the basic coverage long available to anyone with a federally issued Medicare card.
    And the government is paying the private insurance industry a subsidy of 11 percent per patient, on average, to provide it. [...]
    The $7 billion that Medicare will pay private industry this year to provide this fee-for-service coverage is at least $770 million higher than the government would spend covering those patients itself, based on the 11 percent calculation. [...]
    It is a “back-door way of trying to privatize Medicare,” said Dr. Jack Lewin, the chief executive of the California Medical Association, a physicians’ group. But the Bush administration’s Medicare chief, Dr. Mark B. McClellan, insisted yesterday that the trend “is definitely not a ‘push to privatization,’ ’’ but simply a way to give people with Medicare more choices. “The original Medicare program is and remains an option for those who prefer it,’’ said Dr. McClellan, who plans to step down next month.
  • Los Angeles Times: Sick but Insured? Think Again. Lawsuits accuse insurance companies of retroactively dumping families that rack up large bills. Firms defend their policies, but the state is investigating. By Lisa Girion. Excerpts: Dawn Foiles says an improper cancellation forced her and her husband to put their Riverside home up for sale. Steve Leyra says a cancellation — based on a condition he doesn't even have — cost him the chance to become a firefighter. George Nazaretyan and his wife are struggling to save their Van Nuys home and get care for their disabled twin daughters, even as their medical bills approach $1 million.
    The suits accuse health plans of dumping sick policyholders without evidence that the consumers intentionally omitted information about their medical condition or history. They also accuse insurers of using applications that are vague and confusing by design, trapping consumers into making mistakes that can be used to cancel their coverage later.
    The complaints involve individual policies — the type of coverage sold to people who work for themselves or for employers who don't offer health benefits. Unlike many work-based plans, which are open to qualified employees regardless of health, insurers in California and many other states can reject applicants for individual policies based on their conditions or health histories. After an applicant is accepted, a state law prohibits health plans from canceling unless the policyholder lied to obtain coverage.
    Aside from appealing to the company that dumped them, subscribers' only recourse is to complain to state regulators or sue. After an insurer yanks coverage, it can be difficult, if not impossible, to get a policy from another carrier.
  • New York Times, courtesy of Congressman Bernie Sanders: Insurance Horror Stories. By Paul Krugman. Excerpts: "When Steve and Leslie Shaeffer's daughter, Selah, was diagnosed at age 4 with a potentially fatal tumor in her jaw, they figured their health insurance would cover the bulk of her treatment costs." But "shortly after Selah's medical bills hit $20,000, Blue Cross stopped covering them and eventually canceled her coverage retroactively."
    So begins a recent report in The Los Angeles Times titled ''Sick but Insured? Think Again,'' which offers a series of similar horror stories, and suggests that these stories represent a growing trend: more and more health insurers are finding ways to yank your insurance when you get sick.
    This trend helps explain something that has been puzzling me: why is the health insurance industry growing rapidly, even as it covers fewer Americans?
    Between 2000 and 2005, the number of Americans with private health insurance coverage fell by 1 percent. But over the same period, employment at health insurance companies rose a remarkable 32 percent. What are all those extra employees doing?
    Now we know at least part of the answer: they're working harder than ever at identifying people who really need medical care, and ensuring that they don't get it. In the past, they mainly concentrated on screening out applicants likely to get sick. Now, it seems, they're also devoting a lot of effort to finding pretexts for revoking insurance after they've already granted it. They typically do this by claiming that they weren't notified about some pre-existing condition, even if the insured wasn't aware of that condition when he or she bought the policy. Welcome to the ugly world of American health care economics. [...]
    Because everyone faces some risk of incurring huge medical costs, only the super rich can afford to be without health insurance. Yet private insurers try to refuse coverage to those most likely to need it, and deny payment whenever they can get away with it.
    The point isn't that they're evil or greedy (although you do wonder how the people who cut off the Schaeffers can look themselves in the mirror). The fact is that cruelty and injustice are the inevitable result of the current rules of the game. Blue Shield of California is a nonprofit insurance provider, yet as a spokesman put it, if his organization doesn't follow the for-profit practice of selectively covering only the healthiest people, ''we will end up with all the high-risk people.'' [...]
    Every other wealthy nation manages to provide almost all its citizens with guaranteed health insurance, while spending less on health care than we do. And there's no mystery why: we're paying the price for pointless, destructive reliance on private insurers. Medicare, which is a universal health insurance program for older Americans, spends less than 2 cents of every dollar on administrative costs, leaving 98 cents to pay for medical care. By contrast, private insurance companies spend only around 80 cents of each dollar in premiums on medical care; much of the remaining 20 cents is spent denying insurance to those who need it.
  • Yahoo! message board post by "fhawontcutit". Excerpts: The commentary points out that these stories are about people with individual policies, not group policies. It also points out that "employment-based insurance is in rapid decline". Scenarios:
    • You get fired prior to FHA-eligibility and are unable to find a job with health benefits.
    • You get a job post-IBM with health benefits but can't keep that job until age 65.
    • Your FHA runs out -- you "think" you can get a "better deal" with an individual policy.
    • IBM discontinues its retiree healthcare program. (Possible?)
    • You actually succeed in getting individual coverage, but then you have a large claim.
    In all of the above scenarios, "getting a second job" does not help unless that job comes with health benefits under a group policy. You have a healthcare problem. The clock is ticking.
  • New York Times Letters to the Editor: Our Unhealthy Health Care System (3 Letters). Excerpts: Paul Krugman has it right — a single-payer system is the only way out of our health care nightmare. Everyone knows that except the American public. The real question is: How has the right managed to convince Americans of so much that is demonstrably not true?
    Why do we believe in unregulated markets, when over and over again, from Enron to airlines to automakers to health care, the free market has failed to provide the products and services we really need? We will not fix our health care system, or anything else, until the American voter starts paying attention to reality.
  • BusinessWeek: U.S. Health-Care System Gets a "D". A new report from the Commonwealth Fund points out shameful inconsistencies and inadequacies in the care given in the richest country. Excerpts: The U.S. health-care system is doing poorly by virtually every measure. That's the conclusion of a national report card on the U.S. health-care system, released Sept. 20. Although there are pockets of excellence, the report, commissioned by the non-profit and non-partisan Commonwealth Fund, gave the U.S. system low grades on outcomes, quality of care, access to care, and efficiency, compared to other industrialized nations or generally accepted standards of care. Bottom line: U.S. health care barely passes with an overall grade of 66 out of 100.
    Health care is also responsible for most new job creation, according to BusinessWeek's Sept. 25 cover story (see BusinessWeek.com, 9/25/06, "What's Really Propping Up The Economy"). Yet the U.S. ranks 15th out of 19 countries in terms of the number of deaths that could have been prevented. The study estimates that each year 115 out of 100,000 U.S. deaths could have been avoided with timely and appropriate medical attention. Only Ireland, Britain, and Portugal scored worse in this category, while France scored the best, with 75 preventable deaths per 100,000.
    The U.S. ranks at the bottom among industrialized countries for life expectancy both at birth and at age 60. It is also last on infant mortality, with 7 deaths per 1,000 live births, compared with 2.7 in the top three countries. There are dramatic gaps within the U.S. as well, according to the study. The average disability rate for all Americans is 25% worse than the rate for the best five states alone, as is the rate of children missing 11 or more days of school. [...]
    As a share of total health expenditures, insurance administrative costs in the U.S. were more than three times the rate in countries with integrated payment systems.
  • Jim Hightower: A Secret Windfall for Drug Makers. Full excerpt: It looks like '06 is going to be a banner year for drug corporations! Profits at Merck, for example, have doubled, and Schering-Plough is up by a whopping 400 percent. This good fortune is the result of free-market innovations by top corporate executives, right. No – these skyrocketing profits come courtesy of the Bush government... and ultimately come right out of the pockets of us taxpayers.
    When George W pushed congress to pass his new prescription drug scheme, the drug giants smelled a chance to reap a financial windfall. Unleashing their army of lobbyists, they tucked a change into the law allowing them to jack-up the profits they make in a small, but lucrative market: medicines for poor people.
    About 6.5 million elderly or disabled poor people were getting their prescription drugs paid for by Medicaid. Drug companies were supplying these medicines under the "best price" rule, a sensible, taxpayer protection requiring pill makers to sell their products to Medicaid agencies at the lowest price offered to big insurance companies.
    Backed by the White House, however, drug company lobbyists persuaded our congress critters to "free" them from this best price rule – sticking you and me with the tab for the higher prices. How big is the tab? It's estimated that Glaxo, for example, will pocket an extra $298 million from us this year on just one of its drugs, and AstraZeneca will reap an extra $521 million from one of its medicines.
    We taxpayers are not even to be told the actual cost we'll pay under this "worst price" rule. While the drug corporations must report their prices to Medicare officials – the new law directs the officials to keep these prices secret from the media and the people.
    This is Jim Hightower saying... Next time you see a drug executive, tell him to give you a big ol' hug – because you're paying for his bloated corporate profits.
  • San Diego Union-Tribune: Schwarzenegger vetoes universal health care bill. By Steve Lawrence. Excerpts: Saying he opposes government-run health care, Gov. Arnold Schwarzenegger followed through Friday on his promise to veto a Democratic bill that would have set up a universal health care system covering all Californians. “Socialized medicine is not the solution to our state's health care problems,” the Republican governor said in an unusually long veto message in which also he touted his efforts to expand two other government health care programs, Medi-Cal and Healthy Families, which serve the poor. [...]
    He said he wanted to see a “new paradigm that addresses affordability, shared responsibility and the promotion of healthy living. Single payer, government-run health care does none of this.”
    But the bill's author, Sen. Sheila Kuehl, D-Santa Monica, said Schwarzenegger mischaracterized the bill's effects. She said it would do what the governor said he wanted while saving health care consumers and doctors money. “Where there are no cost controls at all now, and enormous administrative overhead and profit for insurance companies, there would have been a transparent system that actually would succeed in making health care affordable in California,” she said in a statement. Kuehl suggested Schwarzenegger's real agenda was to “leave health care in the hands of private insurance companies and let working families lose coverage one family at a time.” [...]
    Supporters said it would save money by significantly reducing administrative costs, pointing to the 2 percent spent on administration by Medicare, the federal health care program for senior citizens, as an example. A program like the one proposed by Kuehl would save nearly $8 billion in the first year, according to an analysis by the independent Lewin Group commissioned by the bill's supporters.
  • New York Times: Relief for Some but Maybe Not Many in Wal-Mart Plan for $4 Generic Drugs. By Michael Barbaro and Reed Abelson. At first glance, Wal-Mart’s plan to sharply cut the cost of generic drugs, to $4, seems like a signal event in American health care. It could make scores of treatments affordable to the uninsured, reduce the burden on Medicaid and bring competitive pricing to the pharmacy industry. Even company critics have praised the plan, conceding that it represents a case of the giant retailer using its size and ability to wring out costs to improve the lives of regular Americans.
    But a close examination of the program, with details confirmed by the company yesterday, suggests that its impact could be blunted by several factors.
    The plan, which is said to cover 300 drugs, includes only about 124 separate medicines in various dosages, like 12 versions of the popular antibiotic amoxicillin. It leaves out some popular drugs altogether, like the generic version of the cholesterol-lowering treatment Zocor. [...]
    Wal-Mart said it would not lose money on the low-cost generic drugs — and, in fact, several industry analysts predicted the company’s pharmacy business would benefit from the new plan. Unlike CVS or Walgreen, which rely on prescription sales for most of their revenues, Wal-Mart’s pharmacy business represents less than 10 percent of its total revenue and the company has identified it as an area that needs improvement. By luring customers of all incomes into the store at least once a month to fill generic drug prescriptions, Wal-Mart could increase overall pharmacy and store sales, these analysts said. [...]
    Health care analysts were quick to point out that Wal-Mart has carefully chosen which drugs it will cover — 300 out of roughly 11,000 generic drugs available. Moreover, it is not offering some expensive drugs, like any of the cholesterol-lowering statins, at the $4 price. And some of the drugs covered, like generic ibuprofen, cost very little and may be currently available for less than $4. “They are not losing money on all these products,” said Ms. Wilson, the health care consultant. [...]
    Still, critics say this plan does little to confront the high costs of health care for the uninsured, including Wal-Mart employees, since they still face the expense of going to a doctor to get a prescription, for example. While the plan is a good first step, “it is clearly as much a public relations effort as a substantive change,” said Ron Pollack, the executive director of Families USA, a Washington consumer group that has often criticized Wal-Mart’s health care offerings.

New on the Alliance@IBM Site:
  • IBM Pension Lawsuit FAQ about Cooper v IBM (Updated 8/8/06)
  • From the Job Cuts Status & Comments page
    • Comments 09/17/06: It's very sad to read how IBM is getting rid of employees. On the other hand IBM is hiring contractors from other countries (especially to the areas where jobs are been sent and will be sent in the near future). IBM is even processing their H-1B visas and green cards. -Anonymous-
    • Comments 09/18/06: I am so tired of IBM's corporate crap... one hand says here are redeployments(layoffs), the other hand wants to know what they can do to improve morale... I wasn't affected but I will not be an IBM employee much longer. I used to love working here now I can stand Mondays.... Take a stand and go work for a competitor those of you who are lucky enough RTP, AUS (pretty much anywhere but Rochester) -Anonymous-
    • I was outsourced to IBM back in mid-2003. Got dumped into band 6 after over 20 years, then was told I was too high in the band to get a raise. A bunch of us got our redeployment notices in Feb., 2005. I guess we were on the cutting-edge of HR euphemisms then. We got the same lines like I see today. "No time specified. There are no specific plans for layoffs. We'll help you find another position. Etc." Exactly 30 days later we got our 30 or 60 day layoff (uh, resource action) notices. Of course the only positions available internally require 100% travel or relocation without any moving assistance. I guess there’s a bit of a benefit to the employee to this process if you really want to stay with IBM since you’re not on the unhirable status until you get the real layoff notice.
      At least our outsourcing contract specified separation terms so I got the full 26 weeks pay. If you’re affected by this, don't forget to take advantage of any retraining money if that's still offered. I occasionally talk with the friends I made. Right now they have more project managers assigned to them than people doing productive work. -Outsourcee-
    • Comments 09/18/06: Offshoring is about to hit IBMC and ADI in Canada, according to the Employee Townhall Presentation we were invited to. We are told that most of our jobs will move to India and Brazil. The move will happen in 2 phases, the first in 4th quarter 2006 and the second in the first quarter of 2007. They did not talk about the wonderful skills of Indians and Brazilians. We were told that the layoffs will have nothing to do with performance, they are just trying to be competitive and save 20-30% on labour cost. There is no future for us. Globalization is destroying us. -still IBMer-
    • Comments 09/18/06: Outsourcee (09/18/06) is right. Our department has 4 productive employees, three project managers, two team leads, two administrative members (not admin's..think secretarial work), one team focal and a manager. For the last 6 months, all of our new hires have been in India. We are suffering not only due to the time difference but also from comprehension and communication when work is assigned to staff in India. Our managers push India, KL, and China every chance they get. We're hurting here in the states while we're ramping up staff in India.
      I'm hanging in there right now, searching and applying for new jobs. The motivation left a long time ago, which hurts when you still have determination to WANT to do a good and thorough job. But lately our favorite quote is from the movie Office Space: "My only real motivation is not to be hassled, that, and the fear of losing my job. But you know, Bob, that will only make someone work just hard enough not to get fired. -Anonymous-
    • Comments 09/19/06: Some people served with a Separation Agreement think they may return in the future to IBM as a contractor. How naive is that? There are other companies that will treat you better than IBM. You need to get off your butt and work for them. IBM uses a blacklist to prevent people from ever returning to IBM. So, if you are the most qualified person for the job per the head hunter, and you don't get back in IBM's door, even though you're the best. Guess what? You've been blacklisted! Don't waste your time on a loser company. Get a real job and live your life to the fullest. There is so much better than IBM. --Don't be Victimized--
    • Comments 09/20/06: Heard today from a reliable source that RTP Server div is cutting approx 150 jobs in 2 weeks time, maybe 750 US wide. Dust off your resumes. -Don't_get_fooled_again-
    • Comments 09/21/06: IBM Australia finance planning function is being shifted to Kuala Lumpur, Malaysia. Over 30 IBMers in Sydney will be losing their jobs in the Cumberland office. This will happen in January 2007. -Malaysian IBMer-
    • Comments 09/21/06: I was actually glad when I reached 30 years service. At 30 years and 10 days I was resourced. I had been planning for that day for 15 years. Got the house paid off and pumped up the savings. I have another job and between the pension and my salary I am even with where I was with IBM. I do not look over my shoulder anymore, and we don't talk about layoffs over lunch. You see, when they know they got you, they can do anything they want to. I have a friend with 35 years in, and he sits and waits and becomes more pathetic each year. If you can go, then go. There is a world out there. -Anonymous-
    • Comments 09/21/06: I'm hearing that the Santa Teresa Lab is going to be shut down in several months. Anyone else hear that ? -Anonymous-
    • Comments 09/22/06: If you're resourced, "why in the hell" would you train people in India, Malaysia, Brazil, China, etc. to take over your job. IBM made it clear, when they resourced you, they didn't need you. Don't do the training. -Anonymous-
    • Comments 09/22/06: Union or no union, American workers everywhere are losing their jobs, but the union workers are getting better packages when they lose their jobs. These job losses are at the expense of HYPER-RICH PIGS not cheap labor! -POK-
    • Comments 09/23/06: Many at RTP have heard that in the first quarter of next year many jobs will be moving to Brazil. A final phase of a 2 year redeployment of work from the US to a foreign country. Of course IBM does not want this information to get out at year end, but many managers have given this information up because it means it’s over for them also. They are on the block along with the troops. -Anonymous-
    • Comments 09/23/06: Maybe a partial good sign, or just first hand proof that the turnover in India is higher than they anticipated? We've had 4 people quit in India on our team within the last 2 weeks. They're leaving IBM for other companies. Management is panicking, thinking it's safer now to hire in KL. In the mean time, everyone else on the team has extra burden now for the work that isn't getting done. Maybe the folks in India are opening their eyes to how bad IBM is treating them, or maybe they're smarter than some of us U.S. workers that are still putting up with the crap. In the end, what is sickening is our second line manager just got a huge promotion for giving us a "presence" in India. So that's where the cost savings is going..not to help the company, but to pad his pockets. -Anonymous-
  • From the General Visitor's Comment page:
    • Comment 9/18/06: Who thinks Sam Palmisano needs to take a pay and bonus cut so that employees remain employed? Sam took home a 4 million dollar bonus last year. Yet, the company has layoffs on a regular basis. If employees need to be cut, then start with management. There are about 6-7 layers of management at this company. Talk about red tape! Fire management. It's TIME! -Anonymous-
    • Comment 9/18/06: Even though I always knew that going the extra mile is not rewarded, I just seemed to not get it. I gave up my work life balance by working 14 hours a day and weekends for 3 years even though I do not get paid overtime. Many times I worked right through vacation and holidays. I was told of rewards for my consistent extra contribution and accomplishments by my management that never came.
      As is common these days, rewards many times are given out based on favoritism versus contribution. I was brave and asked to discuss the situation with my management after many years of broken promises. I expected to at least be given an opportunity to present objective information. Silly me. My management already made up their mind I was wrong before they even talked to me and did not want to be confused by the facts.
      There are many disappointments, broken promises, but also good experiences. I implore you to hold on to the good experiences and do a good job for IBM while not giving up time with your family. Do not sacrifice the precious time you have with your love ones. I stopped all the self-imposed overtime and now spend this time with my family. It is my hope you do the same. Good luck in your journey back to a work life balance. -Anonymous-
    • Comment 9/19/06: After getting resourced and abused by IBM for years, things are becoming clear. I now understand my panic attacks, eye twitches, sweatingness, and shakyness that I experienced while at IBM. It was due to the abusive, corrupt, nasty, evil, self-serving managers I worked for. My first and second level managers loved to gang up and pick on me like bullies in a school yard. I wake up at night in a sweat with nightmares of IBM and pray to God that someday I will be able to put it all behind me. -Slowly recovering from IBM-
    • Comment 9/20/06: Big changes at the Boulder Plant. Most band level 6 and above except managers being knocked down. All the same tricks to get a person to separate themselves.
      Supplementals are the name of the game in Colorado. Management has their own little kingdoms where they rule and hand out the $$ to their friends, family members and lovers while the others do the work. If you see a person jogging in the morning with their I-POD and a grin, it's an IBM'er with connections who "works" from home.
      This company is cutting costs because it's too huge to react to changing business issues and too many are skimming off the top. At least there is a damn Wal-Mart on every corner. If you are still with this company, don't use EAP or HEP programs. I have heard it from the source, the info is going into your files and you can become a target in a second. Good night, Good Luck and Vote in November. -Anonymous-
    • Comment 9/21/06: Sam Palmisano = Marie Antoinette. Sam makes $75,000/WEEK. The peasants are restless. Anyone got a guillotine for Sammy and his court? -Anonymous-
    • Comment 9/21/06: I never did like Sammy from day one. I remember when he took the helm from Lou. I knew it was a bad choice. I remember watching Sammy on the video monitor in the hall around the time of the 9/11 attacks. He seemed like an arrogant ass. Sammy is a two faced arrogant slime ball. Until his ass is fired this company is going nowhere. I feel like the fellow on Office Space getting dinged for TPS report covers. I'm doing the bare minimum until Sammy's arrogant ass is fired. -Anonymous-
    • Comment 9/21/06: The reason that IBM dirty laundry and layoffs don't make the media is that IBM buys a significant amount of advertising. The media isn't going to bite the hand that feeds it. -Anonymous-
    • Comment 9/22/06: I'm a former IBMer that was let go a little over a year ago. I have since found a good job with a much smaller company. It's a good situation and I like it a lot, but there's still the same management B.S. The only way tech workers are going to be able to protect our jobs and our interests is to unionize. I know unionization has its downfalls, but if you're not in your manager's circle of favorites, your chances for opportunity are slim. You are going to get the leftovers. -Anonymous-
    • Comment 9/23/06: IBM doesn't care about people. When you work at IBM you work with people who work against you rather than with you. The company has changed tremendously and for the worst since Thomas Watson's time. This used to be a company of values, respect for the individual. Sam Palmisano has removed that core value from the set of IBM values.
      The number one value at IBM is money. Though this is not written in words; it is spoken in actions.
      Thomas Watson focused on creating IBMers and from that came the company--a company of value. Today, IBM is focused on money, not people of value. As Thomas Watson himself said---all the other companies hold money as a the number one value. Companies with THAT as a core value do not succeed. IBM will fail. Don't be part of the mass exodus from the company; Get out before you become associated with the mass exodus. -IBM's VALUES ARE NOT VALUABLE-
    • Comment 9/23/06: Don't you get the feeling while working at IBM that no one gives a damn about you? Do you really want to work someplace where your manager has a bad attitude and your coworkers are down right nasty. Your coworkers are such bitches and bastards because they are so consumed with looking out for their own jobs (with all the layoffs, outsourcing, etc) that there is no sense of a team. Your team mates are all too willing to speak poorly of you to make themselves or their buddies look good. So they can keep their jobs.
      The idea of a team at IBM is a joke. It's more like everyman for himself. Those that think they have an edge in with the boss are all too willing to bad mouth ya. Is HP hiring? What can be done to lure better companies into this one company town? Let's give IBM some competition in this community. -My Coworkers Think Cause They Work For IBM They Are Better Than Anyone Else-
  • Pension Comments page
  • IBM employees on employee raises
    • Comment 9/23/06: You know, if you are currently being paid way under the midpoint for your job classification and band and have had "2" or "2+" PBCs (and a lot of us are..or will be soon with no raises or even pay cuts through the evil practice of "rebanding"), IBM still seems universally bent to try to frustrate you into leaving..rather than trying to leave you alone so you might or will stay: save them money so they can continue to work you as a modern day indentured servant. They will probably not be offering you a package even if you want to or in the process of leaving.
      If they aren't paying you what you are truly worth now they NEVER WILL!!! Yeah, IBM must take "satisfaction" in stringing you along as a cheap, underpaid, unappreciated worker bee or work widget. How cheap and evil is this company????????!. RESPECT FOR THE INDIVIDUAL? Remember that, IBM? I guess this company has gotten an incurable case of selective amnesia now! -Anonymous-

Vault Message Board Posts
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some sample posts follow:
  • "Well, obviously" by "wonderaboutibm". Full excerpt: We all know that the IBM insiders are heavy net sellers. But you gotta give them credit -- they certainly know how to sow the seeds of confusion. Some questions that should be answered:
    1. What is the net overhang of unissued shares (options, restricted sales, outright gifts, etc.) to the executive management?
    2. What is the comprehensive list of stock award programs available to IBM executives and what are the general terms and conditions of these programs?
    3. How do stock-issue obligations of executive compensation schemes compare in volume to the stock-buyback provisions that sop up excess stock on the market?
    All of the above are reasonable and logical questions that are very difficult to answer precisely. I have tried researching these questions, but publicly available information from, say SEC Form 10-K filings, is spotty and poorly organized. Perhaps new SEC disclosure regulations will clarify the issue, but I am pretty sure that will strike many as a naive statement. The obvious conclusion from examining IBM 10-Ks is that the IBM mgmt is hiding a lot of worthwhile detail. I wonder why.
    Back in February/March we posted a thread about sales from the restricted stock program. It appears that virtually all IBM insiders are selling off as much of their stock as quickly as possible -- every last one of them sold about 40% of the stock that was issued to them that very day. If your statement about very low net purchases by the insiders is correct -- then I guess we all have to admit that anybody buying IBM stock right now is delusional.
    By the way, the stock is now in the low eighties. I am amazed, but then brownian motion zigs up as well as down. The secular trend is still down, with the next big bump down in mid-October after IBM posts less-than-stellar 3Q results.

Nostalgia Corner
  • 8-Track Heaven
  • The Bell System Memorial. Excerpt: This non-commercial website was originally founded and created by David Massey to help keep the memories of the Bell System alive and to pay tribute to those that made it the greatest telecommunications system on earth. This website also provides some technical and corporate historical information relating to Bell Labs, Western Electric, American Telephone and Telegraph (AT&T), and the Regional Bell Operating Companies. There is also some limited technical information on Western Electric telephones for telephone collectors, hobbyists, students, and others for non-commercial use. I am not associated with any of the former Bell System companies (see disclaimer on the home page.)

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