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Highlights—November 1, 2008

  • OpEd News: Judge Changes Pension Plans of Older Retirees So They Get Less. By Sherwood Ross . Full excerpt: Conservative judges seem not to object when companies “dishonestly screw millions of older workers” out of pension monies, a prominent legal reformer says. The conservative Judge Frank Easterbrook of the Seventh Circuit did just that in the IBM pension case by “changing the nature of (employees’) pension plans” from “traditional types” to “cash balance” plans, writes Lawrence Velvel, dean of the Massachusetts School of Law at Andover in his latest book, “An Enemy of the People (Doukathsan Press).”

    “The switch in plans approved by Easterbrook can cost older workers, who may have been at a company for decades, 20 to 50 percent of the pension they expected to receive and had sometimes worked for decades to get,” Velvel writes. Even the conservative Wall Street Journal confirmed older workers “can end up with pensions that are 20% to 50% lower.”

    Velvel said Easterbrook’s opinion “allows huge companies all over the country---hundreds of them---and smaller ones too, to dishonestly screw millions of older workers out of major portions of the pensions they expected to have when they retired.”

    “It is not enough, you see, that people who worked for a company for 20 or 30 years suddenly found themselves out of a job,” Velvel commented. “Nor is it enough that companies’ pension plans for workers weren’t funded, or were funded with company stock that declined terribly in value, so that, while top executives escaped with tens of millions in golden parachutes or funded pensions, or stock options worth millions for bringing companies out of bankruptcy, ordinary workers found themselves with little or nothing by way of pensions when companies fell on hard times or went bust.”

    Basically, Velvel says, Easterbrook wrote a complex opinion “purporting to prove that the change from a traditional to a form of cash balance plan did not constitute age discrimination against older workers,” but instead “is age-neutral” even through older workers were getting screwed in ways that would never occur to younger workers who are far closer to their starting dates than their ending dates.”

    “To ostensibly prove age-neutrality,” Velvel goes on to say, Easterbrok “sought to display intellectual pyrotechnics through complicated, often mathematical, discussions of the time value of money, imputed credits, interest rates, defined-benefit plans versus defined-contribution plans, benefit accruals, and other true arcana.”

    Easterbrook dismissed the arguments against his switch made by the older workers, stating, “(all) of these propositions (may be) correct, and (all) of them are irrelevant.”

    Velvel writes, The only relevant points are two that Easterbrook (and two concurring judges) chose to ignore, chose not even to mention or discuss: (1), the change in pension plans by IBM and hundreds of other companies was grossly unfair to older workers, who had no option to stay with the old plan and consequently lost a major share of pensions they had worked for for years” and (2), it was sheer dishonesty to promise people certain pension benefits, to use the promise to obtain their work for decades, and to then welsh on the promise and cheat people.”

    Velvel also raises the issue of whether it is not age discrimination to allow younger workers to retain their benefits while stripping older workers of those benefits. The law school dean recalled in his essay, “The Seventh Circuit’s Abominable Decision In The IBM Pension Plan Case,” that former Chief Justice Earl Warren frequently asked the question of his decisions, “Is it fair?”

    By contrast, he writes, “You don’t think Easterbrook asked whether it was fair, do you? One would never expect a life tenured, amply pensioned, deeply-conservative, elitist federal judge to ask that question, would one?”

    “You don’t think he even asked if it was honest for companies to promise workers a given level of pension, for which the workers then worked for years, for decades, and to then withdraw the promise when the workers got older and could not start over again, do you? Of course not.”

    Dean Velvel is a cofounder of the Massachusetts School of Law at Andover, a law school that provides a quality, affordable education for minorities, students from low- and middle-income backgrounds, and immigrants. He has been honored for his work by The National Law Journal and described by The National Jurist as a leading reformer in the field of legal education.

  • Austin American-Statesman: Perry put brakes on data center deal with IBM. Governor calls for service review after data losses, server crashes. By Kate Alexander. Excerpts: Citing recent data losses and service problems, Gov. Rick Perry on Tuesday ordered a halt to IBM Corp.'s massive data center consolidation involving dozens of state agencies while officials review the problems. Perry's move does not change the status of IBM's seven-year $863 million contract, which began in March 2007. But the governor's intervention shines the spotlight on the agencies' concerns about IBM's service and the response by the Department of Information Resources , which is overseeing the contract.

    "The problems that have been painfully documented over recent months, including state agency concerns about unreliable e-mail systems, administrative cost increases and other breakdowns, have resulted in a loss of confidence in DIR's ability to provide Texas agencies with a proper level of service for technology services," Perry wrote in a letter to the agency. ...

    The long-simmering issue of IBM's work boiled over this summer after the attorney general's office lost a significant amount of data in a server crash at its Medicaid fraud division in Tyler. IBM had failed to back up the data, as required by the contract. Eight months of data files from the office's fraud investigations were initially lost because the office had stopped using its previous file back-up software in November, though 90 percent of the data has since been recovered, documents from the Department of Information Resources show.

  • Dallas Morning-News: Gov. Perry halts transfer of Texas records to IBM data management program. By Emily Ramshaw and Robert T. Garrett. Excerpts: Gov. Rick Perry suspended the transfer of state records to an IBM data management program on Tuesday, saying serious glitches in Texas’ privatized computer system had put state agencies in danger. Mr. Perry said no more state data should fall under IBM’s control until his office can complete an assessment of the system. IBM has failed to perform “the crucial backup of data for more than 20 state agencies,“ Mr. Perry wrote in a letter to Brian Rawson, who oversees the IBM contract for the state’s Department of Information Resources. “The agency has failed to implement a system of checks and balances that ensures data security, jeopardizing the ability of state agencies to deliver services to their constituencies.” ...

    Last week, The News reported that a July server malfunction in the attorney general’s Tyler Medicaid fraud unit destroyed nearly half of eight months’ worth of documents – compromising scores of prosecutions. In the months before that crash, more than 10 agencies complained about network breakdowns and server backup problems with IBM, The News reported on Tuesday – an indication that the attorney general’s documents weren’t the only ones at risk. ...

    Texas lawmakers ordered the outsourcing of Texas’ information technology in 2005, and one by one, state agencies have been switching over to the IBM system. Mr. Tieszen said he doesn't know how many agencies will be affected by Mr. Perry's order. Currently, 27 state agencies are in varying stages of this transition, and many – including the Texas Department of Transportation and the Health and Human Services Commission – have expressed serious misgivings. “We’re getting complaints and anecdotes in all the time about problems that have cropped up with this system,” said Mike Gross, the coordinator of the Texas State Employees Union. “They thought they would economize [by privatizing]. Instead, they took a one size fits all approach.”

  • Dallas Morning-News reader comments on Gov. Perry halts transfer of Texas records to IBM data management program. A few sample comments follow:
    • I have been involved with IBM Global Services at three different companies, two were fortune 50. Every experience was wholly negative and other than a few friendships with some good people who work for IBM I cannot think of a single positive think to say about IBM's services. Each of these companies have or are currently trying to end their relationship with IBM IMO they do have good hardware and software solutions. And it is true as someone here has said, IBM does have I.T. best practices and procedures very well documented. But that's it, they talk a good game but they're too top heavy and cumbersome to practice what they preach. just my .02
    • I've seen three companies outsource their IT. These were no where near as large as this but…They were team oriented IT departments with around 30 employees each. They were very successful and the budget was tight. They had time to proactively check PC's, networks and servers. Then the big outsourcing bureaucracy came and the left hand didn’t know what the right was doing. Customer service went down with a lot of “that’s not my job”. The big bureaucracy kept pouring more bodies in and more bodies until there were three times as many employees but not keeping up with the original duties. All the people that were being supported were disgusted and just gave up. They’ve been told that this is the way it’s going to be because of cost saving measures. Well, the cost is double what it used to be and upper management all got big fat raises and bonuses for making ridiculous decisions. It's been 6 years and one company is trying to bring IT back. It's going to cost a bundle and I don't think they'll ever pull it off.
    • I, too, am a 'customer' of IBM and the DataCenter, and a member of the IT staff. I can tell you, in no uncertain terms, that the so-called support we have received from IBM from the beginning has been nothing short of a nightmare. Having to take the support back over would also be a nightmare - having to fix everything they haven't over the last year and a half or so. But in the long run, we'd be better off. And tell me this... when they figure the amount of money we will "save" due to the outsourcing, do they consider the amount of time, energy and effort that is put in by State staff who have to 1. redo what is messed up by IBM, 2. do what IBM won't / can't do, or all the work that has to be redone because poor workmanship on IBM's part lost information that had already taken weeks, months or years to collect? And for those of you who are asking who will hold the agencies accountable - EXCUSE ME. It wasn't the agencies who decided this was a good idea. The people you need to hold accountable will soon be sitting in a big granite building up on a hill in Austin. Talk to them, and IBM.
  • Reuters: IBM sues to block executive from moving to Apple. Excerpt: IBM said Mark Papermaster, who was vice president of the company's Blade Development unit until last week, signed a noncompete agreement with IBM that would prevent him from accepting a job with a competitor until one year after leaving the company. In the suit filed at the United States District Court in Manhattan, IBM said Papermaster was one of its top 300 managers and had access to a wide range of the company's intellectual property and trade secrets.
  • UNI Global Union: First-ever strike at IBM Turkey. Excerpts: Last Friday, the first-ever strike in Seventy years of existence took place at IBM Turkey. More than 200 participants, half of which were from IBM and the other half from other IT companies, joined the action in front of IBM building. The main message delivered to the press by the strikers was directed to IBM’s CEO Sam Palmisano who will host the Business Leadership Forum in Istanbul next November. A protest letter will be sent to the 400 participants of this Forum, which is a gathering of business and institutional leaders to discuss the changes in the global economy. In short the message is “Fix the problem or don’t come to Istanbul”.
  • ZD-Net Australia: IBM and Flightdeck workers reconcile. Excerpts: An organiser for the Australian Services Union (ASU), which had been handling the negotiations with IBM, said that recently the talks had been concerned with the text of new letters of offer for the employees involved and had now reached a conclusion. The letters are soon to be sent out to employees to check and sign, the organiser continued.

    Just under 50 employees at the IBM Flightdeck in Baulkham Hills had voted to take industrial action in the form of four-hour rolling stoppages after IBM declined to negotiate an agreement with employees.

  • Forbes: Rich Cheat More On Taxes, New Study Shows. By Janet Novack. Excerpts: A new study based on unpublished Internal Revenue Service data shows the rich are different when it comes to paying taxes: They hide more of their income. The previously unreported study estimates that taxpayers whose true income was between $500,000 and $1 million a year understated their adjusted gross incomes by 21% overall in 2001, compared to an 8% underreporting rate for those earning $50,000 to $100,000 and even lower rates for those earning less. (The "net misreporting rate" as the IRS calls it, includes both underreported income and inflated deductions.) ...

    The main reason for the income-related cheating disparity: Higher income folks receive more of their income from sources that are easier to hide, including self-employment earnings; income from rents, partnerships and S corporations; and capital gains.

  • Yahoo! IBM Pension and Retirement Issues: "Opting Out of Retirement Medical Plan" by "jd_bldr". Full excerpt: I retired from IBM 2 years ago but am still working as a contractor. With the 2009 medical benefits package I recently received and its cost increases, there are now more cost-effective options through my sub-contracting company. But I have a couple of questions before I leap.
    1. If I opt out of the IBM retiree medical plan this year, will I still be able to get back in for future years? Any issues with pre-existing conditions?
    2. The IBM plan has the selection period in Oct/Nov and the coverage goes from January to December. My subcontracting company's plan has the selection in March and coverage runs from May to the following April. What are my options for covering this gap -- both now and whenever I decide to fully retire and won't have the subcontractor coverage any more?
  • "Re: Opting Out of Retirement Medical Plan" by "madinpok". Full excerpt: 1. According to the current rules, if you opt our of the IBM medical plan for 2009, you will be allowed to re-join in the future, provided that you can prove you were covered by a qualified medical plan with no gaps in coverage in the interim, even if you have pre-existing conditions.

    2. If you take a job with a new employer now, that should qualify as a life event status change that would allow you to drop IBM coverage and enroll in the new employer's plan immediately. When you are no longer employed with that employer, that is another life event which would allow you back into the IBM plan, even if it is mid-year.

  • Yahoo! IBM Retiree Information Exchange: "Re: 2009 benefits" by "jsb2b2". Full excerpt: IBM EPO - MVP $193/$888; IBM High Deductible with HSA - MVP $146/$$672; IBM High Deductible PPO - MVP $0/$299; IBM Medium Deductible PPO - MVP $170/$782; IBM Low Deductible PPO - MVP $267/$1,041; Aetna Open Choice PPO $177/$810 (Offered thru Retiree Health Access),

    This is another 28 percent increase. Here is a brief history in case you may have forgotten. 2004 IBM EPO - MVP = $48(Self)+$101(Spouse) per month as an employee. Took early retirement at 55. Retired: Self/Spouse 2005 IBM EPO - MVP = $ 93/$326 per month; 2006 IBM EPO - MVP = $100/$400 per month 18 percent increase; 2007 IBM EPO - MVP = $117/$503 per month 20 percent increase; 2008 IBM EPO - MVP = $150/$690 per month 27 percent increase; 2009 IBM EPO - MVP = $193/$888 per month 28 percent increase.

    Why does the Spouse cost 4 times the Retiree?

    Why does it appear that IBM does not negotiate rates fairly with the insurance companies? For example: If IBM contributes $7500 "Health Dollars" and I pay $10,656 for my spouse and I, why does it cost $18,156 with 20 percent co-pays when the average "Family" plan is less than $14,000?

    If the average Healthcare Plan increase is 12 percent, why are IBM increases 28 percent?

    How much could it cost IBM for non-Medicare eligible Retiree medical since IBM no longer covers Retiree spouses unless they were "grandfathered" into the Retiree medical?

    I know of no IBM retiree that is Medicare eligible that uses any IBM plan due to cost.

    Therefore, it appears IBM is purposely pricing these plans so only the most desperate Retiree will take the IBM plan and IBM will save the $7500 "Health Dollars" promised to all IBMers. IBM is quick to tell anyone who asks how they spend billions on Employee/Retiree Healthcare. This is absolutely misleading and disgusting.

    My wife's Family Plan with Excellus BCBS at a small local hospital went up 16 percent to $191 per month with $15 office co-pays and $5/$10/$15 medication co-pays and this hospital is no where near a $92 billion company reporting record profits each quarter. Hospitals routinely lose money so if my wife contributes $2292 for her "Family Plan" does anyone think that the hospital kicks in another $15,864??

    Since I know of no Federal, State, County or Local government active employee/retiree nor any teacher that pays such ridiculous rates, I am writing my elected officials to take a look at any tax incentives or any other Federal or State government handouts IBM may receive under the guise of Healthcare provision. I urge all to do the same and maybe next year your premiums for the non-Medicare eligible Retirees won't break $1,000 per month which will then account for almost one half of your never increasing pension.

  • Yahoo! IBM Retiree Information Exchange: "Re: 2009 benefits" by "madinpok". Full excerpt: I've provided some comments to your questions inline below.

    Why does the Spouse cost 4 times the Retiree?

    You are seeing the effect of the IBM subsidy of $7500/$7000. For you alone, the premium would be $2316 per year ($193 x 12). Add in the $7500 subsidy and the total cost for insuring just you is $9816. When you add coverage for your spouse, there is no additional subsidy, so you pay all the additional cost. And that is $8340. The net effect is that from your point of view, it looks like it costs 4x to insure your spouse.

    Why does it appear that IBM does not negotiate rates fairly with the insurance companies? For example: If IBM contributes $7500 "Health Dollars" and I pay $10,656 for my spouse and I, why does it cost $18,156 with 20 percent co-pays when the average "Family" plan is less than $14,000?

    In most cases, IBM does not negotiate with insurance companies. IBM is self insured and uses companies like MVP or UHC to administer the plans. The reason it costs $18,156 to insure you vs $14,000 for an average family plan is that retirees are placed in a different group all by themselves. Unfortunately, that group consists of old people that have many more medical expenses than younger folks. So the insurance costs more. We can debate whether it is fair to group people this way, but unfortunately, that's the way it works these days.

    If the average Healthcare Plan increase is 12 percent, why are IBM increases 28 percent.

    Part of the reason for this is caused by the IBM subsidy. When the total cost of the plan goes up 12 percent, you have to pay all of it. Since your premium is about 60% of the total insurance cost, it looks like a 20% increase to you, based on your premiums. The rest of the difference probably comes from the fact that the retiree group has higher medical expenses and thus their costs are going to increase more than the national average, which includes all those healthy, young people.

    How much could it cost IBM for non-Medicare eligible Retiree medical since IBM no longer covers Retiree spouses unless they were "grandfathered" into the Retiree medical? I know of no IBM retiree that is Medicare eligible that uses any IBM plan due to cost.

    There are quite a few people here in this Yahoo group who say the do sign up for the IBM medical plan even though they are on Medicare. They view it as primarily a prescription plan and/or as catastrophic medical coverage.

    Therefore, it appears IBM is purposely pricing these plans so only the most desperate Retiree will take the IBM plan and IBM will save the $7500 "Health Dollars" promised to all IBMers. IBM is quick to tell anyone who asks how they spend billions on Employee/Retiree Healthcare. This is absolutely misleading and disgusting.

    You are right. It is to IBM's advantage if you decline to sign up for medical coverage.

    My wife's Family Plan with Excellus BCBS at a small local hospital went up 16 percent to $191 per month with $15 office co-pays and $5/$10/$15 medication co-pays and this hospital is no where near a $92 billion company reporting record profits each quarter. Hospitals routinely lose money so if my wife contributes $2292 for her "Family Plan" does anyone think that the hospital kicks in another $15,864?

    Your wife's employer probably doesn't contribute $15,864 towards the cost since their employee group probably has many of those healthy, young people in it, and no retirees, and therefore their costs are lower. As an IBM employee, when you go from active employee status to retiree status, the total cost of your health insurance coverage goes up by over 60%. Last year, the COBRA cost of the IBM Low Deductible PPO was about $10,000. But the Low Deductible PPO plan for FHA retirees (who pay the full cost and get no subsidy) was $16,152. A 60% increase because you moved from the active group of employees to the retiree group!

    Since I know of no Federal, State, County or Local government active employee/retiree nor any teacher that pays such ridiculous rates, I am writing my elected officials to take a look at any tax incentives or any other Federal or State government handouts IBM may receive under the guise of Healthcare provision. I urge all to do the same and maybe next year your premiums for the non-Medicare eligible Retirees won't break $1,000 per month which will then account for almost one half of your never increasing pension.

    Government employees usually have some of the best medical benefits. That is because as taxpayers, you and I are paying for it for them.

  • eWeek: Abusing the H-1B System to Fix the Washing Machine. By Kevin Fogarty. The Department of Homeland Security suspects error or flat-out fraud in as many as 20 percent of H-1B visa applications filed by U.S. employers seeking foreign workers. An audit of H-1B visa applications by the Department of Homeland Security's USCIS (U.S. Bureau of Citizenship and Immigration Services) division found H-1B visa applications filed by U.S. employers used fake educational degrees, forged letters or signatures on supporting documents such as those attesting to the qualifications or experience of the applicant, and fictitious work histories and references.

    Some H-1B visa applications even faked the job for which the applicant was supposed to be applying and one went so far as to file an application for a "business development analyst" that the employer actually intended to employ fixing washing machines in a Laundromat. ...

    The high rate of abuse is a threat not just to the foreign workers brought to the United States under false pretenses, but to U.S. technology workers, who must compete with illegally depressed wages kept low by employers who abuse the system, said Gordon Day, president-elect of the U.S. branch of IEEE (Institute for Electrical and Electronics Engineers).

  • Yahoo! IBM Pension and Retirement Issues message board: "Re: 2009 Social Security COLA is 5.8%" by "ranheimchas". Full excerpt: It looks like the SS increase will just about cover the increase in my IBM medical insurance premium payments. I would like to take one of the less expensive medical plans that have limits on prescription drugs, but after having cancer, I know full well what would happen it it ever came back and I had a cap on prescription drugs. If only IBM would take us out of the high risk pool and put us in with the entire IBM workers medical plans, as it used to be, many of us might be able to make ends meet with the savings on our medical payments. It would not cost IBM anything to make this change. It would greatly lower the cost for the retirees, while adding a little more of the cost to the larger working force who can better afford it.
  • Yahoo! IBM Pension and Retirement Issues message board: "Re: 2009 Social Security COLA is 5.8%" by Jim Askew. Full excerpt: Actually, adding retirees to the employee pool would cost IBM because in recent years, IBM has followed the practice of paying for the full cost of *employee* health insurance. Note that this practice does not extend to spouse or child coverage, which have had large premium increases that employees must pay. (IBM would really prefer its employees to not have spouses or children...they tend to get in the way of working exorbitant amounts of free overtime.)

    So, if retirees were included in the employee pool, that would drive up the cost (to IBM) of its "paid in full" employee contributions. As you know, since IBM's contribution for 1st choicer retirees is fixed, all increases in premiums from year to year are imposed on retirees themselves, resulting in no increased cost to IBM as medical costs increase. It's all about risk shifting, which is what our country's health insurance industry spends inordinate amounts of our health care budget on.

  • Wall Street Journal: Obama vs. McCain: It's About Your Money.
  • Hartford Courant: Offices Cut Perks, But Some May Go Too Far. By William Weir. So, you're cutting back at home, waiting a little longer in the year to turn on the heat. Maybe you and the family are eating out a lot less. But what about your second home, the workplace? The things we once took for granted — year-end office parties, an always-filled water cooler — could be on their way out, too. As the economy slumps and businesses are on the lookout for ways to pare costs, what will become of the little things that make work a little easier? Changes don't have to be that dramatic to make a difference. Perhaps coffee still brews in the office, but it's been changed from the good stuff to a generic brand. ...

    "I don't think businesses are going to cut coffee," says Judit Price, a career coach in Massachusetts. "That's not such a big cost, and it's keeping them in the building and giving them focus and energy. It's more cost-effective than not serving coffee." ...

    "What it comes down to is companies that are worried about their margins are now scrutinizing their expenses," he says. Bean counters have to decide whether the damage to morale that would result from cutting certain perks is worth the expenses saved. "That's the equation they're asking themselves." And just as companies get a lot more out of offering coffee, they reap similar benefits with year-end parties, Challenger says. "People really feel they're essential. It brings the community together, even if only to grieve over the crisis the company is facing."

  • Forbes: Dangerous Downsizings. By Ed Sperling. Excerpts: Even in Silicon Valley, where the business climate is relatively robust, the number of layoffs continues to increase. This is in no small measure due to the compensation structures of the CEO and chief financial officer who are rewarded, often lavishly, for cutting operating expenses and improving revenue per employee. Unless they started at the company and grew with it, they often view it as a temporary stay during which they execute sound business principles.

    There are two things wrong with this picture. First, sooner or later you burn out your employees and destroy the company's innovation and drive with this model, no matter how often you turn over your staff. And second, the burden for keeping the corporate machinery running leaner and more efficiently falls increasingly on the IT department in general and the chief information officer in particular. Moreover, the CIO is seeing cutbacks within his or her own department and is unable to keep up with the push for efficiency.

    To attribute this trend to the downturn is convenient but wrong. This process of getting leaner and meaner was accelerating even before the mortgage meltdown became apparent. Companies are so lean right now that most employees don't have the energy left to be mean.

  • Detroit News: Lease perks anger workers. Despite cutbacks, automakers continue to offer subsidized vehicles for many of their managers. By Bryce G. Hoffman. Excerpt: As Detroit's Big Three shutter factories, slash jobs and trim benefits, one executive perk remains: subsidized cars and trucks for management, often with insurance, maintenance and gasoline included. Bonuses have been frozen, health care co-pays increased and retirement plan contributions curtailed, but until recently, these management lease programs have remained largely untouched.
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
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  • New York Times: Scrimping on Medical Care. The economic crisis is exposing further weaknesses in this country’s health care system. With family finances strained, many Americans are skimping on medications, physician visits and preventive screening in order to pay other household bills. This could be dangerous to their health and costly for the economy if more Americans lose work time or end up in the hospital.

    The latest tracking poll from the Kaiser Family Foundation found that one in three Americans say their family has had problems paying medical bills in the past year, and nearly half say someone in their family has skipped pills or postponed medical care because of the cost. Other surveys by insurance groups and health care organizations have had similar findings.

  • Taking Note: Assigning Blame For Rising Medical Costs. By Maggie Mahar. Excerpts: The conventional wisdom about skyrocketing healthcare costs tends to blame someone: patients who demand too much care; doctors who practice defensive medicine because they fear being sued; aging boomers, and finally, everyone’s favorite, “the insurance companies.”

    In fact, none of the above is the driving force behind the nation’s spiraling health care bill, according to a brand new report from the Center for Studying Health System Change (HSC) titled “High and Rising Health Care Costs: Demystifying Health Care Spending.” (Many thanks to Robert Laszewski at Healthcare Policy and Marketplace Review for calling my attention to this report).

  • Associated Press, courtesy of Yahoo! News: McCain health plan calls for shopping around. By Kevin Freking. Excerpts: John McCain's health plan would bring about a dramatic shift in how millions of people get health insurance coverage. He would let people shop around for plans offered by insurers in other states. New Yorkers could look to Alabama, for example, or any other state when shopping for coverage. "Why not? Don't we go across state lines when we purchase other things in America?" McCain asks. The idea sounds simple, but has huge implications.

    Consider this: Cervical cancer screenings, contraceptives and diabetic supplies are just some of the benefits that health insurers in New York must cover when serving customers there. New York also requires insurers to accept people regardless of pre-existing health conditions and without charging them higher premiums. The state has some of the best consumer protections around, but those protections come at a price. Few insurers offer coverage in New York's individual health insurance market. The ones that do have pricey monthly premiums.

    Now shift to Alabama, identified as having among the fewest consumer protections of any state. Dozens upon dozens of plans offer coverage at a much lower cost. The trade-off: Insurers can reject applicants with previous illnesses and there's no mandatory coverage of cervical cancer screenings, treatment of eating disorders, or many of the other insurance benefits that New Yorkers get.

    Health care experts say McCain's plan would make it easier for younger and healthier people to shop around for affordable health insurance coverage. That's a huge group: Nearly half the nation's uninsured adults are ages 19-34. But people with health troubles could have more trouble obtaining coverage. Because of their pre-existing health conditions, they would not have the luxury of buying coverage in the least-regulated states. They would be stuck with plans in the most-regulated states, where premiums would increase if younger, healthier people went elsewhere for coverage.

    "In the long run, what you'll end up with are fairly bare-bone policies sold to the healthy," said Len Nichols, a health economist at the New America Foundation, which is pushing for universal medical coverage.

  • Los Angeles Times: Health insurers reinvent themselves as money managers. Many rush to open banks as more Americans open health savings accounts, a tax-sheltered way to pay medical bills. Managing that money is more profitable than offering health insurance. By Michael A. Hiltzik. Excerpts: That a medical insurer would agree to keep a lid on healthcare expenditures so it could get approval to open a bank illustrates a fundamental change in the industry: Insurers are moving away from their traditional role of pooling health risks and are reinventing themselves as money managers -- providers of financial vehicles through which consumers pay for their own healthcare.

    Like home and auto insurance, traditional health coverage is based on shared risks within broad populations of customers: a small proportion with big medical expenses and a large majority with few or none. Premiums paid by the latter help pay the costs incurred by the others and provide a margin of profit. In theory, this system serves everyone's interests, because people generally can't know in advance which group they'll fall into.

    For several decades, health insurance has been retreating from this paradigm.

    A sea change occurred in the 1970s, when large employers began self-insuring medical costs, in part because a new federal law exempted self-insured plans from state regulation.

    Insurance companies began remaking themselves as administrators, providing employers with expert help in processing claims and negotiating rates with doctor groups and hospitals. Profit margins on these services are high because the companies can charge fees without assuming the cost of underwriting customers' medical needs. ...

    Among the signs of the change is the growth in health savings accounts, which allow individuals and families to pay out-of-pocket medical expenses from tax-exempt savings. As with individual retirement accounts and 401(k) plans, the money in HSAs tends to sit for long periods and can be invested in mutual funds and securities. ...

    Federal tax rules for HSAs were liberalized in 2003, making them very attractive to well-heeled taxpayers. Commercial banks such as Bank of America and Mellon Bank, seeing the opportunity to collect management fees on the accounts, jumped into the business. "Every bank wants to increase its share of HSAs," said John Casillas, director of the Medical Banking Project, a Franklin, Tenn., organization that helps medical administrators develop financial service systems. "There's fees for managing the account, transaction fees, fees for investing the funds," Casillas said. "You're going to see many billions of dollars moving from premium payments to professionally managed investment funds under HSA rules. Some people think that banks are going to threaten health plans by replacing them in the marketplace."

  • New York Times: The Candidates’ Health Plans.
  • Baltimore Sun: For a little more, the doctor will see you now . 'Boutique' plans enrich care for some but exclude many. By Tyeesha Dixon and Kelly Brewington. Excerpts: Diana Moore learned the news through the neighborhood grapevine. Her family's primary-care physician of seven years would no longer accept Moore, her husband and daughter as patients - unless the family paid a $4,500 annual fee. The physicians at Charter Internal Medicine in Columbia are overhauling the practice, ditching the insurance-dependent model and instead charging a flat yearly fee in exchange for the promise of 24-hour access to doctors, unhurried appointments, home visits and state-of-the-art annual physicals.

    Known as "boutique" medicine or "concierge" care, the national trend appears to be sweeping across Maryland as primary-care doctors feel the financial crush of rising costs and low insurance reimbursement rates. Physicians say the model allows them to trim their patient loads and give patients quality care without worrying whether insurance will cover it.

  • Washington Post: How They Would Change Health Care: Obama. Obama's Approach Emulates Massachusetts's Except for Mandate on Covering All Adults. By Amy Goldstein.
  • Washington Post: How They Would Change Health Care: McCain. McCain's Proposal for High-Risk Coverage Is Similar to a Program in Minnesota. By Amy Goldstein.
  • New York Times: Women Buying Health Policies Pay a Penalty. By Robert Pear. Striking new evidence has emerged of a widespread gap in the cost of health insurance, as women pay much more than men of the same age for individual insurance policies providing identical coverage, according to new data from insurance companies and online brokers. Some insurance executives expressed surprise at the size and prevalence of the disparities, which can make a woman’s insurance cost hundreds of dollars a year more than a man’s. Women’s advocacy groups have raised concerns about the differences, and members of Congress have begun to question the justification for them.
  • New York Times: Insurers Entice Doctors to Prescribe Generic Drugs. Excerpts: All the doctors had to do was show up, enjoy a free dinner at an elegant Rochester, N.Y., area restaurant specializing in steaks, chops and top-shelf wines, and pocket $100 on the way out the door. Health insurance companies had invited the physicians to hear a pitch about the benefits of prescribing generic drugs instead of their pricier, name-brand competitors. ...

    But insurance companies are allowed to push doctors toward cheaper prescriptions, frequently by offering the physician a form of bonus, a cut from the savings that insurance companies get when doctors prescribe generic drugs. For example, Independent Health, a Buffalo, N.Y.-based insurer, offered doctors who prescribe 70 percent or more generic prescriptions in a month a bonus of 50 cents per patient per month. A doctor seeing 500 patients per month who meets the 70 percent minimum can collect $3,000 a year. ...

    And caught in the middle, physicians warn that when a medical decision is taken out of a doctor's hands, it can hurt patients, such as 77-year-old Emmett Curran of Lynn, Mass. After 10 years of taking the cholesterol medicine Lipitor, which has no low-cost generic equivalent, Curran's new insurer under Medicare refused to cover it. They insisted he take the generic equivalent of a completely different drug and he was scared. ''I'm not 25 or 30,'' he said. ''There's something that's working for me with no side effects, why do you want me to experiment?''

    His physician, Dr. Mario Motta, gave him free samples of Lipitor provided by drug salesmen. He also wrote to the insurance company to explain Curran had tried generic drugs, but in this case the brand-name drug was essential.

    Still the company refused to cover it. Curran started spacing out his medication out of fear he would run out. He wound up in the hospital and had a fifth stent put in to help keep his blood vessels open. The insurance company didn't relent until Motta got the American Medical Association to make a call. Curran was covered by Anthem Blue Cross and Blue Shield, a subsidiary of WellPoint Inc. -- the nation's largest insurer based on enrollment.

  • New York Times: Don’t Blame the Uninsured. Excerpts: In the debate over health care, there is a widely held belief that uninsured people are clogging the nation’s emergency rooms to receive free care for minor ailments. As President Bush fatuously proclaimed last year: “People have access to health care in America. After all, you just go to an emergency room.”

    A provocative new study in the Journal of the American Medical Association calls that belief into question but leaves another troublesome implication: that many uninsured patients are simply going without needed care until they become so sick that they can’t stay away. ...

    Although the number of uninsured patients in emergency rooms has been rising, so has the number of insured patients, largely because both groups lack easy access to primary care. As it turns out, people who have public insurance, such as Medicaid, were more likely to crowd into the emergency room for minor complaints, especially in low-income areas.

  • Los Angeles Times: An eroding model for health insurance. Working Americans once could rely on employer-based benefits. But more people are being forced into the individual market, where coverage is costly, bare-bones and precarious. By Lisa Girion and Michael A. Hiltzik. Excerpts: As careful consumers, they shopped for the best deals, weighed premium costs against benefits and always assumed they could keep their family covered. Then last spring Blue Shield of California stunned them with a rejection notice. Baby Ava, their happy, healthy 7-pounder, was born with a minor hip joint misalignment. Her pediatrician said it was nothing serious and probably temporary. Still, Blue Shield declared the infant uninsurable. The company foresaw extra doctor visits, "the need for monitoring and an X-ray." Ava's slight imperfection "exceeds . . . eligibility criteria for acceptance," Blue Shield said. "I was enraged, baffled; I just could not understand," recalled Jennifer, 36.

    The family's experience is symptomatic of the nation's healthcare crisis. Ineligible for group insurance, millions of Americans are paying more for individual policies that offer less coverage and expose them to seemingly arbitrary exclusions and denials. The health insurance system has become increasingly expensive and inaccessible. It leaves patients responsible for bills they understood would be covered, squeezes doctors and hospitals, and tries to avoid even minuscule risks, such as providing coverage to a newborn with no serious illness. At the heart of the problem is the clash between the cost of medical care and insurers' need to turn a profit.

  • ERISA Law Blog: An Eroding Model For Health Insurance. By Brian S. King. Full excerpt: The title for this post is the title of an article in yesterday's L.A. Times by Lisa Girion and Michael A. Hiltzik. It's the first in a three part article dealing with trends in the health insurance market. The second part, appearing in today's paper, is found here and tomorrow's paper will, I assume, contain the final installment. Post claims underwriting of individual insurance policies is one of the reasons for the erosion of coverage in the individual claims market. This type of wrongful rescinding of claims is something I've discussed at length in a number of past blog entries. If the individual insurance market expands, we'll see more of that noxious practice unless fundamental reforms occur in state insurance laws. But there are other problems with individual policies ranging from cancellation of coverage after serious health conditions arise, to astronomical premium increases to unduly restrictive underwriting criteria.

    One of the troubling things about Senator McCain's proposals to reform the way healthcare is delivered and financed in this country is his promotion of individual health insurance policies. To be blunt, the idea that competition in the insurance market will be effective in providing access to cheaper health insurance for anyone other than healthy young people is just plain foolishness. Any honest person who understands how insurance risk pooling, cost spreading and underwriting works will tell you that.

    If you run across someone who tells you the solution to our problems of coverage for healthcare is to expand the availability of individual health insurance policies, they are not to be taken seriously. Without fundamental insurance industry reforms, this approach is a non-starter. The first two days of the L.A. Times series help understand why.

News and Opinion Concerning the U.S. Financial Crisis
Minimize "It is a restatement of laissez-faire-let things take their natural course without government interference. If people manage to become prosperous, good. If they starve, or have no place to live, or no money to pay medical bills, they have only themselves to blame; it is not the responsibility of society. We mustn't make people dependent on government- it is bad for them, the argument goes. Better hunger than dependency, better sickness than dependency."

"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.

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New on the Alliance@IBM Site
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  • Job Cuts Status & Comments page
    • Comment 10/26/08: I asked one of the affected 100 CTG contractors some questions about his layoff here in RTP. There was absolutely no notice, no warning. He was working at his ThinkPad on Friday afternoon at the office, when a CTG rep he had never seen before came and told him he was affected by the layoff, and to pack up his things. He didn't even get a chance to say goodbye. He was then escorted out of the building as if a common criminal. Pack-up, and get-out. In the blink of an eye, another job lost, and a life put in turmoil. Who knows when the reaper will come for you... but he is coming if you work in the USA. Be ready. -Joe Punchclock-
    • Comment 10/27/08: To Anonymous...you are right that dismissing Contractors is not technically a layoff. But is a dismissal of PEOPLE on no notice and in some cases critical members of teams. It impacts those who no longer draw the check and their families, and also impacts those left behind who must pick up the pieces. Mgt may consider the workforce flexible, but the work itself is usually NOT flexible. I do appreciate hearing about any changes in workforce whether full time employees or contractors. -Have a heart-
    • Comment 10/27/08: I was one of the 100+ contractors that was terminated from an IBM contract with CTG. This "termination" was botched. Stripped the contractor of any self dignity "on stage" and thrown out the door in less than sixty minutes. The worse part of this one was that no time was allotted for work transfer to the IBMer's who will have to put in OT just to figure out which end is up. Also, it demonstrated the lack of professionalism and humanity to IBM's current employees. I seen three contractor layoffs and there IBM employee layoffs and this one was one of the worst. Many times, contractors were terminated on Wednesday and allowed stayed to Friday. I guess the rope gets shorter companies mature. -anon@RTP-
    • Comment 10/28/08: How can contractors avoid knowing that their employment is less secure than that of regulars? It should be obvious that the reason for such an arrangement is to allow IBM less obligation. The problem appears when the contractor has been there for several years and is fully integrated into work operations. In my experience there was hardly any distinction in work assignments and responsibilities. Indeed, my manager would attempt to hire those who showed superior performance over time. At layoff time, however, the difference in status does appear. After all, it is the company that pays you who has to utter the words "you're fired" and manage you out the door. Perhaps in the contract IBM could stipulate how this should be done, but what contract-employee-applicant is in a position to negotiate such a thing? Unless *they* have a union . . . -Butter Duck-
    • Comment 10/28/08: All of the IT jobs in our entire organization (in the IBM Global Account of IGS) are being sent overseas. Word is that 90% of all of the IBM Global Account will be overseas by EOY 2009. This includes Business Area Managers, Project Managers, IT Specialists, and IT Architects. Where are the jobs to absorb this huge loss, as US unemployment soars? There will be no stopping this without government intervention. -Anonymous-
    • Comment 10/28/08: I was told today that the goal is to have 60% of ITD be global resourced leaving 40% from the US by end of year 2009. Manager confirmed this and to actively start looking now. -where has our country gone-
    • Comment 10/28/08: Pay close attention, traditionally contractors are removed from the business just before employees are told they have 30 days. And regarding that 30 days, it takes a very high level of approval to allow an RA'd employee to transfer. Approvals are NOT likely as the key is to cut expenses and employees = expenses. -Smiley-
    • Comment 10/28/08: To -anonymous - To put in perspective your comment regarding, "Word is that 90% of all of the IBM Global Account will be overseas by EOY 2009". Can you tell us just how big IBM Global Account is? 10 people? 20 people? 100 people? It's interesting ,but I work in IGS and I haven't heard any rumors of layoffs and I don't know anyone personally who is on the bench, but I have heard (hearsay) from others who told me they know people on the bench for months and have not been laid off. -I don't hear the rumors-
    • Comment 10/29/08: IGS GA (Global Account) is thousands of people, and there is an aggressive push by the CIO office to move jobs from the USA to the GDC (Global Deployment Competency) centers in India, Mexico, Brazil, and China. Bottom line....MANY people will be looking for jobs in 2009. -Anonymous-
    • Comment 10/30/08: My friend left for India on an 18mo relocation He let me know IBM is accelerating their goal for 2009 from 3000 to 7000 jobs going to India. Well done Sal and great support for America, when do you move to Bangalore? -Ex-IBMer-
    • Comment 10/30/08: 2nd round of layoffs here, I just got the word yesterday. Band 8,Software Group. -Anonymous-
    • Comment 10/30/08: Significant action affection Sales and Distribution above-region teams for SWG sales. 20-40% on some teams... -PassedOver-
    • Comment 10/30/08: I was just informed by my manager of a "resource action" today which will effect the SEA&T organization, as well as all of IBM. They have been calling people all day to let them know that they are not effected. I'm one of those, but I fear for friends that have been on the bench. You have been alerted! -ADrone-
    • Comment 10/30/08: I know of two Project Managers on the Phoenix, AZ American Express account who are being released and replaced by personnel in Brazil. Their last day is tomorrow. (Charles Colodner & Clark Shindel). They are contractors though, not IBM employees. -Anonymous-
    • Comment 10/30/08: huge cuts in ISC today... Rochester,MN , Not sure what other sites. First glance at package handed out , appears to be 100's + -homerJ-
    • Comment 10/30/08: My manager notified my today that I have 30 days to find a new position at IBM. I have 10 years of experience as a project manager currently in the ITD group. I had just returned from family leave of absence just two months ago. No prospects in site. -Future ex-IBM'er-
    • Comment 10/30/08: Today there was a small lay off in AIS. Rumor I've heard: 20% of HQ will be given the axe in November. (good post Joe Punchclock) -Joe.the.Plummer-
  • General Visitor's Comment page
    • Comment 10/30/08: The second OT lawsuit filed against IBM on April 17, 2008 (Danieli v IBM) is a class action suit, and it is only for those employees that were reclassified from exempt to non-exempt on 2/16/08. As part of the November 2006 settlement of the first OT pay class action lawsuit ( Rosenberg et al v. IBM) IBM agreed to reclassify to non-exempt all of the employees they had misclassified by July 12, 2007. IBM failed to meet that date. IBM did not reclassify the exempt employees who participated in Rosenberg et al to non-exempt until 2/16/2008. Therefore, the employees who were class members of Rosenberg remained on IBM's books as being exempt and were not paid for any overtime they may have worked between 7/12/07 and 2/16/08. The second lawsuit aims to recover the OT not paid to the misclassified employees during the timeframe of 7/12/07 to 2/16/08, and also asks the court to award punitive damages to the plaintiffs from IBM. -Anonymous-
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Vault Message Board Posts
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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:

If you hire good people and treat them well, they will try to do a good job. They will stimulate one another by their vigor and example. They will set a fast pace for themselves. Then if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its sucess, they will contribute in a major way. The customer will get the superior service he is looking for. The result is profit to customers, employees, and to stcckholders. —Thomas J. Watson, Jr., from A Business and Its Beliefs: The Ideas That Helped Build IBM.

This site is designed to allow IBM Employees to communicate and share methods of protecting their rights through the establishment of an IBM Employees Labor Union. Section 8(a)(1) of the National Labor Relations Act states it is a violation for Employers to spy on union gatherings, or pretend to spy. For the purpose of the National Labor Relations Act, notice is given that this site and all of its content, messages, communications, or other content is considered to be a union gathering.