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Home/ stevenwarran's Library/ Notes/ February 17, 2004, Oakland Tribune, Kaiser Aluminum axes benefits. Cuts medical & life insurance for retirees, dependents, by Alec Rosenberg,

February 17, 2004, Oakland Tribune, Kaiser Aluminum axes benefits. Cuts medical & life insurance for retirees, dependents, by Alec Rosenberg,

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February 17, 2004, Oakland Tribune, Kaiser Aluminum axes benefits. Cuts medical & life insurance for retirees, dependents, by Alec Rosenberg,

OAKLAND -- After working 30 years for Kaiser Aluminum, Oakland resident Karen Wessenberg retired in 2000, ready to reap the rewards of a pension and low-cost lifetime medical benefits, just like her mom, who worked 27 years for Kaiser.

But the 53-year-old Wessenberg took a new job last month to help pay for her health insurance, which has skyrocketed since Kaiser Aluminum filed for bankruptcy in February 2002.

It's only getting worse. Kaiser Aluminum & Chemical Corp., a company once synonymous with Oakland that is now based in Houston and trying to emerge from bankruptcy, has reached an agreement to cancel medical and life insurance benefits for all retirees May 31. The decision, announced Feb. 4, affects more than 11,000 hourly and salaried retired employees and dependents,

including about 700 salaried retirees who live in the Bay Area, mostly in the East Bay.

"It's a big hit," Wessenberg said. "We've referred to it as the second shoe falling."

As a salaried early retiree, Wessenberg and her husband initially paid a $35 monthly premium for medical benefits. Shortly after Kaiser Aluminum filed for bankruptcy, their monthly premium jumped to $350. In January, it rose to $600. Wessenberg, a former salaried benefits administrator with a $1,100 monthly pension, is making ends meet by working in sales at an insurance broker.

But many are too old to work, like her 77-year-old mom and dad, Castro Valley residents who receive home health care. Kaiser Aluminum currently picks up half of the $5,000 monthly tab, but that could change after May.

Wessenberg said retirees feel blindsided. "There are many people with pre-existing conditions and for those it is difficult to get coverage," she said.

Kaiser Aluminum was founded in 1946 in Oakland by Henry J. Kaiser, the progressive industrialist who also started separately owned Kaiser Permanente, the nation's largest nonprofit health maintenance organization. By 1980, Kaiser Aluminum had grown to 26,000 employees and net worth of $1.4 billion.

But the company racked up losses in the 1980s and was bought in 1988 by Charles Hurwitz and Maxxam Corp., owner of Pacific Lumber. Kaiser Aluminum had some profits in the 1990s, but the bankrupt firm has lost more than $1 billion since 2001. Kaiser Aluminum no longer has facilities in the Bay Area.

Kaiser Aluminum was spending about $60 million a year in retiree medical benefits, company spokesman Scott Lamb said.

"We're trying to restructure the company," Lamb said. "We simply do not have the ability to make those kind of payments."

Now with about 5,000 employees, Kaiser hopes to emerge from bankruptcy in mid-2004 and focus on its aluminum fabricating business.

Meanwhile, it will cancel medical benefits for retirees May 31, pending final approval by union members, the company's board and Bankruptcy Court. Kaiser will offer retirees new medical benefits at a lower level under a Voluntary Employee Beneficiary Association (VEBA), which depends on its profitability. Kaiser retirees also could opt for costly federal COBRA coverage.

Also, Kaiser plans to end its pension plan. The federal Pension Benefit Guaranty Corp. will help, but while older retirees can expect similar pension payments, recent retirees and current employees will likely take big cuts.

The unions and other employee groups agreed to the cuts because they realize the seriousness of Kaiser's "very unfortunate" situation, Lamb said.

"This is by no means a perfect solution," said Dave Foster, a United Steelworkers of America district director and union negotiator.

Kaiser employees and retirees are angry and frightened, Foster said. The VEBA offers hope, but it still would involve significant cutbacks, he said.

Foster has seen worse -- 300,000 of his union's retirees have lost health insurance in the last 18 months.

"It's a real indictment of the employer-based system of providing health insurance in this country when the company that was the foremost proponent of it, Kaiser, has been reduced to bankruptcy," Foster said.

Salaried retirees already have had two health insurance hikes, while hourly ones have continued so far without monthly premiums.

"It's a difficulty for everybody. It's a true hardship for a number of our retirees," said Bob Irelan, spokesman for the 4,600-member Kaiser Aluminum Salaried Retirees Association.

The association has told retirees about options such as Medigap, said Irelan, a former Kaiser vice president of public relations. Many members already dropped their Kaiser coverage because they couldn't afford it, he said.

Moraga resident Evo Alexandre, 71, ran Kaiser's information systems before retiring in 1986. His late father also worked for Kaiser and his mom receives Kaiser medical coverage -- at least until May.

"These people are older and really need the insurance," Alexandre said. "To see the whole thing collapse is disconcerting at best. You wonder if better managers were running the place, perhaps (benefits) would still be in place."

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