AK Steel Retirees Ask Court to Bar New Health Care Plan

July 19, 2006 (PLANSPONSOR.com) - A class action lawsuit brought by almost 4,600 retirees of AK Steel Corp. asks a federal court in Cincinnati to bar the company from making them pay monthly health insurance premiums, eliminating vision and dental coverage, eliminating Medicare subsidy benefits, and reducing life insurance coverage.

The retirees of the Middletown, Ohio, plant and their spouses now only pay for co-pays for doctor’s visits and prescription drugs, but the company’s new policy that would make them pay a larger share of health care costs is set to go into effect on October 1, according to The Enquirer.

The company made the announcement in June (See AK Steel Requires AEIF Retirees to Share Health Care Costs) and contends that in order for it to remain competitive, retirees must share in more of the costs.

This argument has been a trend among companies that say covering health care is becoming too expensive.A recent report by the US Agency for Healthcare Research and Quality found that more than 54% of workers covered by employer-sponsored health care plans paid a hospital co-pay in 2003, up from 33% in 1999 (See More Workers Share Cost of Health Care ).

AK Steel said that its retiree health care costs have risen nearly 50% since 1999, when the now-expired AEIF contract was ratified. According to the news release, the company spent more than $230 million for health care benefits for employees, retirees and their dependents in 2005, which the company attributes to increases in prescription drug costs.

Under the plan, retirees under age 65 will pay 10% of the monthly health care premium until 2008, and thereafter will pay all increases in the monthly premium. According to the release, the monthly premium amount is based on the actual cost the company incurs to provide retiree health care benefits. Medicare-eligible retirees will pay 50% of the monthly health care premium until 2008 and will then pay all increases in the monthly premium.

The lawsuit against AK Steel was filed by Michael Bailey, president of the Concerned Armco/AK Retired Workers, and eight other retirees asks for an injunction that would prevent the new plan and for AK Steel to pay compensatory damages and attorneys’ fees. According to The Enquirer, the lawsuit argues retirees and their union, the Armco Employees Independent Federation (AEIF) negotiated the retirement health care with AK and its predecessor companies as far back as 1948.

The newspaper reported that AK Steel added language three years ago to the insurance plan, giving it the right to amend, suspend or terminate the plan. However, the lawsuit argues that “nowhere do the agreements or health plans … grant the company the right to modify, amend or terminate retiree health benefits.”