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CLEVELAND - When Chuck Kurilko was 18 years old and living in a Pennsylvania coal-mining town, he read a classified advertisement seeking men to work in the steel mills of Cleveland. For Mr. Kurilko, it meant he wouldn't have to work in the mines the way his father had. A job in steel, he believed, would provide a path to financial security, if not prosperity.
Mr. Kurilko labored at LTV Corp. for 37 years until he retired in 2001. But his dreams of a solid future haven't panned out. LTV, along with much of the rest of the steel industry, has been restructured and Mr. Kurilko's health benefits are a casualty.
Now 57 years old and in fragile health, Mr. Kurilko faces an excruciating decision. Should he use up his savings to pay the monthly $2,864 fee for health insurance himself? Should he buy a plan that is cheaper but provides less coverage? Or should he go without coverage and hope that his weakened heart doesn't give out?
"We have had the biggest arguments in our marriage over this issue," said Carolyn Kurilko, his wife of 36 years, sitting in the living room of their modest white bungalow on a winter afternoon. Mr. Kurilko has suffered four episodes of congestive heart failure. Sometimes he has been so irate over the couple's insurance dilemma that his wife worried that he was headed for another trip to the hospital. She badly wanted him to pay the insurance premium, but he was against it. "I don't know what the hell he is thinking," she said.
After she left the room, her husband, who looks healthier and more robust than he is, broke down in tears. He realizes that his health may soon fail. If it does and he dies, he doesn't want to leave his wife without a nest egg -- the $35,000 they have saved. The latest doubling of premiums would quickly wipe out that pot of money.
"If I pay, we are guaranteed to lose our savings within a year. Then what?" he asked. "I want to leave her with something."
Mr. Kurilko is one of 40,000 LTV retirees and dependents without health insurance. A far-larger population -- more than 200,000 retired workers and dependents, at roughly a dozen steel companies -- likely will be stripped of their health-care benefits as well, as their former employers reorganize or liquidate in bankruptcy. If a company goes out of business and sells its assets to another, neither is obligated to pick up the tab for former workers. That leaves retirees in a no-man's land.
![[image]](steelw2.gif)
What
makes the predicament of retired LTV workers so striking is that their old
bankrupt company is now operating profitably under a new name.
International Steel Group paid $1.5 billion for LTV and assumed nearly all
of its liabilities, not including the costs of paying health insurance for
retirees. In the business equivalent of robbing Peter to pay Paul, the
jobs of younger workers were preserved by taking away the benefits of
retirees.
A similar situation awaits the retirees of Bethlehem Steel Corp., National Steel Corp. and others that are now becoming parts of leaner, stronger competitors -- which buy their assets but abandon promises made to former workers in better times.
Increasing Burden
The same fate might befall retirees in other struggling industries such as airlines and autos, which have managed so far to pay retiree benefits but are increasingly burdened by them and looking for ways, including bankruptcy, to relieve themselves of such obligations. This year US Airways expects to spend $12 million on health benefits for current employees, but more than $55 million for retirees, their dependents and surviving spouses. At Ford Motor Co., the figures are $600 million for current employees and $1.9 billion for retirees and their families. Thus, steel retirees are already living the worst-case scenario that some others may eventually face.
The Kurilkos and thousands of others are caught in the middle of political, economic, global and demographic forces.
Foreign competition, the rise of nonunionized minimills -- which recycle steel into new products -- a world-wide steel glut and skyrocketing health-care costs have forced steelmakers to make drastic cost cuts. Retirees are a ripe target, in part because there are so many of them. At the integrated companies that manufacture steel from raw materials, the 600,000 retirees and dependents far outnumber the 80,000 to 90,000 current workers and their dependents. Just before Bethlehem Steel's assets were sold to International Steel Group earlier this year, it had 95,000 retirees, and one active employee for every 13 retirees. At LTV, the ratio was one active employee for every seven retirees, before its assets were sold to International Steel Group.
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Decades ago, steelmakers agreed to generous benefits for their retirees, in large part because of pressure from the White House. In the early 1960s, President Kennedy pushed steel companies to give workers whatever they wanted when the economy was fragile and steel was in demand. Steelmakers didn't want to spend their profits on higher wages, so instead they promised generous retirement benefits, essentially postponing the day of financial reckoning in hopes that when it dawned they could afford the payouts.
But they can't. The estimated lifetime tab for American steel retirees is $14 billion. Retiree costs added about $20 to $40 to each ton of steel made last year. Steel generally costs a few hundred dollars per ton, depending on the type of steel and market conditions. Since the U.S. is already one of the world's highest-cost steel producers, the benefits helped make it impossible for unionized steelmakers to survive. More than 30 have filed for bankruptcy-court protection since 1998. Bethlehem, once the nation's third-largest steelmaker, filed in October 2001. LTV, once the fourth-largest, filed in December 2000.
Retirees in the 55-to-65 age range, such as Mr. Kurilko, are especially vulnerable because they may be too young or too well off to be eligible for government-backed health-care plans and often too old to find another job with benefits.
Since deciding they couldn't afford to pay the insurance premium in January, the Kurilkos have been consumed with figuring out how to manage. Mr. Kurilko is too disabled to work and has given up serving as an auxiliary police officer, which he did for about 20 years.
"Every day, every minute, I worry about him. I go everywhere with him," says Mrs. Kurilko, who has been a housewife throughout their marriage. "Or if he goes to the store, I tell him, 'You call me when you get there.' "
Mr. Kurilko is a beefy man with a full beard and a full head of hair. He looks strong, as if he could arm-wrestle a man half his age. But he has a bum heart, which pumps at only 35% of what should be his normal rate, his doctor has told him. His lungs are infected and he has diabetes and mild glaucoma. He often sleeps sitting up in a living-room easy chair, with an oxygen mask on, and takes about a dozen medications to treat high blood pressure, high cholesterol, diabetes, lung discomfort and other ailments.
Since giving up their insurance, the Kurilkos have cut pills in half and sometimes abandoned prescriptions, even though doing so is dangerous. When Mrs. Kurilko gave up her sinus medication, she woke up one morning with her face so swollen she could barely open her eyes. Somewhat reluctantly, she resumed taking her medication.
The Kurilkos also decided that if Mr. Kurilko required hospitalization they would forgo the nearby hospital and drive 20 to 25 minutes to a Cleveland hospital that takes patients with limited or no health insurance.
A traditional and proud breadwinner, Mr. Kurilko was ashamed that people might think he didn't try hard enough to make a solid, comfortable life for his family. "People could think that I didn't work hard," he said. "But I worked for everything that I ever owned." He doesn't want his wife to get a job, and she also prefers to remain a housewife. The two also are determined not to sell their home to pay bills.
The steel industry was bustling in the mid-1960s when Mr. Kurilko, living in Bobtown, Pa., read the classified ad looking for men willing to move to Cleveland and work in the steel mills. It was a chance to escape his hometown and a life in the mines. "Not enough windows in a coal mine," Mr. Kurilko says.
Others from his hometown headed to Detroit to build cars, but Mr. Kurilko thought Detroit was too urbanized for a boy with deep rural roots. Besides, steel had an allure, its history woven with titans such as Andrew Carnegie and its product girding the country's infrastructure and its proudest landmarks, such as the Empire State Building. The jobs were solid and for several generations had provided a path to security.
At the time, the U.S. steel industry was still one of the lowest-cost producers and made about 35% of all the steel consumed in the world. The burgeoning American middle class was gobbling up steel-intensive products, such as automobiles and appliances. Bethlehem Steel and U.S. Steel owned raw-material deposits and dependable distribution systems such as railroads and ships that could transport steel cheaply and quickly. They didn't have to worry about low-cost competition. Imported steel had yet to take hold in the U.S.; it represented about 4.5% of the market in 1960. At the time, it seemed inconceivable that the industry would wither and implode under the pressure of its own debt and foreign competition.
When Mr. Kurilko moved to Cleveland, he started out tending the open-hearth furnace, a sweltering, dangerous job that paid $6 an hour, more than his father ever made working in the coal mines, and enough to pay for an aquamarine Ford Mustang. At the time, the company was called Republic Steel, but it eventually morphed into LTV Steel. He lived with distant relatives in the working-class Cleveland neighborhood of Garfield Heights.
He married his hometown sweetheart and eventually the couple bought a modest three-bedroom house, where they raised their daughter and son and continue to live. To escape the hot belching furnace and the asbestos suit he wore each day, Mr. Kurilko in 1969 became an apprentice in the machine shop, taking a huge pay cut to $2.18 an hour. He settled into his new life, working the 11 p.m. to 7 a.m. shift as a machinist.
Changing Fortunes
Steel's fortunes began turning in the late 1970s and early 1980s, when low-cost imports began flooding in, exposing the inefficiencies and outmoded technology of U.S. producers. By the early 1970s, imports had won nearly 18% of the U.S. market. LTV went through two bankruptcies, seven years apart. Thousands of steelworkers lost their jobs. In the late 1960s, Mr. Kurilko was one of 240 machinists working for the company. By the time he retired in 2001, only 40 were left and he was second in seniority.
Mr. Kurilko never feared he would lose his health care or pension benefits, in large part because he really didn't need them. He was young and didn't feel vulnerable physically. He rarely used his insurance and neither did his wife, except when she gave birth. Then, in 1995, at 48, he tripped over a fire hose at work, fell backward and severed his Achilles' tendon. He went to the doctor, who discovered that he had a blood clot and other medical problems: high cholesterol, diabetes, infected lungs and a weak heart. During the next six years, his four flareups of congestive heart failure each required longer stints in the hospital.
He retired in November 2001, in part because of his health but also because he knew the situation at LTV was growing dire, and he was hoping to hold onto his retirement benefits. At the time, Mr. Kurilko was earning $65,000 a year. With their house paid for and their children grown, the Kurilkos had more than enough to live on. Mr. Kurilko had a full pension of $2,450 a month and paid $115 a month for health-care coverage under LTV's retirement plan. The insurance covered 100% of their medical costs and typically required them to pay only $10 to $20 for prescriptions. Because of his congestive heart failure, Mr. Kurilko qualified for disability pay, which kicked in eight months after he retired.
All in all, the Kurilkos looked financially sound. But their security started to unravel a month after Mr. Kurilko retired.
In December 2001 LTV liquidated. The company wanted to end health coverage for retirees, but the union managed to negotiate some coverage. The price, however, was higher. In January the Kurilkos' health-insurance premium jumped 61% to $185.
In February 2002, LTV's assets were sold to International Steel Group, which didn't assume health-care coverage for retirees. Under Chapter 7 of the bankruptcy code, employees are considered unsecured creditors and thus are far down on the list of creditors to be paid out of a company's remaining assets. To keep the insurance, the Kurilkos' only option was to pay much of the premium under COBRA, a federal law that enables former employees to temporarily extend their insurance at their own expense. A portion was picked up by LTV under an arrangement negotiated by the union, but the Kurilkos' monthly premium still skyrocketed to $1,305.19.
That same month, Mr. Kurilko's pension was cut 38% to $1,529.41 a month, after the Pension Benefit Guarantee Corp., a quasi-public insurer that assumes pension plans of failing employers, took over LTV's pension plan.
The couple began dipping into their $35,000 in savings and breathed much easier when the $1,500 a month disability payments kicked in. They thought they had their money problems beaten.
That changed in January, when LTV's contributions to their health insurance ended and monthly payments jumped to more than $2,800.
Paying that increase would have left the couple with $300 a month to live on, enough to cover only three bills: gas, heat and electricity. It wouldn't have covered the $161 a month the couple spent for life insurance, the $65 a month in phone bills, the $335 lease payment for their Chevrolet Blazer or food.
When they decided to go without health insurance in January, Mr. Kurilko began surfing the Internet nightly looking for cheap drugs. He often found them in Canada. An online service let him reduce the cost of three of his prescriptions: albuterol for clearing airways, Xalatan for glaucoma and another that controls his cholesterol levels. He cut his expenses for the three drugs by 35%, from $249 to $161.03 for a three-month prescription period.
His doctor gave him 20 milligrams of Lipitor, for high cholesterol. Instead of taking that recommended dosage every day, he took the 20 milligram tablet every other day. It was not a big saving but every penny was worth it, he says. One of his doctors agreed to cut 25% off his office-visit charges.
Mr. Kurilko earlier this year also began looking for inexpensive insurance on the Internet. He applied for coverage with one company he found on the Web, but after initially accepting his application, the company said it wasn't willing to insure him because he suffered from too many ailments.
In April, through a member of his daughter's church, Mr. Kurilko finally found insurance that is cheaper than the COBRA plan. But it won't provide nearly the same coverage, especially if Mr. Kurilko gets very sick again.
The couple will pay United Health Insurance Plans $614 a month to cover them both. Routine doctor visits will cost $15. But the Kurilkos will get only a 10% discount on prescriptions. More significantly, hospitalization and medical procedures will be only 70% covered, leaving the Kurilkos to pick up the rest of the bills. That means that if Mr. Kurilko has to go to the hospital for an extended period, he could quickly burn through his savings and end up in debt.
The Kurilkos realize they still could face huge medical costs in the future. When they discuss money, Mr. Kurilko's face turns beet-red. His eyes water. Mrs. Kurilko looks downward as her big mountain of a husband dissolves.
"This is always on my mind. I hope nothing happens to my health," he says. "When I think of all the years of sacrificing. Betcha in my whole life, I may have missed 10 days of work in 30 years. I sent my kids to Catholic school, I paid my public taxes and still, at this time of my life, I should be doing really good. I should be living the way a retiree is supposed to be living. I'm sick of it all. I'm scared to death."
Copyright ©
2002 Global Action on Aging
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