J.C. Penney, Josten’s To Discontinue Retiree Drug Benefits
Retailer J.C. Penney and Josten's, which distributes school yearbooks and class rings, recently notified retirees that they will discontinue some or all of their health benefits when the new Medicare prescription drug plan takes effect Jan. 1, 2006, the Fresno Bee reports.
J.C. Penney spokesperson Tim Lyon said the company will discontinue all health benefits for about 9,500 retirees who are older than age 65. "The majority of claims in our retiree medical plan are prescription drug claims, particularly in the 65 and older. The fact that Medicare was implementing prescription drug coverage in 2006 was the impetus for the change," Lyon said.
J.C. Penney will help retirees enroll in a plan offered by AARP and will pay 55% of the premium cost for one year as a transition. Lyon said, "It is our feeling that the coverage under the AARP plan will tend to be better than what they have now under J.C. Penney."
Richard Stoebeid, a spokesperson for Josten's, said the new Medicare benefit also prompted the company to discontinue prescription drug benefits for retirees older than age 65. He said, "Prescription drug coverage had been a gap in the Medicare program, so really, because of that, we have offered supplemental drug coverage that was paid for by the retirees." Stoebeid would not say how many retirees will be affected by the change.
Robert Hayes, president of the Medicare Rights Center, said the two companies are the first organizations he has heard of that will reduce retiree benefits because of the drug benefit. "The national score card is suggesting that most companies are holding steady this year. The bailing out by these employers is particularly regrettable," Hayes said.
CMS spokesperson Jack Cheevers said the agency has not heard of any employers cutting benefits as a result of the new Medicare drug benefit, but he added that employers "are not required to inform us if they are dropping coverage." Cheevers said a federal subsidy to help offset retiree health care costs at companies would encourage employers to maintain retiree benefits.
However, Hayes said the moves by J.C. Penney and Josten's are an indication that the subsidy will not be enough to persuade employers to provide retiree drug coverage, and he said he expects more companies to reduce benefits in the coming months (Correa, Fresno Bee, 10/28).
Additional information on the Medicare drug benefit is available online.