SBC's Health Care Surprise

Monday, March 15, 2004

SBC released its 2003 annual report on March 11. We weren't surprised at the positive financial indicators, especially since we had already heard from an SBC spokesperson that the company "had a great year operationally." (New York Times, 3-8-04)

But there was one big surprise.

The report shows that SBC's financial obligation for retiree health benefits has been reduced -- by at least $1.6 billion! -- by two important developments.

First, as a result of the recent Medicare prescription drug law, SBC's retiree health obligation – the amount of money it needs to pay for benefits provided to retirees into the future -- will decline by more than $1.6 billion. For 2004 alone, the company's annual expense for this obligation will be reduced by about $22 million. In future years, SBC reports that the Medicare benefit will reduce costs between $250 and $300 million.

At the same time, SBC reports that its recent move to cut retiree health care benefits beginning next January will further reduce its retiree health obligation by $2 to $3.5 billion. SBC is shifting costs to retirees in order to boost its own profits.

The intent of the Medicare subsidy to employers was to get them to maintain the provision of prescription drug benefits for their retirees, even as Medicare added those benefits to its package…not pump up profits.

SBC isn't playing fair. On the one hand, SBC is shifting costs to retirees. On the other hand, the company is collecting a huge subsidy from Medicare for maintaining prescription drug coverage.

SBC had a great year and is well-positioned for the future. We deserve our fair share. Stand strong and prepare to fight for our health care benefits – today on the job and tomorrow when we retire.


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