PRESIDING CHAIRMEN: Senator Prague

Representative Ryan

SENATORS: DeFronzo, Guglielmo

REPRESENTATIVES: Zalaski, Hetherington, Belden, Cafero, Hewett, Olson

SENATOR PRAGUE: Hello everybody. We're going to bring this hearing to order, and we'll start our proceedings. I want to thank all of you for coming. Do you want to say something too?

REPRESENTATIVE RYAN: Good afternoon. I'm glad you're all able to make it. I do want to introduce the Representatives from the Connecticut Delegation to Congress who are here to hear about this issue. They're representing their various officeholders.

We have from Christopher Dodd's office Anthony Householder. Is he here? And Rosa DeLaura, we have Lou Mangini. And for John Larson, we have Lisa Perrone. And I believe Ken Dagliere is going to join us from Senator Lieberman's office.

But they are here to hear testimony and bring it back to their respective officeholders about this important issue. And I'll return it to Senator Prague.

SEN. PRAGUE: To make one more comment about these folks who are here from the congressional offices. If you have any questions of them, you can feel free to ask it.

After all, ERISA is a federal program, and if there are ever going to be any changes made in ERISA, it has to come from the feds. And these are our representatives who can make those changes.

So having said that, I'd like to go down to number three. The first speaker to represent the retirees is Mr. Dwyer, who actually brought this issue to our attention. And, Mr. Dwyer, would you come up please and give us your testimony.

And we are being recorded, so you do have to speak into the microphone and identify yourself.

JOHN DWYER: My name, Senator Prague, Representative Ryan, members of the Committee. Good afternoon, my name is John J. Dwyer of West Simsbury, Connecticut. I have the privilege of serving as chairman of the Aetna Retirees Association formed last September because of the actions that Aetna took against its retirees.

In four short months, more than 900 members from the course of the country have paid their dues and joined the Association. More than 500 of them are residents of Connecticut, and all of them wronged when Aetna unilaterally decided to eliminate a retirement benefit that had been promised to us when we were active employees.

On behalf of our members of the 11,600 retirees of Aetna and their beneficiaries, I want to thank you for providing this forum and the opportunity to bring to your attention to what I believe was Aetna's outrageous decision to eliminate the dental subsidy.

By your leadership, you have begun the process of recognizing the unconscionable trend in corporate America of reducing or eliminating benefits that were promised to employees, and then taken away after many years of service.

To the best of my knowledge, no other state legislative committee in America has taken the time to focus on the problem and provide a public informational forum to gain further insight into the problem and the issues.

I must also thank the Representatives from the staffs of our Connecticut Congressional Delegation. I won't try to name each of them, but their presence here today suggests a recognition of the importance of this issue and encourages us retirees to continue our efforts.

My purpose today is not to suggest answers, but to review for you the history of Aetna's broken promise. And if you decide that a wrong has been done, to work with you and others to formulate a remedy.

At the outset, I should state for the record that loss of the dental subsidy does not represent a significant financial hardship for me personally. We don't know precisely what the average pension value is for all 11,600 retirees, but for many of them the Aetna action could be as much as 10% or more of a retiree's total pension.

My concern is for the clerical staff, the people down the line, all the wonderful employees who work so hard to make Aetna and people like me successful.

For them, this is a big deal, and a violation of everything that Aetna ever stood for. Perhaps more frightening is the uncertainty that their action has created in the minds of all retirees.

What's next? How far will they go to squeeze out another dollar of earnings? Do they recognize any limits? Imagine the person on a fixed income, retired for 10 or 15 or more years and compelled to worry about what plans Aetna might be working on to further reduce their commitments to retirees. I suspect you'd be worried too.

I joined Aetna as a claim representative trainee at the Harrisburg office in Pennsylvania in 1960. I left the company as senior vice-president of the Claim Department in 1994. In all of that time, it was clearly understood that while Aetna might not be the highest-paying company in terms of salary alone, we would always have very, very good benefits.

I want to repeat that I left in 1994. It was on February 6^th on 2004, 10 years later, that all Aetna retirees received a form letter from the Head of Human Resources at Aetna announcing Aetna's intention to eliminate the dental subsidy in January of 2005.

And as if eliminating the subsidy wasn't bad enough, when the annual enrollment period came around in November of 2004, they forced the issue by requiring that if you didn't renew the insured plan on an unsubsidized basis for 2005, you could not later enroll in subsequent years.

It was take it this year, or lose it forever, one more insult to those who gave so much of themselves to this company. At the time of the announcement, the supporting memo argued that they had to eliminate the subsidy to reduce their expense ratio and to remain competitive.

As the former chairman of a publicly traded company, I understand those goals. They're not unusual. In fact they're laudable. What I found difficult to accept was that the company had knowingly made their results worse by accelerating the rate at which they funded a pension-reserve deficiency, and yet the financial results were improving dramatically.

I went to the annual meeting. I even complimented the chairman of Aetna on the outstanding first quarter of 2004 results.

I found it very difficult to understand why, in the face of those vastly improving results, they would alienate and hurt so many retirees for a $3,000,000 annual savings. Of course, that committed them to then take $32,000,000 of reserves set aside to pay for those annual benefits into the future and re-deploy them into second quarter 2004 earnings.

A few months later, they received a federal income tax refund of approximately $740,000,000. They continued to buy back shares,8.3 million shares in the third quarter of 2004. Multiply that by $100 per share, and you'll have some sense of the magnitude.

And finally, a contribution of $45,000,000 to the AETNA foundation. Let me repeat the number, of course, our dental subsidy $3,000,000 annually.

By almost any measure, this is producing historic financial results, but I will tell you categorically, if Aetna were financially threatened in any substantial way, most of the people in this room would have a vastly different attitude than the one they have.

If Aetna was threatened at all, we'd have a very different attitude. Many of our retirees begin their retirement with the promise that they would receive free health and welfare benefits for life. Those people, many retired for 20 or more years, have been receiving free benefits until a month ago.

It is unconscionable that people led to believe for years that the benefits that they worked for and were promised could suddenly be eliminated for corporate profits. Why wouldn't all policyholders and beneficiaries be worried about the coverage they purchased?

Is there really any difference between coverage purchased with a dollar and coverage purchased with your years of service?

Consider the young man or the young woman who decides to go to work tomorrow for Aetna. He or she can look at the salary and benefits and can decide whether to join Aetna or go some other place where the salary and benefits are more attractive.

There's an enormous difference between that person and the man or person who spent 30 or 40 years at Aetna relying on the pension and benefit promise, only to have them reduced or eliminated 5, 10, or more years after retirement. Those retirees have no options.

Dr. Rowe, Aetna's CEO, in response to a question I raised at the last annual meeting, said that the expenses had to be reduced in order for them to remain competitive. I suggested that retirees resented being described as expenses.

The promises made to them were commitments, just like any other claim the company incurs in the ordinary course of being in the insurance and benefits business. Each time Aetna's spokesman, a Mr. LaBerge, has been interviewed by the media since this announcement, he has tried to make the point that some companies never offered dental benefits, and somehow that justifies what Aetna has done.

His statement is just nonsense. It's as if I were to tell you that I used to keep my promises. And then one day, I found someone who never made a promise. So now I don't have to keep my promises any longer.

In my last assignment at Aetna, I was a senior vice-president of Aetna's Casualty and Property Claim Department. Some of you may recall that in 1992 Aetna went through a significant restructuring, and I was deeply involved in that process.

In 1992, in my department alone, we eliminated more than 1,500 positions in that one year. And I'll tell you, it was the right thing to do.

Most of those people were retired early, and given enhanced separation packages to facilitate their early retirement, and in return for a signed release agreeing to forego litigation against Aetna, particularly litigation that might arise out of age discrimination.

My staff and I not only negotiated those enhanced packages, but if questioned, we reassured those employees that they didn't have to worry at all about their benefits.

And I can tell you categorically that not once in that entire process did corporate personnel, the human resource staff, the most senior levels of the law department, or the most senior levels of management ever advise us or alert us to otherwise warn the retiring employee that some years later his or her benefits might be reduced or eliminated.

There was no reason to even consider that someone 10 or 20 years later might seek to change or eliminate benefits that had been promised and, in fact, were being received.

For 150 years, Aetna has prided itself on the promises it made and it kept. As a young claim representative trainee, I was taught that if I made a claim offer, and later discovered that I had made that offer in error, it had to be honored irrespective of the cost.

There was no reason to suspect or worry about any other outcome. Perhaps most significantly, at the annual meeting of the Aetna shareholders here in Hartford on April 28^th of 2000, at a time when Aetna was selling off its financial services business, an Aetna shareholder and a retiree asked, and I take this directly from the transcript of that meeting, they asked Aetna's then-chairman William H. Donaldson quote, “Mr. Donaldson, do we have your assurances that these benefits will continue as promised?”

Donaldson responded, it's a good question. I know retiree benefits are of great concern, great concern. You have the commitment of this corporation that retiree benefits will not change in terms of what benefits you have now, and the obligations and the details of the future will be the same as they are right now. He went on, Aetna will stand behind its obligations.

Less than four years later, the retirees got the shameful letter. I offer for your Committee a copy of the relevant pages from that meeting transcript for your further review.

Interestingly, I have submitted a shareholder proposal for inclusion in the 2005 proxy statement asking Aetna's directors to review the decision announced in February of 2004 in the light of Mr. Donaldson's commitment in 2000. Aetna, in turn, has written to the SEC, asking the SEC to allow Aetna to exclude my proposal.

One wonders now if they're trying to protect Mr. Donaldson, the current chairman of the SEC, from being embarrassed by the actions of his successor, or seeking to protect themselves from his affirmation of the commitments that he made at the 2000 Annual Shareholder's Meeting.

If this Committee and other committed members of this Legislature are convinced that a wrong has been done, and that wrong should be remedied, then I'm persuaded that the creativity of this legislative body will find a way to induce the right behavior, and begin the process of protecting the benefits promised to retirees in the State of Connecticut.

Again, thank you very much.

SEN. PRAGE: Mr. Dwyer, I'm not going to let you go so fast. Do members of the Committee have any questions to ask? Representative Hetherington?

REP. HETHERINGTON: Mr. Dwyer, you were subsequently chairman of another committee. Your distinguished career is noted. Is the [inaudible] of dental benefits that seems to be the matter at issue, is that the heart of the concern? Or is the concern really that this is the beginning of the erosion of other benefits?

JOHN DWYER: It's both, Representative Hetherington. Still for some people the benefit or the cost for a retiree and his spouse went from $14 a month for dental, to $67 a month, and that's more than 10% for some of the low-level employees, at least 10% of their pension.

And I don't want to, Aetna, or it's obvious to think that if I say to you, well, that's really not the major issue they'll feel comfortable about it. But, clearly, the cloud overhanging, what else will they do is the real principle issue.

I think all of the people that belong to our Association, and more importantly, retirees across the country are scared to death. There are currently rules being promulgated, as you probably know, dealing with how prescription drugs are going to be treated in the year 2006. And the rules have been thus drafted that there is room for some considerable amount of mischief.

A subsidy to the corporation will include not only what the corporation pays, but what the employee retiree pays. And it will be a terrible outcome if corporations can receive a subsidy for the amount of premium they've managed to push over on retirees.

So the whole issue of benefits and what corporate America is likely to be thinking about down the road and doing, scares us all to death.

REP. HETHERINGTON: What are they relying on in trying to exclude your proposal, the ordinary business exception?

JOHN DWYER: As I understand, it Representative, and I am certainly not an expert, but I know that you've got some ERISA experts coming to speak this afternoon. If a company puts a reservation of rights language in its documents that it gives to its employees, that it reserves the right to modify, change, or eliminate, then they are, in fact, protected.

It's interesting, from my perspective, and I suspect from others if one thinks about it. What difference does it make if you can't do that with a pension, with the annuity monthly income portion? What difference does it make to the pensioner if he's entitled to $10,000 of annual pension benefits. They can't touch that.

But whereas he used to get $2,000 worth of health coverage, he no longer has to get that. So he has to take the $2,000 out of his monthly pension and put it over to buy healthcare coverage. Money is fungible. There is no difference.

So stealing from one pocket to pay the other, it seems to me is a ridiculous distinction that I frankly don't understand. But more importantly, interestingly as I understand it, and I haven't studied the document, this reservation language was first introduced in Aetna documents as I'm told, I think in 1988.

It's one sentence, in black ink, on purple-background paper. If you think about the amount of warning you get when you buy an egg beater or a toaster, I think you'd conclude that these warnings are inadequate or just a nonsense.

REP. HETHERINGTON: Thank you Mr. Dwyer, thank you Madam Chair.

JOHN DWYER: Yes, Sir.

SEN. PRAGUE: Representative Belden.

REP. BELDEN: Thank you for being with us today. I think you've kind of answered some of my questions, but you did indicate that my personal experience where an employer in a verbal communication with employees promising them work for a certain period of time. And then later on, in a civil suit, in fact, won the case that even though it was a verbal promise, that the employer had an obligation then to provide work for those people until that particular time period.

They do indicate that there is a reservation in the purple paper in the black ink that goes back, that says they do have the ability to modify?

JOHN DWYER: I have not seen it myself, but I am told that there was language first introduced in 1988, which was in the 28^th year of my employment. And I can tell you, if it was in there, hide it and read it. Because in the first 27 years, benefits just kept getting better and better.

So why would they begin? And if I had read it, I would have said, well, that's just somebody in the law department doing an excessive amount of lawyering, and it doesn't mean anything. God knows, we've been around for 150 years. Aetna has never decreased or eliminated a benefit. They have just made them better.

REP. BELDEN: Plus it theoretically would apply for only any employee hired after that date is another part of the equation potentially.

JOHN DWYER: That would be my sense, Sir.

REP. BELDEN: Thank you. Are there any lawsuits or legal actions pending regarding this issue?

JOHN DWYER: From the perspective of Aetna retirees, not yet, Sir.

REP. BELDEN: Thank you.

SEN. PRAGUE: Do you have questions for Committee handling? I have some questions. First of all, could you please give the testimony to our chorographer, so we'll make copies and all Committee members can have copies of the testimony. And we'll have extra copies for the press, the congressional offices particularly want them to have copies of the testimony.

JOHN DWYER: I'll do that. Yes, ma'am.

SEN. PRAGUE: Secondly, people took early retirement with a promise that they were going to have continued health benefits—-

JOHN DWYER: Yes Senator, there's no question about that. As I said in my testimony, in 1992, we had two claim departments at Aetna, and I was given the responsibility to put them back together again. I said 1,500 jobs were eliminated. It was probably closer to 2000.

But those people all went, all left knowing that a) they had an enhanced separation package, some extra weeks of severance pay, and you just didn't have to worry about your health, your pension. You knew you were going to get that.

And, I mean, if you've been around Hartford long enough, you know Aetna used to be referred to as Mother Aetna. And some smart Wall Street analysts have suggested that the paternalism atmosphere was excessive, and I won't comment on that.

But Aetna's reputation was just unquestionable in terms of a) its willingness and its ability to pay claims to the public, and b) its willingness and its sense of responsibility with respect to its employees and retirees.

Of all the 2,000 people that might have left the claim department in those 18 months that I was responsible for those terminations, I suspect some of them are here today, and I still consider them all friends. And I'm not ashamed of anything, because what we knew was that Aetna was going to take care of it.

What I'm ashamed of is that acting as the senior officer of a department with 8,000 people, I think the laws of agency say that I had the authority to made commitments. And they're not now being kept, and that's why I'm here today.

If they had just reneged on me, that's okay. But they reneged on the commitments that I made to 2,000 people. And a lot of senior people at Aetna who made those same kinds of commitments, their commitment is being reneged upon as well.

So, I'm a layman, but my understanding of the laws of agency is that a principle must honor the obligations taken on by his agent, and that's not being done. Yes, Senator.

SEN. PRAGUE: It's a pretty bitter pill for you to swallow. Is there, do the shareholders have the final word in telling what the law's problem is and what it can do or does do?

JOHN DWYER: As the chairman of a corporation regulated by the SEC, I'm going to say the answer is yes. But you have to have a management team that's willing to put the issue before the shareholders.

If I'd ever ask you a question, you might have the right to say no. But if I never ask you the question, you'll never give me the chance to say. So in the instant case, as I've said again, I have submitted a proposal to Aetna for inclusion in the proxy materials scheduled for the April 28, 2005 meeting.

Aetna has asked the SEC to allow them to not put that in the proxy materials. The SEC has not yet decided that issue, and I am anxiously awaiting their decision. If the SEC is true to its mission of trying to watch out for the little investor, and I am a little investor in Aetna, they'll let that issue go forward.

But, theoretically, they have the right and the obligation, the directors represent the shareholders, and, but as I said, the issue has to be framed properly and put before them for them to speak appropriately. We are retirees.

You'll be interested to know that we've written to the State Treasurer, noted to be, here in Connecticut, noted to be a pretty astute investor, and hold significant holdings in a lot of large corporations. She apparently is not in the business of taking on causes for the sake of causes, but to protect the interests of the pensioners in the State of Connecticut.

But the State of Connecticut holds 4.2 shares of Aetna common, and we have written to her to ask that if, in fact, this issue survives and gets into the proxy materials, that she would be willing to support the shareholder proposal, which merely asks the directors, look at what the managers have done four years after Bill Donaldson gave a commitment in open court, in front of all the retirees and shareholders that none of you have to worry.

How do you reconcile those two things? I don't know. And that's all I want those directors at Aetna to think about. How do you step over that obvious distortion, contradiction?

SEN. PRAGUE: I'd like to just carry this one step further, if you don't mind.

JOHN DWYER: I'm a retired Senator. I can stay here all day. In fact, Senator, I'm going to tell you I want to spend the rest of my days on this issue.

SEN. PRAGUE: I commend you for that. Somebody has to stand up for the rights of these retirees.

JOHN DWYER: Well, thank you, ma'am. I'm not going to run for office though, so you need not worry.

SEN. PRAGUE: It's not like you can run. Would you support this Committee backing your proposal and writing to the SEC backing up what you have requested? I don't know whether it would have any impact whatsoever.

JOHN DWYER: I don't either. One, because I don't have his permission, I won't use his name, but one very well-known columnist, TV commentator in the Hartford area, who is not a retiree but is an Aetna shareholder, read the little squib in the Hartford Current and called and asked if he could write a letter, and he did so. I don't know what weight the SEC lawyers gave it or will give it, but we sure as heck appreciated it.

And if your Committee saw fit to do that, I'd urge you to do it quickly, because I think they're probably fairly close to reaching a decision, but I don't know specifically.

SEN. PRAGUE: Okay, and I think we ought to sit down with the Treasurer and discuss this. We'll send her a copy of your testimony and ask her for a meeting.

JOHN DWYER: Very good, thank you.

SEN. PRAGUE: Thank you very much for being the crusader on this issue.

JOHN DWYER: It's some great people. I've got some great volunteers too. Thank you very much.

SEN. PRAGUE: You're welcome. Out of respect for the time of the attorneys who have come here to offer testimony, we're going to ask them to come up next to testify. Would Helen Kemp, the counsel of Robinson & Cole, where are you, Helen? Oh good. If you have written testimony would you give a copy to your? Okay, I guess we have a copy of it. Where was this? Okay, thank you, yes. Make sure your microphone's on.

HELEN KEMP: Okay. Can you all hear me? I have a slight cold and I apologize if I repeat myself or sniffle. Senator Prague, Representative Ryan, members of the Labor Committee, my name is Helen Kemp, and I'm testifying as an ERISA expert with regard to this Committee's hearing.

I am an attorney with Robinson & Cole, and its health and benefit litigation section, and I practice in the life health and disability benefits area.

I think to understand some of the issues, one needs to understand the intent and purpose of ERISA. The intent of ERISA was to provide a uniform body of employee benefit law for pension vesting, funding, insurance, and portability standards.

It proposed to eliminate conflicting or inconsistent state and local legislation of employee benefit plans, and to establish exclusive federal authority for such legislation.

ERISA not only applies to pension plans, but also applies to welfare benefit plans for unionized and non-unionized workers. ERISA defined plans that provide medical benefits as welfare benefit plans.

However, ERISA treats welfare benefit plans different from pension plans in the following ways. ERISA does not require welfare benefit plans to be funded. ERISA does not regulate employee participation or coverage in employee benefit plans.

And most importantly, ERISA does not require the vesting of employee benefits. Well, why doesn't ERISA require vesting of benefits?

As the Court of Appeals for the Second Circuit has observed, automatic vesting was rejected because the cost of such plans are subject to fluctuating in unpredictable variables. Actuarial decisions concerning fixed annuities, such as a pension, are based on fairly stable data.

Investing is appropriate. In contrast, medical insurance must take into account the inflation, changes in medical practice and technology, and increases in the cost of treatment independent of inflation. These unstable variables prevent accurate prediction of future needs and costs.

Because ERISA does not require the vesting of health benefits, employers are free to amend or terminate welfare benefits under an ERISA plan, and most employers specifically reserve the right to change, amend or terminate benefits at any time or for any reason.

However, an employer may relinquish this freedom to amend or terminate benefits by contracting with its employees for the vesting of employee welfare benefits. If an employee can prove that his or her employer promised vested benefits, the courts will enforce this promise. However, because vesting of welfare plan benefits is not required by law, an employer's commitment to vest such benefits is not to be inferred lightly.

I note historically, before 1980, most employers that provided retiree health coverage did so on a lifetime basis. The trend, back then, especially for firms with labor unions, was to continue to improve retiree health benefits with each successive labor contract.

Beginning in the early 1990s, however, two things happened to stop this trend. One was sharply rising medical costs, which equated to sharply rising premiums. And two, the adoption of Financial Accounting Standard 106, which made employers aware of the extent of their liabilities in this area.

In brief, FAS 106 requires employers to calculate their accumulated post-retirement benefit obligations, i.e., the cost of providing future health benefits, and to charge the entire future cost against current earnings, or to accrete the liability over 20 years or more with an annual charge against current earnings.

As a result of these two events, more and more employers began to cut back or eliminate altogether health insurance coverage.

From the employer's perspective, courts or the Legislature should not lightly impose an indefinite financial obligation, when unlike with pension plans, the employer lacks the ability to predict or control cost.

Additionally, the employers believe that courts or the Legislature should hesitate to impose such an obligation when the result could be to discourage employers from providing such benefits in the first place.

Commentators have suggested that stringent regulation by either the courts or the Legislature designed to protect employees will increase the costs of benefits to employers, and thus, at some point, may create an incentive for employers to exercise their prerogative not to provide benefits at all.

And I thank you for listening.

SEN. PRAGUE: Thank you for coming with this testimony. I'm sure there will be lots of questions. My first question to you is, do you represent Aetna?

HELEN KEMP: No I do not. I am here as an ERISA expert, just to give kind of a background and overview.

SEN. PRAGUE: Thank you. We did invite Aetna to come, but they have refused to come. And I was wondering if maybe they had, maybe had you worked at Aetna. We are very pleased that you're here to give us this explanation.

HELEN KEMP: Thank you.

SEN. PRAGUE: And I'll hold my questions until the Committee and the [inaudible – microphone not turned on.]. Just based on what you have heard from Mr. Dwyer, is this a common practice to your knowledge, that corporations as large as Aetna do something like this?

HELEN KEMP: I wouldn't say it's a common practice. I do see, there are a lot of court cases and court actions with regard to the elimination or the modification of retiree health benefits. My experience has been most of those come about with regard to union contracts. And then there's an interpretation of what the union contract stated.

I am aware of several articles and several papers and surveys and studies, which indicate that more and more employers intend to reduce or modify their retiree health benefits packages.

SEN. PRAGUE: And just one more brief question. Do the courts under similar circumstances usually come down on the side of the employees when benefits have been promised and there's a commitment made?

HELEN KEMP: I have to say that, and I'm sure that Attorney Rintoul, who is going to be the next speaker, will elaborate. I think that if I was a retiree whose health benefit was reduced, and if I was a plaintiff's attorney, I would be very happy to be both in Connecticut and in the 2^nd Circuit, which Connecticut is a part of.

The 2^nd Circuit I think has made some very favorable decisions, I mean, not always, they're not always on one side. They are judges and they try to go based on the law. But I think they have one of the broadest holdings with regard to fiduciary duties, fiduciary liabilities.

And so I think with this Circuit, and again Attorney Rintoul can discuss it further, but I think that it's beneficial for the retirees that this occurred in this particular Circuit.

SEN. PRAGUE: Thank you very much, and thank you for coming today. Oh, I'm sorry, Representative Zalaski.

REP. ZALASKI: Thank you. I just have a question, and that is, I come from a labor union, Associated Spring in Bristol, the Barnes Group. And we were taken on by the corporation, our union was, the retirees in the same manner as you're going through now. The question that I have now is on FASBY, I think we used to call it FASBY.

HELEN KEMP: Yes, I did too, but I'm careful now, I leave off the b.

REP. ZALASKI: Yeah, right, I see there's not a b on there. Anyway it's, is this the same instance where because they're not a union group, does that still have to be on the balance sheet in total, for all the benefits of everybody that works there? Is this the same instance as if they're a labor union right? Well, we ended up in court for a long term, and finally came out with somewhat of a settlement, but it wasn't to all of our satisfactions, but—-

HELEN KEMP: At least it was a settlement, so that was good.

REP. ZALASKI: --Yeah, thanks.

SEN. PRAGUE: Representative Belden.

REP. BELDEN: Thank you, good afternoon. Did I understand, and I'm looking at various documents that we have before us, the only area in the courts where welfare benefits can be adjudicated would be through the ERISA, through the federal court system. Is that your understanding?

HELEN KEMP: If it is an ERISA plan, a person can bring suit in either state court or federal court. There are some nuances. For example, if I believed my health insurer should have paid for a treatment and they did not, I have the right to go through the Department of Insurance and ask for external review of that decision.

But if I was seeking a benefit that had been eliminated or terminated or reduced, and it wasn't a treatment specific to me, then my recourse is to file a suit in either state or federal court.

REP. BELDEN: You did mention an ERISA approved plan, ERISA plan, what does that mean versus what are the other types of plans?

HELEN KEMP: ERISA does not apply to all employers. For example, it would not apply to a church employer. It would not apply to a government employer. And there's also a very few oddball things. Employees under the US Postal Service, the Railroad Act, so there's a few oddballs like that. But outside a few oddballs like the church and the government, it does apply to I would say 90 to 95% of all American employers.

REP. BELDEN: Thank you. One other question. There was some discussion before about when Aetna first published a disclaimer anywhere in their documents. In your litigation, have you run across cases where, let me put it another way.

When we changed the retirement plan for the State of Connecticut, it's only, it was only for future hires, not retroactively. In your litigation, have you ever seen cases where employees hired prior to a disclaimer or prior to a change in the policy actually being recognized and given those benefits?

HELEN KEMP: Yes, there are some court decisions out there which state that I'm hired in 1970 and I expect a certain benefit. And then they changed the plan say in 1985, there are cases that say that the plans can be changed, that just because something was promised in 1970 does not mean that you cannot change it going forward.

Again, what the courts usually look at, is they look to see what the plan states. They'll look to see if there's a reservation of rights. They'll look to see when things occurred, when did the reservations of right come up, what were the employees informed, how were they informed, what document was the reservation of rights contained in, and there's a variety of facts they look at.

It's not just one straw or one issue. They usually look at a variety of factors. However, in most cases if there is a very, very clear, unambiguous reservation of rights, and by reservation of rights all I mean is that the employer is saying, look, I reserve the right to change, modify, terminate employee welfare benefits at any time for any reason.

If that's very, very clear, then the courts generally say that, well, since the employer reserved the right, they can change the benefit or eliminate the benefit at any time.

[Inaudible – microphone not turned on.]

REP. HETHERINGTON: With respect to a plan such as Aetna's, which is an ERISA plan, would, to what extent can a state act in this area? Is this pre-empted by the federal legislation under ERISA or known as ERISA?

HELEN KEMP: All I can give you is my opinion based on the law to date. And I would say that what this Committee can do is somewhat limited because of ERISA pre-emption.

And I'll draw the Committee's attention to a Statute that was on the books for a very, very long time, and it had to do with worker's comp.

And under the statute, they said, look, if an employee's on worker's comp, the employer has got to pay for their health insurance benefits during the time that they're on comp.

And that was a very noble statute, but the court came in and said, look, that statute is [Gap in testimony. Changing from Tape 1A to Tape 1B]

That way. And so perhaps with that example, that might guide you as to what the Committee can do in this area.

REP. HETHERINGTON: Thank you, and thank you, Madam Chair.

SEN. PRAGUE: So in answer to Representative Hetherington's question, we can't do very much can we? Or anything, but--

HELEN KEMP: With regard, I mean, I think, if I understood you correctly, you think of, perhaps you would send a letter to the SEC or whatever. I think, certainly ERISA doesn't affect that whatsoever, but I think ERISA and the doctrine of pre-emption really limits what this Committee could do in a very practical sense.

SEN. PRAGUE: ERISA, am I correct, ERISA is for companies that are self-insured?

HELEN KEMP: No, ERISA can apply to all companies. The only things that it doesn't apply to are, as I said before, are governmental plans, church-related plans. But otherwise, it would apply to most all employers.

SEN. PRAGUE: Okay, well again thank you very much. Representative Ryan has a question.

REP. RYAN: Part of your testimony on page two, you say that an employee may relinquish his freedom to amend or terminate benefits by contracting with its employees for the vesting of welfare benefits. Can you just expand on that, explain how that can happen or why it would happen?

HELEN KEMP: Certainly. I think the most common area that this happens is in context of a union.

REP. RYAN: Okay, that's what I was thinking.

HELEN KEMP: And the union says, listen, I'll tell you what, instead of a 5% increase this year, we'll go for a 3%, but we want lifetime benefits for our retirees. And it's negotiated, it's put in the contract.

And, therefore, the employer has basically given away or relinquished the right to unilaterally change that.

Now again, with unions, you could come back and bargain. The union could come back 20 years later and say, listen, I want my 6%, and to get my 6%, I will get this part on the retiree health benefits. But that's the most common area where employers give up benefits.

Now, or excuse me, their right to change or omit. Now, quite frankly, there are court cases and situations where it is a non-union employer. And the employer perhaps, in their summary plan description or their personnel handbook or some other document, states we will continue retiree health benefits, we will continue your benefits.

And then the issue is, well, was that a promise, was that a clear promise to relinquish their right to change the benefits? So it has happened in non-union situations.

REP. RYAN: Thank you.

SEN. PRAGUE: Along that same questioning, Mr. Dwyer mentioned that Mr. Donaldson committed, and he was the former president, former CEO of Aetna, he committed that health benefits would not change. Does that hold any water?

HELEN KEMP: Well, I'll tell you, I'll give you the answer you don't want to hear, and that's yes and no.

I'll go no first because it's a little bit easier. You know people's benefits are very important as you can see by the turnout today. And ERISA does not require vesting. And the courts have said that, well, because it doesn't require vesting, if an employer makes a promise or gives up its right to change or amend, that's not to be inferred lightly.

And that means we want to see a document, we want to see something in writing, we want something to show that, yes, the employer did agree not to change this benefit or not to remove this benefit.

So what ERISA, or I should say what courts usually do, is they will first look at the documents. And if the documents are very, very clear, and say look, we reserve the right to amend at any time etc., etc. Then the fact that someone may have promised lifetime benefits may not even get to the court.

But there's something the attorney should realize, and I think Attorney Rintoul will cover this as well. As they say in the legal trade, there is more than one way to defer a feline. Meow.

And that is, you may not be able to secure your benefits based on whether or not the benefit was promised you, but if you can create, if you can persuade the court that there was an ambiguity between the plan documents and what's done, you might be able to file a claim for breach of fiduciary liability.

You might be able to file a claim based on equitable estoppel. Now these aren't easy, and you're very lucky today because Attorney Moukawsher and Attorney Rintoul are speaking They've done a lot of plaintiffs work in this very, very area. So, I mean, they're going to be great resources for your Committee.

But that's another way you can handle it. You can say, well, listen, you're right, maybe the employer did reserve the right to change the benefit.

But, on the other hand, maybe there's enough information to show that certain representations were made, and there might be an avenue based on a breach of fiduciary liability or equitable estoppel to resolve the issue that way.

SEN. PRAGUE: Thank you very much. And Senator DeFronzo's with us.

SEN. DEFRONZO: Picking up on your last statement. If, for example, as was indicated in your earlier testimony, that a number of retirees took early retirement predicated on the notion, not the notion, but the commitment of the company that they would receive a benefit package, and in their cases might have a clearer claim to established benefit or a commitment of established benefit package, a long-term commitment, would their claim to retaining those benefits be stronger than others' perhaps?

HELEN KEMP: It could be. The 2^nd Circuit does have a few cases, which state that, again, you might not get the benefit because it was promised to you, but you might get the benefit because you relied on a representation to give up something, i.e. equitable estoppel. But I don't want to give anyone any false impressions or false promises.

These are difficult legal theories to claim a benefit, equitable estoppel very difficult, breach of fiduciary liability difficult, and why? Because basically most of the courts have said, look, people are going to say things. They're going to say, yeah, don't worry about it, or, yeah, don't wait until next year.

So you've got to show that the comment or promise was more than just misleading. It's got to be materially misleading. And those are issues really for the court to decide.

And again, Attorney Rintoul and Attorney Moukawsher, they do this type of work. They certainly could explain it in greater detail than I. But, yes, if you gave up something in return for what you were told, if you can get it in front of a court, you might have a chance to succeed.

SEN. DEFRONZO: Thank you very much.

SEN. PRAGUE: [inaudible – microphone not turned on.]

REP. HEWETT: That was my very question. In other words, thank you, Madam Chair. If it did get to the court system, and the testimony of Mr. Dwyer that was here earlier that made that promise, in other words, the court would have to weigh his testimony versus what was signed in the contract as to the right to reserve, the right to do what they want to do.

In other words, the courts will be the ones that weigh that testimony. So it's a possible chance that it could have some weight to it.

HELEN KEMP: Yes, what a court might do is, let's say they might see a very clear reservation of rights, very clear. We reserve a right to change any place, way, shape or form, whatever. And then someone might say, yes, but I gave something up in reliance on a promise.

The court could also turn to you and say, yeah, but you don't have the necessary reliance. How could you rely on a verbal promise if there's something different in writing?

So again, there is, it's a very difficult hurdle, not insurmountable and other retirees have done it, but it is a hurdle they would have to go through.

SEN. DEFRONZO: Thank you, Madam Chair.

SEN. PRAGUE: Representative Cafero.

REP. CAFERO: Thank you, Madam Chair. With regard to Representative Hewett's questions, does, what is the quid pro quo then for the fact that the company might have reserved the right to change it? Is that just a one-sided agreement? What's the consideration?

So I take a job, I know I'm going to make certain salary, have certain health benefits. I know when I retire I'm going to get X, Y, and Z. That's the plan at the time I sign up. But there's this reservation clause, which says, we reserve the right to change anything we want.

So now I work. I turn vested, whatever and all this, and now I'm retired. I'm relying on these benefits. And all of a sudden, I get a letter in the mail that says, you don't got nothing. That's okay?

HELEN KEMP: For the majority of the cases? Yes, the courts have said, yes, that is okay.

REP. CAFERO: In your experience and your knowledge of the process, is it within our power here in the State Legislature to change a law that would affect that circumstance? Or is that a federal matter?

HELEN KEMP: In my opinion, that's a federal issue, because that would be an ERISA plan.

REP. CAFERO: Well, you know, this might sound trite and obvious, but you know, all of us who were raised from the time we get to the kitchen table that you keep your word when you make your word, and especially for those people who are relying on it when they're most needy.

I just think it stinks, and I'm not looking for that. But I just think that if you make a promise in this world, whether you're a labor union or a company or whatever, you make a promise to someone that's put in that kind of time, and you summarily change their benefits at your whim, that stinks.

And maybe there's no state law that could deal with it, maybe it has to be a federal law. But I would hope that any company that does business to volume that's done by this particular company thinks long and hard about that.

Because what would happen in this world if we, as a Legislature, were to pass certain say, tax breaks, and in the middle of the year, when that company is relying on that tax break as part of their revenue picture to either open up a new building or open up a new plant or whatever the heck they might do with it, we said, eh, we changed our mind.

What would they do? What would they think of this Legislature? How can we go through our lives in reliance on everything if that's the rules of the game? I hope whoever's out there from the company thinks long and hard about that, because that just stinks.

And it's unfortunate that we can't do anything about it, and maybe that remains to be seen. But Madam Chair, I hope that we send a strong message to all companies with regard to the way I hope this Legislature thinks of those kinds of things, because it is just wrong.

SEN. PRAGUE: You know, maybe Representative Cafero is on to something when he mentioned the tax breaks. Maybe what we need to do is look and see if Aetna gets a tax break. Maybe that's an area that we could do something about.

That's the value of this Committee. When all of us put our heads together, maybe there's something we could do. And I would think that what Representative Cafero said is something we ought to look at.

So, anyhow, thank you again for coming.

HELEN KEMP: Well, thank you for having me.

SEN. PRAGUE: Thank you very much. Do we have a phone number or something where we can get in touch with you? Would you give it to our clerk? Thank you.

HELEN KEMP: Oh, yes, I will. Thank you.

SEN. PRAGUE: So our next attorney is Attorney Moukawsher. Where's my agenda? Welcome Attorney Moukawsher. You have a brother here in the Legislature.

TOM MOUKAWSHER: Yes, I am not Representative Ted Moukawsher.

SEN. PRAGUE: But you look just like him.

TOM MOUKAWSHER: I am former Representative Tom Moukawsher though, and I have spent many years in various capacities hanging around up here. But I've reformed, and now I'm here in my capacity as co-chairman of the American Bar Association's Committee on Employee Benefits and Individual Rights.

I also edit the American Bar Association's newsletter on employee benefits, and I practice employee benefit law exclusively on behalf of employees and retirees here at Hartford at Moukawsher and Walsh.

And so that's the capacity in which I address you. And I certainly want to echo some of the things that Attorney Kemp said. She and I just did a presentation on some of these difficult subjects for the Bar Association in Phoenix.

And ERISA is indeed a complicated and annoying statute. These employee and retiree termination questions are some of the most annoying, because it's actually becoming quite common.

More and more companies today are terminating retiree health insurance. And every time I've read about one, it always turns out that the employees, the retirees, are shocked to find out that their benefits that they believed were lifetime benefits, in fact, were not lifetime benefits because, as the companies tend to explain, you didn't read the small print.

And that there was, in one place in the documents that were given to employees, a promise of lifetime benefits, and in oral explanations a promise of lifetime benefits, but somewhere in some document there is, in fine print, a statement to say that the company reserves the right to change its benefits at any time.

Now the good news is that the federal courts, at least in this Circuit, in the 2^nd Circuit, in the District of Connecticut, enforce lifetime-benefit promises. The bad news is that they usually also enforce the small print telling them that lifetime benefits aren't exactly lifetime benefits.

The really interesting thing is, and that may be the issue in this case, is what do you do when it's not so clear what happens?

As Attorney Kemp pointed out, if there's, if it's been made unequivocally clear to employees that these benefits don't vest, as she put it, don't last a lifetime, if that's unequivocally clear, then retirees are out of luck.

If, on the other hand, it's absolutely clear that they were promised retiree benefits, then clearly they have a right to enforce them. The real issue is what happens when you have a mixed message.

What happens when, for instance, the disclaimer, the statement that the benefits aren't for a lifetime, are in one document, and then in another document, without any sort of disclaimer, there's a very explicit promise that there are lifetime benefits, and that these promises are reinforced over and again by the personnel of the company at issue.

Here, a perfect example, of course, is when the chairman of the company comes out and says, we are going to live up to our promises. Just like, apparently, Mr. Donaldson did in this case.

Now that has to be weighed off against the nature of the disclaimer, the disclaimer in this case saying we reserve the right to change benefits. Many questions can determine whether that's enforceable, such as where was it, how prominent was it, was it only in one document and not in another.

For instance, I have a case with Lucent Technologies that I'm litigating in Ohio on this question where, what else was it accompanied by? And I think Representative Cafero and others have addressed the situation about what's the inducement here, what's the consideration.

And, many times, the company will say look, we're promising you lifetime benefits. And in exchange for the promise of these lifetime benefits, we not only want you to retire, we want you to retire early.

And in the Lucent case that I'm litigating now, they kept telling people that if you leave by the end of the year, your benefits for healthcare will be X and such, excellent ones. But if you wait another three months after that, they won't be so good anymore, so go now.

And the company obviously had some goals that they were trying to meet financially, and they needed to go out the door, and they got them to do it by doing that.

But sure enough in the Lucent case, after maybe six months to a year, the company turned around and said now that you're out the door, you didn't read the small print over here which says we can change the benefits at any time. And they reneged on the lifetime benefit promise.

We're litigating that now, and there are lots of bad law out there, as Attorney Kemp said. Fortunately, some of the better law is actually here. The District of Connecticut has good law on this subject, the 2^nd Circuit Court of Appeals has good law on this subject.

And, really, unless it's a clear case, unless the disclaimer of lifetime benefits was unequivocal, this is going to be one of those situations where, this is just my personal opinion, others would have a more skeptical opinion perhaps, but that a court would probably look at the totality of the circumstances, the things that I said, where was it, published what else was said, was there any reason to believe that the people didn't get these disclosures?

In one case I'm litigating up in Boston, where that happened it was explained to an employee that, oh, I know, don't you, you're showing me this disclaimer I know, but that doesn't apply here.

So a company, for instance, might give you this very clear written disclosure. And then somebody else may say that that doesn't apply under these circumstances. And in that case, a court shouldn't, and some haven't applied the disclaimer, because an employee's been misled.

As Attorney Kemp said, that's a breach of fiduciary duty.

Companies in this situation explaining about benefits to employees and retirees have a fiduciary duty to give truthful and complete explanations in response to questions.

So if employees were going to their supervisors or to their human resources people, to anyone that they had a reasonable expectation that that person was the right person to ask about it, and that that person assured them that notwithstanding anything else, you're going to get lifetime benefits, then those promises could lead to an action for breach of fiduciary duty.

Because the company did not provide truthful and complete answers to a question under that circumstance. So even if you have a disclaimer in front of you, somebody explains to you it doesn't apply and you then rely on that and leave, in instances like that, you can enforce the promise of lifetime benefits.

But, again, I'd say it's the totality of the circumstances. I think it was a question though.

SEN. PRAGUE: I didn't know you were done.

TOM MOUKAWSHER: I'm not done, but I like to be interrupted with questions at any time. In any case, so I would say that the totality of the circumstances is what would matter under those circumstances.

As Attorney Kemp said, these suits aren't easy. As Attorney Kemp also said, and I would agree with, that with respect to the simple issue of whether you could say that companies must give lifetime benefits if they promise lifetime benefits, the Legislature, the Connecticut General Assembly doesn't have jurisdiction, the Congress does.

And it sounded like you had a number of things that took into account that fact, and that there are some things, perhaps in the nature of leverage that the Connecticut General Assembly can do. But I would also like to take this opportunity to urge the Legislature to urge its federal delegation because you would get a lot more credibility than I do with them, and to make some changes in the ERISA statute.

This is a symptom of a disease in ERISA. It is not the only symptom of the growing disease. There are many problems with it. And ERISA, of course, if it doesn't protect employees, nothing does, because, of course, of the doctrine of pre-emption. But there are many other problems. I want to give you an example.

There's a case in California called Bast v. Prudential. And that was a case in the Federal Appeals Court where it held that the only thing that ERISA could do, a woman named Rhonda Bast, after her insurer refused to pay for a vital operation, was to, of course, order the insurer to pay for the operation.

It didn't do Rhonda Bast any good, however, because she died waiting for the operation, which the insurance company failed and refused to pay for. The court said that ERISA could have provided her the money for the operation, but it also prevents her from getting anything for dying while waiting for it.

In a recent case, actually that involved Aetna, called Aetna v. Davila, the United States Supreme Court confirmed that this was the right result, and that it struck down a Patients Bill of Rights law that Texas had passed.

There are lots of bad things like that about ERISA. That's just perhaps the most egregious case. There are no jury trials under ERISA. There are no punitive damages even in a case where, for instance, a company deliberately decides to withhold benefits and lets someone die.

There are no punishment damages an employee could seek under ERISA. A small case under ERISA can't be brought in small claims court. You have to file a federal lawsuit.

So let's say you have a situation where you have a benefit of $20 a month, you have to file a federal lawsuit to try and recover that. And if you win, the only thing you can get out of it is the $20 a month.

There's no guarantee that a court will, in addition, order the company to pay your attorney's fees. It's up to the judge totally in their discretion.

Finally, and this is one thing I'd like you to take particular note of, because it's going to, I have a recommendation about something you actually can do.

And, finally, this is about the deck being stacked against employees, including the retirees here today if they go to federal court, is that under ERISA what are called discretionary clauses that are written into the health insurance contracts under which companies claim it gives the insurers virtually the final say over what medical treatment employees can get, over what a plan covers, over what a plan says etc.

The bottom line, the courts have said, is that when a company refuses your benefits, or interprets its plan as not providing you any more benefits any more because there's no lifetime promise, the courts will generally overturn that decision only if it was arbitrary and capricious.

So one of the worst things about the statute is that it's been interpreted as requiring the courts to side with the employers in these circumstances from the start, and only overturn them if they're arbitrary and capricious.

With that, I have five things I'd like to recommend that you pass on to Congress that would in part help the retirees in this room, but in many ways help so many others, and one that could help them and many others that you can do.

The first of them is that there, this is a problem in this case of disclosure. And I think that there ought to be minimum standards in ERISA governing the size and placement of any disclaimers of the topic that are at issue here.

SEC law and elsewhere covers these things quite clearly, the nature of the disclaimers, lots of consumer protection laws obviously are the same.

ERISA ought to make it clear that you can't put a teeny disclaimer over here, and then an enormous advertisement of life benefits over there. And I'd certainly recommend that you recommend that to Congress.

Also the external review process that was discussed earlier ought to be expanded and ought to cover all of these ERISA plans. States have been doing a pretty good job with it, and it should cover all of this.

The family of Rhonda Bast also shouldn't have been left in legal limbo without a remedy. ERISA should let people recover not just the benefits, but reasonable damages in death cases, like Rhonda Bast's.

And I personally believe that punitive damages not permitted under the current law ought to be there for the worst cases, clearly for the worst cases, especially in the situation where someone intentionally causes someone else's death. There should at least be some punishment that an employee, a state could seek as a remedy for that.

Fourth, ERISA should replace the current practice of judge trials with jury trials. There is absolutely no reason to deny this basic right to people simply because, say, they're suing an HMO.

Fifth, the existing Attorney's Provision should be strengthened to mirror the Civil Rights Attorney's Fee Statute, under which if you win, if you're a prevailing plaintiff in a Civil Rights Statute, you're going to get your attorneys fees.

And I know that might not affect the matter that's before you today, but it's a very important thing, because the person out there with $20 of benefits to recover simply has no access to the courts, because there's nothing other than the $20 they can recover.

Attorneys won't take their cases to recover a third of $20 a month for the next 20 years, and those people deserve representation. And people like us are forced to turn them down.

We have other business, it's not a complaint of ours, and the shame of it is that these people get stuck from it. So the fifth thing I'd recommend is for Congress to do something about that.

Now as for the Connecticut General Assembly, I think I don't want to make too small a thing about this, because you could have an enormous impact on people's lives, on the retirees who go to court to challenge decisions like that which was made here, and also the lives of people with health insurance and disability insurance by doing something about the discretionary clauses, which I described a moment ago, which gives plans the discretion to decide virtually without challenge what's covered, what's not covered, what the plan says, what the plan doesn't say, in which the courts interpret as granting them the right to make any decision they want unless it's arbitrary and capricious.

This is an area of insurance regulation. One of the things you need to know about ERISA is there's one little section in it that's called a savings clause, which says that if what you're doing is purely a regulation of insurance that the State Legislatures can act.

Now in August of 2004, the National Association of Insurance Commissioners passed a model act, which it recommends to the states. And that model act forbids these clauses, giving these companies this wide latitude to defeat lawsuits like the one that may emerge here and the ones that others filed. And they've recommended to the states that they adopt them.

If the Connecticut General Assembly adopts that, it will shift very much, very strongly, and any practitioner in ERISA would tell you this, very strongly what's rated against employees and beneficiaries today towards something that might be a more neutral ground.

In my testimony, I put the NAIC website in there. You can go there and order a copy of the model act, and you'd be really doing something within your power, number one, and something that would make a big difference perhaps in the lives of retirees like the ones here today, but also for thousands of others in Connecticut that suffer because courts presume that companies are right and employees are wrong.

And I thank you for your indulgence, and I'd be happy to answer any questions.

SEN. PRAGUE: Thank you very much Attorney Moukawsher. Let's give Representative Cafero his chance.

REP. CAFERO: Thank you, Madam Chair. Thank you so much for your testimony. Just to focus on that last part, this disclaimer. When you say disclaimer, are you referring to the small print that says, but we reserve the right to change whatever we want whenever we want?

TOM MOUKAWSHER: No, you're not going to be able to change that law. There's an additional provision in most insurance policies that's a discretionary clause as opposed to a disclaimer.

The discretionary clause says that the insurance company will have the final and absolute control over the meaning of the words in the plan, what they mean, such as, for instance, the promise of a lifetime benefit, and also will have final and absolute discretion over things like what kind of benefits are covered, what kind of health benefits are covered, etc.

That's a different kind of clause. But it adds another problem for people like the people here today, and for anybody who makes a claim, because courts interpret that to mean, this is the most bizarre, but the courts interpret that to mean that you have to treat an insurance company in that situation like you would a state or federal agency.

In other words, you defer to their judgment unless it's deemed to be arbitrary and capricious.

REP. CAFERO: That being the case, maybe I'm misunderstanding the difference, that being the case, when you refer to various clauses that, for instance, we insist upon in regard to consumer protection, the size of the print, the locale of the print etc., does that pertain to what you're talking about?

In other words could we pass, our Insurance Committee and our Legislature Committee pass a law that insists that all insurance-related policies issued by whomever, if, in fact, they provide a discretionary clause which allows them to change the stated benefit, this discretionary clause must be prominently displayed in a certain print typed etc., etc., is that within our power to do?

TOM MOUKAWSHER: I think it's something that you really could explore if you confined it to the insurance policies, and confined it to something like disclosures, something like, if you're going to say this benefit can be changed at any time, put it in so big a type and things like that. I guess I'm a little more optimistic than lots of lawyers in this field.

And if it hasn't been held to be something that's outside your jurisdiction on insurance, like lots of things have, I'd give it a try. I wouldn't suggest for a minute that I think you have the power to require someone to provide lifetime benefits or to interfere with the substance of ERISA plans, because only Congress could do that and I don't think they would.

REP. CAFERO: That I understand, but with regard to changing the rules in the middle of the game, I guess is it within our power to say, when you outline the rules, if you're going to reserve a clause to change the rules, you better make damn sure you put it prominently of a certain type that someone signs off on or checks them off as they understood them, like Miranda rights, or something like that. Is that within our power to do?

TOM MOUKAWSHER: I wouldn't say that as a consumer protection type of thing, but if you stuck it as an insurance thing, ERISA has this savings clause for insurance. It would be worth researching, I guess, would be the fair thing to say about that.

It would be worth researching that if the policy of insurance has some language like that in it, that the policy has to put it in so much size type or something of that nature.

I guess my point is that I've never seen anything that's said that's out of bounds too, so why not, you know, research the issue, and then consider it as a piece of legislation.

The other thing about outlawing these clauses that give them the absolute discretion to interpret the plan, that has been researched and you can do that. So I'd certainly recommend you do that, and I would recommend you research doing exactly what you just described.

REP. CAFERO: Thank you.

SEN. PRAGUE: Representative Hetherington.

REP. HETHERINGTON: Thank you, Madam Chair. So the area that is left to regulation of insurance would include such things as defining the terms, defining the terms of the policy, is that right? I mean, the terms, the words providing the definitions.

TOM MOUKAWSHER: Well, as long as it's within the context of traditional insurance regulation. Once it gets to impacting a common plan, once you get beyond traditional insurance regulation, that's where you get into problems.

REP. HETHERINGTON: What if you were to define lifetime benefit as meaning a benefit that exists for a lifetime, not one subject to further modification. Could you get in the back door, in effect, by defining the term?

TOM MOUKAWSHER: It's only my opinion, but I expect that they would say that that would be related to the substance of the ERISA plan and would be pre-empted and you couldn't do it.

REP. HETHERINGTON: I guess another problem is that there's some question whether or not a plan such as the Aetna plan would be characterized as an insurance plan.

TOM MOUKAWSHER: It's a plan that provides insurance. So I guess you'd have a planned document that lays out what the terms are, and there may also be an insurance policy, but it's the presence of the plan, not the policy that makes it covered by ERISA.

Something sponsored by an employer as a plan is what ERISA covers. If you went out and bought your own individual policy, or any employee who didn't have coverage from his company went out and bought an individual policy, that's not covered by ERISA.

It's the plan. It's the fact that you've got this group plan that you're under which ERISA covers. And it was originally done for a very good reason, which is that it would be nice if there was one set of laws we could look to to do this.

So Congress originally thought this would be a great way to protect employees all across the country, but it's turned out to do exactly the opposite when it needs to be fair.

REP. HETHERINGTON: Okay. Thank you for your helpful counsel. Thank you, Madam Chair.

SEN. PRAGUE: I'm going to ask you for a favor if you would do it or have time to do it. Would you briefly jot down for us the language you would like us to present? Because even though we're not the Insurance Committee, we are the Labor and Public Employees, and retirees' benefits are something that we could deal with.

And because it's related, if you could just give us the language on those two issues that this Committee could offer, we would very much appreciate that.

TOM MOUKAWSHER: I would be happy to look at the disclaimer issue for you, and then I can get for you the Model Act that the National Association of Insurance Commissioners is recommending. I'd be happy to do that.

SEN. PRAGUE: Okay, thank you very much, and thank you for coming in.

TOM MOUKAWSHER: Thank you.

SEN. PRAGUE: I just have to leave this hearing for a few minutes, and Representative Ryan will take over. The next speaker is Attorney David Rintoul.

REP. RYAN: Good afternoon, Sir.

DAVID RINTOUL: Good afternoon. My name is David Rintoul. I'm an attorney with the law firm of Brown, Paindiris & Scott. And among other things, I represent many claimants who are bringing claims for benefits under ERISA.

I've represented people both in cases involving changes in retiree health benefits as well as getting people coverage for medical conditions, and also for long-term disability benefits. I think the basics of this area were covered well by Attorneys Kemp and Moukawsher.

What I would like to point out to the Committee on the basic issue of the change in retiree health benefits is that the current state of the law is very inconsistent with the way most people operate.

They get an announcement from human resources saying, you retire by the 30^th of the month, and you'll get lifetime health benefits. They go to presentations where HR puts up wonderful beautiful PowerPoint slides, which again repeat, lifetime retiree benefits.

Situations like the CEO, like Mr. Donaldson, saying lifetime retiree benefits. Senior vice president, like Mr. Dwyer, repeats, lifetime retiree medical benefits. Yet many courts will enforce the black ink on the purple page, saying that they reserved the right to change benefits.

I don't think the point is necessarily that the retirees here are looking to put Aetna into a straightjacket in terms of the benefits that they offer into the future that are going to affect it's financial viability.

I think what they want, and what the law doesn't require, is being forthright. If you're going to have a paragraph saying lifetime free medical benefits, the next paragraph should be, but only so long as we decide to give it to you.

Every PowerPoint presentation that says free retiree health benefits, the next slide up there should be until we decide to change it.

So certainly, I don't think anyone in this room would want to impose a continuing obligation on a company that the company did not intend to adopt, but at least they should be required to say it. They should be required to say what their obligation is.

And currently, the law does not require that. Now the law is developing. It is in much better shape than it was five years ago. Five to 10 years ago, both Attorney Moukawsher and I would say, it doesn't matter if it's on page 34, in footnote 7, in 8-point type, you're out of luck. The law has gotten better, particularly in this Circuit.

The people, there's one particular case in the 2^nd Circuit that has a pretty complete explanation of this issue. And I'll give you the site, in case you would want to have you or your staff look at it. It's a case called Devlin v. Empire, and it's 274 F.3d 76, which goes through this entire issue of changes in retiree health benefits.

Now as Attorney Kemp pointed out, there are possibilities of bringing claims for a breach of fiduciary duty or estoppel. But let's say in that first announcement that came out, and you've got the retiree health benefits promise in the first paragraph?

If that language reserving the right to change is in that same document, it's going to be a really tough claim. Even with the PowerPoint slides, even with CEO Donaldson and the senior VP, it's going to be an awfully tough row to hoe.

Now I would like to, and I will certainly answer any questions on this point, but I want to reinforce some of the other points that Attorney Moukawsher made about the remedies available under ERISA, particularly the availability of attorney's fees.

In the current political climate, the idea that an elected official would be concerned about attorneys getting their fees would not seem to be a very high priority.

The problem is the Department of Labor doesn't bring these cases to enforce a claim to disability benefits. The Attorney General doesn't bring these cases to get people the medical benefits they've been promised, or the disability benefits.

Tom and I are the only types of people that do it. There aren't many people in the state that are willing to bring the plaintiffs' claim under ERISA, because it's tough.

So the point is, these are rights that society once vindicated. And if you want to do it, you've either got to pay an attorney. [Gap in testimony. Changing from Tape 1B to Tape 2A]

Patients to get their attorneys fees from the people that didn't meet their obligations.

I recently had a case where I obtained disability benefits for somebody who suffered from Fibromyalgia. I thought it was an outrageous case.

They rejected the claim based on a file review by someone who had worked in a rural medical clinic for 15 years, and rejected the opinions of 2 national experts on Fibromyalgia.

I managed to prevail, but the court did not award attorneys fees. That meant my client had to pay a third of her benefit to me. I came out, I have no complaints, I came out pretty well, but it makes me furious that the insurer who wrongfully denied benefits didn't have to pay, and it had to come out of my client's recovery.

The point is, corporations are profit maximizers, right? What is the incentive to pay a benefit? You don't pay. If you've got any argument that would justify you not paying it, why would you pay it?

The worst you're going to have to do is pay the benefit and maybe pay your lawyers', attorneys' fees, and maybe pay the claimants attorneys' fees, maybe.

But think of the number of claims, which are never going to be brought because there aren't attorneys' fees.

The companies are much better, unless it's an absolute lead pipe cinch to deny the benefits and, say, sue me. There has to be an incentive. There has to be a financial reason to make sure the companies are actually complying with their obligations and what they say.

And currently, there are not those incentives. The incentive is not to pay benefits.

Furthermore that's related to the issue of punitive damages. It doesn't matter how outrageous the benefit denial is. All they're going to have to pay, no matter how bad it is, is the benefit, their own attorneys' fees and my attorneys' fees.

So there is no financial incentive to actually pay the benefits. Now on the attorneys' fee issue, this has to be something that's done by Congress, due to the pre-emption of ERISA. If it's anything concerned with the plan, there's not a lot you can do about it.

This also relates to the issue of punitive damages. The purpose of punitive damages is to punish companies who are duly wrong. And then you have an outrageous benefit denial. The only way you're going to avoid that is if, occasionally, there's a big hint.

So I would reinforce Tom Moukawsher's point about the importance on the federal level of expanding the remedies, particularly attorneys' fees. I won't bring the claim if it's going to be worth less than $60,000. I won't even talk to the people. It's not, I can't do it from a business sense.

Secondly, the issue of arbitrary and capricious language that Attorney Moukawsher talked about. This is such a dry issue about whether it makes a difference about one sentence saying the plan reserves the right to interpret the terms of the plan and make decisions regarding benefits.

If that language is in a plan I'm looking at, 90% of the time I don't take the person's case. Because as long as there's any rational basis for the company's decision, any rational basis, I'm going to lose. And you can be sure that it's a very rare plan, which doesn't put that sentence in.

So that case where I told you about, where they denied benefits based on an internal foul review from a GP who had worked 15 years in a rural clinic and 10 years for the insurance company, under the arbitrary and capricious standard of review I probably would have lost.

I probably wouldn't have brought the case. It just happens it was an old plan. The language had never been cleaned up.

So there, in the area of ERISA, there are vast areas where there is no remedy for circumstances where, when one looks at it, one would think there's got to be something to do.

And I would certainly reinforce Attorney Moukawsher's view that if arbitrary and capricious language was banned in an insurance contract, that would make a huge difference to the rights of Connecticut workers. Where it won't make a difference is in the self-insured plans, which is one of the points Attorney Prague made.

For instance, Aetna, their health benefits are self-insured. They don't have the insurance policy. The money comes out of their general fund. You can't do anything about that.

If it's self-insured it's totally pre-empted by ERISA. And there's nothing you can do to affect that. And the only remedy can be at the federal level.

I'd now be happy to answer any questions the Committee might have on any of these points.

REP. RYAN: Thank you, Mr. Rintoul. Do we have any questions? Senator Guglielmo.

SEN. GUGLIELMO: Just a quick question. When you mentioned the federal law, obviously, that's the same in all 50 states, but you said that you and a prior attorney mentioned that there is good federal law in the 2^nd Circuit. Does that mean they're interpreting it differently than other circuits?

DAVID RINTOUL: Yes, for instance, one illustration of that point with this issue of vesting. Many Circuits say you actually have to use the word vesting, it's got to be in the plan, and it's got to say retiree health benefits vest for life.

In the 2^nd Circuit, however, if your plan says you will be provided with lifetime health benefits, that language is sufficient to vest the benefits in the absence of language reserving the right to change.

So, basically, you have the same law, but you could have different outcomes in Connecticut than you'd have in Montana. That's where they're different.

SEN. GUGLIELMO: Has anybody ever brought it up higher than that, to the Supreme Court to test it?

DAVID RINTOULE: Eventually, I think this issue will probably go to the Supreme Court, because there's such a clear split in the Circuits, but it has not happened yet.

SEN. GUGLIELMO: Okay, thank you.

REP. RYAN: Thank you very much for your time. The next portion of the testimony, we're going to ask people to stay within three minutes. You're going to hear a bell. That will just give you an indication of how long you've been speaking. That's just so we can get everybody in to give their testimony that they brought in today. We can see that there are a number of people here today, and we don't want to make anybody wait any longer than they have to.

The next person to testify is going to be Representative Guerrera, and his testimony is going to be presented by Ben Baigle.

BEN BAIGLE: Thank you, Representative Ryan, Members of the Committee. For the record, I am Representative Tony Guerrera, the 29^th Assembly District serving Rocky Hill, Newington, and Wethersfield.

I come before you today to speak in support of legislation that would prohibit any stock corporation doing business in the State of Connecticut changing its retiree benefit package in respect to employees that have retired.

I have heard from a number of constituents in my district who are retirees who were recently notified that a portion of their health benefits policy was being stripped from their package, leaving them without coverage.

I submit to you that this is unfair. It adds an extra financial burden to those who had planned their retirement based on certain assuring expectations, are living on fixed incomes, and can little afford the additional financial burden placed on them.

I ask that the Committee look favorably on passing any legislation that would protect the benefits of all retirees, and I thank you for allowing me the opportunity to speak before you today on Tony's behalf.

If you have any questions, I'd be happy to bring them back to him.

REP. RYAN: We want the answers now. Do we have any questions to bring back to Representative Guerrera? Thank you. Thank Representative Guerrera for presenting some testimony this afternoon.

We'll now go to the testimony by Aetna retirees. And the first person giving testimony would be Jack Moore, and he'll be followed by Charlotte Bradbury. Good afternoon, Mr. Moore.

JACK MOORE: Good afternoon, Senator Prague, Representative Ryan, and Senator Guglielmo, and also the Committee. Thank you for allowing me to have some time here.

I retired from the Aetna after 33 years. And one of the reasons that I retired was I was promised lifetime no-charge dental and medical coverage, in other words, no premium charge.

Now, interestingly enough, Attorney Moukawsher described exactly my case. It was explained to me that if I left in 1987, the benefits went with me. But if I waited until 1988, they would not. That's exactly what he described to you just a few minutes ago.

Now, at the time, there was no reason for me to suspect that there was anything wrong with this promise. After all, the essence of insurance is promises.

And for 150 years, or actually a little more than that, the Aetna had held itself to an exceedingly high standard of ethical standards of ethics and morality. Obviously, the present administration has a different standard, lower.

I have two personal reasons for being concerned with this matter. For one thing, for one, I inherited poor teeth and a not-so-good heart. In the past three years, I've gone through all kinds of surgery on my jaws and my teeth, and had I had to pay all of that, that would have been very, very expensive. Well, it was expensive anyway, but I didn't have to pay for all of it.

I've had one heart attack, and I'm going to have a pacemaker installed fairly shortly. Most of the members of my family have passed away as a consequence of heart attacks, so obviously, this is a serious concern to me.

If the Aetna's broken, my big problem here is that if the Aetna's broken promises continue, I can envision escalating costs of my premiums, and perhaps even the abolition of my free medical coverage. And if that happened, it would be disastrous, it really and truly would.

You know, the thing that really annoys me about this whole thing is that this is a self-correcting problem. The Aetna never had to do this. If you're looking back at me, you won't see a bunch of blond-haired 20-year-olds. All of these people are going to pass away, fairly shortly.

When that happens, when that happens, I'm not, you're going to die, I'm not going to say, I'm with you. When that happens, there's no problem, it goes away.

So why did they have to do this? Why did they have to discriminate against their employees? These are the same people who built that company. I mean, they inherited a pretty good base, that's for pretty sure, but nevertheless.

John Dwyer commented on the fact that the company's doing very well financially. Boy, it sure is. The CEO's compensation is roughly $100,000,000 a year.

Now my guess is that every member of this Committee could scrape by on $100,000,000 a year. Additionally, the company intends to buy back stock. I'm not sure what that does is totally understood.

If the company's income is up here, and their numbers of stocks are here, if the stock quantity is reduced by 50%, the value of each share doubles.

Now who do you think owns a huge block of this stock and options to buy it? The very people that made this decision. Now isn't that a coincidence. No, I don't think so.

By the way, another thing you should understand is that the situation regarding this, I call it a broken promise, does not apply to future retirees.

As of about three years ago, these promises were not made, officially were not made. So consequently, all we're talking about is a finite group predating I think it was 2001.

I don't really know what you can do to help us, but I certainly hope you can do something. I've heard some of the attorneys here giving you some suggestions, and I hope you're able to act upon them, because you have a group back here that needs your help.

And by the way, you have Aetna employees in each of your districts, so this is not just a local thing, it's not just from New Hartford, which is where I come from, it covers all 669 towns.

Thank you very much for your time.

REP. RYAN: Thank you, Mr. Moore. Do we have any questions for Mr. Moore? Thank you, Sir. Thank you for coming in and waiting for the other testimony, I appreciate it. Miss Bradbury, followed by Alfred Bradbury.

CHARLOTTE BRADBURY: Senator Prague, Representative Ryan, and all assembled, my name is Charlotte Bradbury. And as the wife of an Aetna retiree, I have every reason to be very, very interested in these proceedings. But today, I'm here to read the statement of Marilyn Wilson, who is very ill and unable to be here to do this for herself.

Good afternoon, my name is Marilyn Wilson, and I'm an Aetna retiree. I spent 29 years of my working life at Aetna and retired in 1991. Aetna was a very, very fine company, and I was proud to say that I worked for them.

I'm a widow. My husband died in 1978, when my daughter was entering her last year in college. I was so thankful that I had a job and good company, and that Aetna offered its employees medical and dental benefits, a 401(k) plan, life insurance, and the knowledge that I would receive a pension and medical/dental benefits upon retirement based upon salary and years of service.

Aetna has started to erode the medical and dental benefits promised to its retirees. At retirement, based on years of service, I was to pay 15% of the premium.

Now the dental subsidy has been taken away, and retirees must pay 100% of the dental premium. That's a change from about $100 to $800 per year. While this may seem like a relatively small amount, to some retirees, it is a definite hardship.

Some retirees are now in their 80s and a few even in their 90s. They retired at a time when salaries were much lower than they are today. Therefore, their premiums are very small, and their Social Security payment is low for the very same reason. Some retirees cannot afford this extra dental premium.

As retirees, we are worried that the rescission of the dental subsidy is only the first step in reducing or eliminating other benefits such as prescription drugs or the medical plan. Many people of retirement age take several medications, and cannot continue to take them if they have to pay the full premium and the increasing deductibles and co-pays.

Aetna, without its current employees and its retirees who have spent their careers there, is really just a building. Without the people who have done the myriad of jobs involving running an insurance business, it is nothing.

Aetna has gone through some rough times, but it is now doing very well. Aetna's stock is at an all-time high.

Just recently, Aetna took $32,000,000 out of the money set aside for payment of dental premiums and benefits for its retirees and added it to its bottom line.

Just recently, former retirees with whom I was acquainted have died [inaudible], and eventually they will all be gone, and Aetna will no longer have to hold the monies for them.

Whatever would be left in benefit funds at that time could then be applied to the bottom line, and their liability would be over.

I worked with some very fine, honest, and intelligent people in the employees benefits division, who were very dedicated to Aetna. One of the men for whom I've worked was a vice president.

He sent a note to all the officers that reported to him that he had read that a person would be much better off to stay with the company for many years than to seek greener pastures in another company.

Years of service and increasing salary over the years would add greatly to their patient benefits. Many employees of Aetna worked for 25, 30, 40, and a few even for 50 years. That is one reason that I stayed with the Aetna for so long.

Aetna has lost its integrity in our eyes by not keeping the promises it made to us when we retired. This is a moral issue. Aetna, which is in the healthcare business, should be an example to all other corporations.

What would happen if Aetna's customers, who are small, medium, and large corporations, decided not to pay any medical and dental premiums for their employees? How many of those employees could afford to keep their benefits, 50%, 40%, or more or less? Many of those employees might have to drop their benefits.

It wouldn't take long before Aetna and other healthcare companies would see what effect that would have on their bottom line. They might eventually have to go out of business, and then the entire country would have to look for the government for national health insurance, which, as taxpayers, I don't believe we could afford. Such a plan would be very expensive and possibly a bureaucratic nightmare.

This country now has the best healthcare system in the world, and we want it to stay that way.

In summation, we as retirees who were very loyal, believe it is in Aetna's best interest to be morally responsible and to keep the promises that were made to us at retirement. I am sure that retirees from other companies feel the same.

Thank you for your time and your consideration of this issue.

REP. RYAN: Thank you very much. Do we have any questions for Mrs. Bradbury?

SEN. PRAGUE: I have a comment. I want to thank you for coming in. Tell your friend we hope she'll be better.

CHARLOTTE BRADBURY: Thank you very much. I'll pass that along.

SEN. PRAGUE: Are there any Members of the Congressional offices still here? Okay. Thank you.

REP. RYAN: Mr. Bradbury, I know I called you next, but the next person has to leave, so would you mind if I just switched the two of you? Mr. Valechko? I know I have Mr. Bradbury.

SEN. PRAGUE: Can I ask the people who are coming up to testify, if it's going to be, you know, what has already been said, could you summarize your testimony for us so we won't be here for any, for much longer? We'll appreciate that, thank you.

SHARON VALECHKO: I'm Sharon Valechko of Southington. I retired from Aetna after 45 years of service. I don't want to talk about the contribution of benefits because you're already aware of that.

As you are aware, Aetna announced in mid-2004 they would discontinue their contributions to dental coverage in January 2005. They offered to renew the coverage at what they called group rates, but this amounted to less coverage for premiums as much as four times what I paid with a subsidy. My husband is also retired.

My real fear, especially as a breast cancer survivor, is that Aetna next will discontinue the subsidy of health coverage as well. This means an additional significant drain on our fixed income. Even worse, if I am forced to go out to the market to find health coverage, I may not be able to get coverage because of my history, or the policy would exclude coverage from re-occurrence of my previous illness.

I won't finish, because you already have heard about the reneging, so I won't duplicate what everyone has already said. Pretty much, yep.

REP. RYAN: Thank you very much. Do we have any questions for Mrs. Valechko? Thank you for bringing your testimony. Oh, we do have a, Representative Zalaski.

REP. ZALASKI: I just wanted to say that, as I said earlier, I know what you're going through, and believe me, when I tell you that if there's anything this Committee can do, we will. I want to thank you for coming.

SHARON VALECHKO: I appreciate that. Thanks a lot.

REP. RYAN: Now does your husband have to leave with you as well? Does he want to quickly come up?

THAD VALECHKO: My name is Thad Valechko. I worked with Northeast Utilities, and I am retired. [inaudible] I used to pay like $80 a month when I worked. My bill is now up to $220 a month after I retired. I'm just in the same boat as, whatever they are, the same boat as you're going to be in in the future, pretty soon. But I do want to say it's a shame on my part. I have never been to the Capitol Building, and I'm very happy to see the way it works, and the way you're doing your job.

If I could, I'd vote for all of you, but I may not be able to do it. Oh, yeah, I can run for you. Okay, I'll go through the left side. Thanks very much. I really appreciate it.

REP. RYAN: We happened to get that political speech in as well. We appreciate you coming in. I wanted to bring Mr. Valechko forward just to show that this, if you've been reading the newspapers, I think one of the attorneys brought out the point. This is more widespread. This is becoming more widespread than just Aetna.

And I didn't want to miss the opportunity to kind of point that out as the only other retiree that we had here this afternoon who's going to go through the same problem. Thank you. Thank you for coming.

Mr. Bradbury? Okay now, we have one State Rep up here who is also a, Mr. Bradbury thank you for allowing us to do that.

ARTHUR BRADBURY: Representative Ryan and Committee members, we really appreciate the opportunity to express our concerns about this issue, and thank you for holding this hearing.

My name is Arthur Bradbury, and I live in East Hartford, and that was my wife Charlotte who spoke just a few minutes ago.

I had been employed by the Aetna Life Insurance Company for 36 years when I took early retirement in 1985.

The medical and dental benefits, which I took into retirement with me, were essentially those I had enjoyed as an active employee. There were health premiums to pay for a few years, but when I reached Medicare age, they stopped.

That's right. Although deductibles have occasionally been increased over the years, there were no further premiums for that coverage.

On February 6, 2004, almost exactly one year ago, Aetna announced to its retirees its intent to eliminate the company's subsidy from the retiree dental plan beginning January 1.

And what has caused even more concern is that they also hinted about the real possibility of reducing or eliminating other retiree health benefits in the future. The reason advanced at that time was that Aetna had to bring its cost structure in line with other competitors, and after all, and I quote, “most companies do not even offer a group dental plan for its retirees.”

To be very honest, I was hurt, I was disappointed, and I was angry.

This was a company in which I had taken enormous pride. It had stood for reliability and fairness. It had always tried hard to keep its promises, not only to its employees, but to its customers. And, after all, shouldn't that be the hallmark of every trustworthy insurance company? Keeping its promises?

I wrote a letter to Aetna Chairman John Rowe on March 30, 2004, and in it I congratulated him and his management team for turning the company around financially. I also pointed out my views are that in the face of this apparent return to profitability, the elimination of an important retiree benefit appeared greedy, unethical, and unfair.

And since retirees had been promised four years earlier, as you've heard, by an Aetna chairman, that retiree benefits would always be the same as they were at that time, I felt betrayed.

I was assured in the Aetna's acknowledgement letter to me on April 2, 2004 that my concerns would be reviewed with the senior management team. Imagine my dismay when I learned that the company had already taken steps by the end of that first quarter to eliminate the $3,000,000 annual outlay and take down the $32,000,000 reserve.

I ask you, was this duplicitous? Is there any wonder that I'm disappointed in the Aetna?

My wife and I decided that we needed to keep our dental coverage, and so, from a premium of 0 for that coverage, our monthly pension check was $66 smaller starting from January 1, 2005. And as has been pointed out, that's going to be over $800 a year.

The hope of the Aetna Retirees Association is that Aetna will reconsider its action and restore the dental subsidy, which it has eliminated.

Further, and perhaps of even more import, is the hope that it will honor other benefits, which have been promised to its retirees.

That's why the Association was formed, and that's why I'm here today. Thank you.

REP. RYAN: Thank you. Do we have any questions for Mr. Bradbury? We appreciate you coming in. Next is Mr. Gundmaker, and he'll be followed by Mr. Desmond.

While I'm still here, I should mention that someone is still here from Rosa DeLaura's office. When we asked you before, it didn't appear anyone was here. But Lou Mangini is still here. Thank you, Sir.

ED GUNDMAKER: Members of the Committee, thank you for having me. My name is Ed Gundmaker. I'm from Salisbury, Connecticut. I'm 73 years old and was employed by Aetna for 42 years. It's the only full-time job I ever had. I loved working for Aetna and was proud to be associated with them.

In the interest of accommodating requests not to duplicate things, I'll say ditto, ditto, ditto to everything John Dwyer said. Instead of my prepared remarks, I'd like to read my letter to Dr. Rowe on April 12, 2004.

Dear Sir, This memo is to express my disappointment concerning Aetna eliminating the retiree dental subsidy. This is certainly evidence of the instability of our benefits, as are periodic increases of deductibles and co-pays.

During our retirement process, retirees were led to believe that benefits would be stable and un-interrupted. I believe similar representations were made more recently, in the year 2000 to be exact by Mr. Donaldson. Many retirees relied on these presentations prior to taking early retirement packages, which I did.

I'm appalled that one of the reasons offered for this change is that other companies don't offer these benefits. I always thought Aetna was the leader, not the follower.

This rationale is extremely shallow, especially when you consider the media announcements about this change that came in a few days of articles saying how Aetna had substantially increased their earnings, mentioning rather lucrative salary increases for senior management. Not very good timing.

I urge you to reconsider and reverse the decision regarding dental coverage. On behalf of the thousands who've contributed to Aetna's success, please don't abandon us now. Thanks for listening.

Well, I think they did abandon us. And certainly our plea to rescind the action on dental coverage has fallen on deaf ears. What's next? Prescription drugs? Aetna is already studying this issue. What will it do when Medicare kicks in with prescription drug coverage in 2006?

Aetna, of course, runs their pharmacy program. So we'll have to wait and see how they react.

Let me sum this up by saying I read a recent article in the North Bulletin.

A retiree from some other company wrote to President Bush and said, health benefits is a reward for many years and hard work and loyalty to the employers. It is not a gift. There is not an entitlement. It is an earned benefit. There was pay. Those benefits should be sacrosanct.

I believe my fellow employees behind me would agree with that position. This is no longer a local issue. It's a national issue. And that issue will remain unresolved if employers are allowed to arbitrarily eliminate benefits in pursuit of profit at any cost.

I think I have a right to be disappointed. In light of my experience, I am out of here. We need your help, and thank you very much for listening.

REP, RYAN: Thank you for coming in. Do we have any questions for Mr. Gundmaker? We appreciate your sharing the letter with us. Mr. Desmond, and you'll be followed by, I think, Rich Bazzone.

GILES DESMOND: Good afternoon, Representative Ryan and all the Committee Members. I appreciate the opportunity to talk to you.

Most of what I would have said has already been said as mentioned. I want to emphasize to parts of it though. I started with the Aetna in 1955. I'm an Aetna retiree living in Avon. I took early retirement in 1994.

For the whole, my whole history with the Aetna, and I'm sure the same with all the people behind me, we grew up that insurance was a promise, whether it was a promise to you as an employee or a promise to your claimant, or a promise to the people who you were trying to sell your product to. And that meant you didn't even question things that, as far as the benefits, everyone assumed they would be there. We never thought to question whether or not it would be there.

As a specific example of that, when the restructuring that John Dwyer referred to in 1992 occurred, and there had been an earlier one in 1989 or 1990, and an actuarial type in corporate planning, I was the initial quantifier on the impact, the potential impact of future earnings and what we would have to take for a write-off under various packages proposed mostly by the then-chairman Jim Lin, but also proposed by Human Resources and the Labor Department.

While we had an initial list of basic assumptions, there was only one that I recall that basically said assuming benefits as current package.

There was never any question. There was never any option. After all, they'll generally ask for many different options on the severance package. There was never one that talked about any curtailment of benefits. And that was never a surprise to all of us, that was what we all had grown up under.

And similarly, when I read Chairman Donaldson's remark in 2000, I think my reaction to it was, well, so what? You know, it was what we all knew was going to be the case anyway. We never even had made it a question.

Even though another one of my roles in corporate planning was to review the NDA, National Discussion and Analysis of earnings and things with a bent towards the mathematical part, and believe me Jim Lin was as nitpicking a person as I have ever worked for.

And in that role, I looked at everything that was said, and how could this be interpreted differently and stuff, but, and I read that disclaimer in the reference package. But because of the culture we had all grown up in, I never even thought to question that, even though as something in the NDA, I would have really honed in on some possibility.

I know we all appreciate greatly your taking the time and the effort to work with this, and we really would appreciate your help.

I do think our pleas to management have, obviously, fallen on deaf ears, but I think it would make a difference even if they just heard from the Legislative Committee that they were willing to look into this and discuss it. Thank you.

REP. RYAN: And this is the beginning of that process. Thank you. And does anybody have any questions for Mr. Desmond? Thank you. Mr. Bazzone? And you'll be followed by Mr. Paulus. Good afternoon, Sir.

RICHARD BAZZONE: I too will attempt to limit my remarks and not cover items that have been covered in the past.

I'm sorry to say that my Senator left, that was my representative, Senator Guglielmo. He must have seen me coming up so you know, he just--

REP. RYAN: Sometimes we have to leave at—-

RICHARD BAZZONE: --I know, it's just I was trying—-

REP. RYAN: --This Committee's proceeding is in our offices. They are taping and filming in, so he can at least listen to the proceedings. So if he's not here, he may be listening, so be careful what you say.

RICHARD BAZZONE: Okay. My name is Richard Bazzone. I live in Tolland, Connecticut, and I'm a retired 26-year employee of Aetna in health claims and health administration, and in the human resource benefits area of Aetna in the corporate area.

I learned something today though, listening to the attorneys there, I always thought the first word of that act was the Employee Retirement Income Security Act. It appears, to me, as if it's the Employer Retirement Income Security Act.

It's just so disheartening to hear those types of comments about federal legislation meant to help us and is helping big business.

I'm just going to quote something from an article in the Hartford Currant, February 2, 2005, the last paragraph, a very good picture of Dr. Rowe.

In 2003, Dr. Rowe reaped $18,200,000 of compensation. $18.2 million. We have one sixth of his total compensation as savings of the Aetna. $3,000,000. $7.6 million of value from exercising stock options. And, in addition, he was granted new stock options that year with a theoretical value of another $5.5 million.

Dr. Rowe's doing fine. In fact, Dr. Rowe, I believe, heads up the UCONN Trustees. And, of course, under his leadership, he recommended another increase for the students in the State of Connecticut.

Fortunately, we have a Governor who has a bit more common sense, has stepped back and said wait a minute, enough is enough. And that's enough about Dr. Rowe.

I want to thank you for the opportunity to provide testimony on corporate reduction of these retiree benefits.

My personal premiums for dental coverage for me and my wife increased about 350%. That's quite a bit. You know, $14 to $64 a month? When you're all on a fixed income, it hurts.

And that's not the only thing that has gone up. As all of you well know, that they unilaterally eliminated their dollar subsidy to retirees for dental coverage.

And I'm just going to re-echo, I counseled a lot of people that walked away from this company, stating to them that those benefits would not change.

That's what we were told in Human Resources when we were there. Make sure these people who were being encouraged to retire were not going to walk away and think that everything was going to be taken away from them.

It makes me feel bad, and it makes a few contemporaries of mine in this room with me feel even worse. This is something that's happening nationwide to all retirees. Benefits promised during years of employment are being reduced or eliminated completely.

Meanwhile corporate management of these companies continues to reap inordinate and exorbitant compensation packages, many in the multi-million dollar level.

The PR departments never see fit to address the compensation packages. They only address the dollars being spent on retiree benefits. That was addressed earlier by one of the speakers here. I believe it may have been Mr. Dwyer.

It becomes a self-fulfilling prophecy when these corporations constantly repeat to the media the following comment, most companies don't even provide health or dental benefits to retirees.

Twenty years ago, that wasn't the norm. Most larger employers, 10,000 plus employees, were provided medical benefits. Why the turnaround? It's simple. Job eliminations in the past decade have added many more lives to those retiree plans. However, employees covered under active plans, they've been reduced proportionately.

Employers can't, they cry wolf saying the costs of these plans have been increased three, four, five-fold. Well, you know, if you hadn't eliminated those jobs, many millions of them in the first place, the retiree rights wouldn't have been swelled significantly.

Early retirees, people that would not have retired in the first place, people that need insurance between that gap of 55 and 65, and that's where they're saying their costs have increased. They want their cake and eat it too.

REP. RYAN: Mr. Bazzone, the time went off a little while ago. Could you kind of consolidate what you have and finish up, please? Thank you.

RICHARD BAZZONE: I will.

REP. RYAN: I need a [inaudible] that Senator Guglielmo [inaudible].

RICHARD BAZZONE: I'll just read this last paragraph. Many studies anticipate that people aged 55 to 64 heading toward retirement, or already retired, are likely to suffer even greater difficulties.

And I believe one of the most disturbing statistics I recently read was that two-thirds of the elderly, 65 or older, rely on Social Security for half or more of their income.

Now corporate America is making a valiant effort on their part to take the remaining one-third down to that same level, eliminating healthcare benefits and pension plans through sham maneuvers.

I thank you for your time and your willingness to listen.

REP. RYAN: Thank you, Sir. Do we have any questions? Thank you very much. And Senator Guglielmo did come back, because he knew you were here. Mr. Paulus, and he'll be followed by Mr. McLaughlin.

TOM PAULUS: Thank you very much. My name is Tom Paulus, and I promise to be very brief. Most of the folks that are here are not comfortable with protesting anything, let alone protesting about our former employer whom we all had a great deal of respect for, and put a lot of time in.

We want to do this right. We want to show them the proper respect. And the leadership that the Retirees Association has got will do just that.

The legalities of this thing may be overwhelming both to you and us. It sounds like that's certainly a possibility.

I also submit a guess that a lot of good things, besides good law, a lot of good things happen in the world because of an appeal for people to take a higher road, a higher path.

And I think that's what we've got to do, is find a way to appeal to the Aetna, to take that higher road and set an example not only for us, Connecticut, but for all over to set that higher standard to make a difference here.

And I hope we can find ways to do that, and thank you all very much for your time.

REP. RYAN: Thank you for coming in, Sir. And do we have any questions? Thank you. Mr. McLaughlin.

PAUL MCLAUGHLIN: Good afternoon, and thank you for giving me a couple of minutes to talk about my 33 happy years with the Aetna, working with claims, almost always out on the field working with, or supervising, some of the people that did a lot of the work that carried out the promises made by the Aetna contracts.

So that included agency customers, and clients and brokers, and attorneys with their lawsuits et al. So I still look back to that as a happy time.

To make this really short, I agree with every word that John Dwyer said, and the spirit with which he said it.

And having looked out in the field, it was clear almost from day one that if we were to be successful and carry out the promises, you had to attract and keep really good people, people that could do things, that could make decisions, that could do the hard work.

And in order to do that, and to get and keep people, every opportunity that I had to talk about the Aetna and its benefits, I emphasized all of the things that weren't salary, because they could understand the dollars in their salaries fast enough.

So I talked about the benefits, and not once, looking back all of those years, did I say, and by the way ladies and gentlemen, keep in mind and bear in mind and never forget that the Aetna can change, remove, abolish, and throw out any of these benefits without any warning whatever. Never said that.

Just walking down here today, I thought if I had ever said that, can you imagine what my boss would have done? It wouldn't just have been cutting my bonus a little bit. I would have been out looking for work. So there.

So the Aetna says that it's having problems with its expense ratios. Well, they're hardly, this management is hardly the first one that's had that problem.

It is the first one, however, that's turned to hitting the people that are mostly defenseless, that they can't do much about it, where it's really going to hurt. And that's too bad.

Now if the Aetna, it went without saying when we talked about benefits [inaudible]. There was no question that if the Aetna ever had a bank hurt, ever had a serious financial problem, and they've had them in the past, there's no doubt that everybody would have to hunker down and do without and increase productivity and get by and keep the company going, because that meant everything to everybody from a financial standpoint etc. So, so there.

So the fact that they just did, and didn't tell us about it, is too bad. Finally, as you all I'm sure know, that in the New York Times magazine section, they have a new section every week on ethics. And a few weeks ago, they had a case where an employer decided, without any good reason, to discontinue benefits, health benefits etc.

I can't repeat all of the hard language that appeared in the ed article, but let's just say they disagreed with it. This is an unethical thing, if it's not illegal. Then they ought to have some ways of letting people know about it.

Thank you very much.

REP. RYAN: Thank you, Sir. Do you have any questions for Mr. McLaughlin? Thank you, thank you for coming in today. Mr. Bell, and he'll be followed by Catherine Lally. Good afternoon.

[Gap in testimony. Changing from Tape 2A to Tape 2B]

TAD BELL: Aetna's Employee Benefits Manager. And I will try to boil this down, because I was trying to say something entirely different, but it has all been covered very well thus far.

I spent a lifetime developing employee benefits for companies including Aetna. I worked there for 16 years, and retired from Aetna 15 years ago.

When I left Aetna, the team that worked on benefits produced a product that was among the best five-benefit plans in the country, as evidenced by Money Magazine in 1990.

Benefits were a religion for me, and from when the company cancelled these benefits unilaterally, they essentially made all of us who worked in corporate personnel, corporate human resources, con artists.

We were shills for the company, because we were selling something that wasn't panning out. And it's as if I have been gutted because I spent a career doing what I thought was the right thing.

These benefits were promoted, we used slideshows, movies, we had group meetings, individual meetings, personalized employee benefit statements. These benefits were heavily promoted, because they amounted to 30% plus of pay.

And we never warned employees about, you know, at some point, when the company needs a nickel or two, they're going to raid these benefits, especially if you're a retiree.

And I cannot tell you how sickened I am by what the company has done. Just let me give you one example and then I'll shut up.

When I first came to work, there were two giants that we worked for. John Filer, oh, I'm having a senior moment, let's just leave it at John Filer.

And among the first things we did, this was in the '70s, you may not remember, but there was a big spurt of inflation at that point. And one of the things the company did was go back to existing retirees and up their benefits. They did this on two occasions.

These retirees had no connection to Aetna anymore, they were gone, but the company unilaterally went out and increased their pension benefits. And these were permanent lifetime increases.

Contrast that with what this company is doing today. It sickens me.

Thank you for listening.

REP. RYAN: Thank you for sharing that with us. Do you have any questions for Mr. Bell? That's okay. I think we're all set. Catherine Lally. Next will be Roger Evarts.

CATHERINE LALLY: Good afternoon. Thank you for the opportunity to speak. My name is Catherine Lally, from Milford, Connecticut.

I was a member of the senior staff of both the Property Casualty Division and the Commercial Insurance Division, and retired from Aetna with about 25 years of experience.

I made the choice, when I started my retirement health benefits, to join their HMO. In January of 2003, the Aetna introduced a deductible for prescription medication to HMO participants. In January of 2004, they forced retirees from the HMO in Connecticut from the HMO into HMO90.

As the 90 indicates, instead of the majority of your benefits being covered at 100% they're now covered at 90%. They increased the deductible for prescriptions, and they introduced a deductible for medical care.

At that point, I thought, I wonder when HMO 80 is coming? Instead, in January of 2005, they've taken away dental benefits.

While people may feel that these are not significant impacts, I have to say, from my perspective, they are significant impacts. The changes in their healthcare benefits, and my sitting here not knowing when HMO 80, HMO 70, 60, 50 are coming have been key determinants in my decision to return to work.

I feel that without having guaranteed benefits, and not knowing how much I'm going to have to pay for my health and dental insurance, that I really have to return to the work force.

It is very difficult for retirees to worry about paying deductibles, dental insurance, and increased health cost when Aetna enjoys significant profits and their chairman and other senior officers are paid millions of dollars a year.

We all understand, as you can tell, we all love the Aetna. We came from that environment where we were proud to say we worked for the Aetna.

It is very difficult for us to sit here now and look at the Aetna management of today and the cavalier approach that they have to their retirees.

I want to thank you for your time and any help that you can give us with trying to resolve these issues with the Aetna.

REP. RYAN: Thank you, thank you very much. Do we have any other questions? Oh, Representative Belden does have a question for her. Excuse me, ma'am, ma'am, and I should mention this. Typically, we don't allow clapping. We maintain a certain level of decorum just so people can hear each other. And maybe we should do that. But Representative Belden has a question.

REP. BELDEN: Thank you Mr. Chairman. You just mentioned the 90 Plan and the reduction of dental benefits. Do you know whether the company's current employees also had a reduction in dental benefits and have to go through the 90 Plan?

CATHERINE LALLY: Well, I know two things. Because I asked whether the Aetna had removed the HMO product from the market, and I was told, no, that the Aetna still continues to offer the HMO product in the market.

But yes, it did make me feel a little bit better, I guess, that they did not just pick on the retirees from that standpoint, but that they forced their employees that were HMO members into HMO90 as well.

REP. RYAN: Let's try this one more time before you go. Any other questions? Okay, there we go, thank you. Mr. Evarts, and he is going to be followed by Mr. Gerrol. Good afternoon, Sir.

ROGER EVARTS: Good afternoon. To make it short, I feel a little bit, referencing the baseball season, to the clean-up hitter that came up without any runners on base.

There's been a lot of testimony this afternoon, and some really great facts and issues have been raised.

So on behalf of all the Aetna retirees, my name is Roger Evarts, and I'm retired from Aetna where I worked for over 30 years.

I did, I'll just summarize some things here because I'm not going to take up three or four minutes. I did review my retirement package before I came here

And some ten years ago, I took a package and went in for the retirement interview. And, in that package, they told me about the term insurance that I would get and about the medical and the dental coverages. There were no reservation rights stipulated in that package and nothing for me to sign.

So, yes, as Representative Cafero had mentioned earlier, it's a unilateral contract. And it's interesting, however, to note that there was a statement in that package, in the conference that I was having, that what I pay may change because the rates for coverage may change. The rate is the cost for a unit of insurance.

But nowhere on that package was it written that the amount of my contribution, which is at stake here, may be changed or that the coverage may be reduced or eliminated. So it's interesting that there is stuff in some of the written material that could be construed as an implied promise.

We certainly feel that what Aetna has done is break a promise to the retirees by changing the healthcare benefit, for example. This is unethical. To break a promise doesn't make an awful lot of sense, because if you can casually do that, why make the promise at all?

And it also begs the question of, are there three different promises? One, promises you make, but intend to break. Two, promises that you make that you don't intend to keep. And then promises that you make that you do intend to keep.

Well, it doesn't make sense that there are three promises, because then the promises become very confusing and totally meaningless.

Now Aetna is an insurance company, as has been pointed out in prior testimony. They are in the business of making promises. They know what a promise is.

It's been reduced to contracts in policyholders. They take them, they buy these policies with coverage. We go into our retirement conference, and we got a package that stipulated what we were getting.

Nowhere in that package did they make us stand up and sign a contract and get a copy of that contract that says, your benefits may be reduced or withdrawn.

So I think it behooves us all to look at the situation to make sure that we find a way to regulate the companies that are involved in making these unethical activities, decisions, and try to bring about a moral persuasion in the corporate culture, so that companies will act ethically and uphold promises they make.

Very briefly, I'll end up by saying we are simply assaulted with stories in the media every single day about unethical, or what are categories of unethical activities, by corporations all across this land.

If we don't do something about this at every level, including this level, we believe that companies like Aetna, making these kinds of unethical decisions are going to lead to the demise of these great companies.

We have to remind companies like Aetna that they do not want to follow in the footsteps of these other companies that are making these unethical decisions.

I appreciate your allowing me to speak. Thank you.

REP. RYAN: Thank you, Sir. And do we have any questions for Mr. Evart? Thank you. Mr. Gerrol, and he'll be followed by Mr. Drost. Good afternoon.

ROBERT GERROL: My name is Robert Gerrol. I live in Newington. My story is perhaps a little bit different.

In the mid-'80s, during one of the downsizing programs of Aetna, my position was eliminated. And, at the time, I had two children in college. I was forced to take my pension at that point in order to maintain the medical and dental benefits.

You can appreciate that when you take a pension at roughly age 50, you have a very, very small pension. So I'm one of those little people that Mr. Dwyer mentioned early on.

One of the concerns that I have, of course, naturally, is the elimination of the subsidy for dental benefits. If we look at when we approach to Medicare at age 65, we were promised that there would be no further premiums for us to pay.

If we look at the medical coverage, we understand that Aetna's program of coordination of benefits means that essentially Medicare pays for all of the medical needs, and that means that Aetna doesn't have to spend any money.

On the dental side, Medicare doesn't cover dental benefits. So, therefore, that's where they intend to take their cut, because that's what costs them the money.

I think it's important to understand that there's a very major difference between the medical benefits and the dental benefits. And, of course, the impact of dental premiums for me is far more significant perhaps than for the people sitting behind me.

I do intend to live perhaps another 20 years or so, so perhaps Aetna may have a little bit more money for me, but I don't think that's going to be significant.

Thank you very much.

REP. RYAN: Thank you. I appreciate your life plan. Do we have any questions for Mr. Gerrol? Thank you. Mr. Drost is next, followed by Mr. Solo.

JOHN DROST: My name is John Drost. I wrote this up since I came here, so you'll have to excuse me. I'm very nervous, and I'm not used to speaking in front of large groups.

Anyway, I'm a retiree of Aetna. I worked there for 39 years with John Dwyer in National Accounts. I retired in '86. At Aetna, I worked for John as underwriter there. And my dental expenses since last December of this past year, and I'm having some major work done in January and February I think it will be about $4,000 plus.

And most of that I'm not really sure how much the Aetna will pay, because the dental work has been going on October, November, December and this month. So I don't know how my dental insurance will figure that.

But anyway, I did talk to my dentist, and I told him I would probably have to be paying him monthly payments, and he agreed to accept payments monthly.

Anyway, I thought when I retired that my medical and dental expenses would not go downhill or backwards. How wrong I was. As long as the Aetna does not declare bankruptcy, I thought I was safe.

I do not think the Aetna, I don't think the Aetna is going to be declaring bankruptcy in the very near future as their stock has gone up over 82% the past year. I wish I had more of it.

In addition, some of the executive offices have and will be receiving huge bonuses. Some of them will be receiving bonuses in the seven figures, which is, as you know, over a million dollars.

I truly don't think this is fair for retirees, because not all of us employees and executives are treated equally.

As a follow-up comment, when I retired in '86, I was not paying anything for my medical coverage. Then starting this year, starting in January, my payments are now $67 a month, so over $800 a year.

So, actually, my standard of living will be decreased quite substantially.

Thank you for listening to me.

REP. RYAN: Thank you, Mr. Drost. Before you leave, just to clarify something, are you saying that you started the dental work?

JOHN DROST: In November of last year, but it's continuing this year.

REP. RYAN: And did they approve the dental care?

JOHN DROST: Well, I'm not really sure. My sense, it started in November, December, and it's continuing now. I'm not really sure how much of that the Aetna is covering. But it's going to be over $4,000 plus total bill. And I'm not sure how much the Aetna is going to pay of that.

REP. RYAN: So you can't really answer my question, will they pick up the tab that they started in November before they cut off the plan, or will they just stop from what you incurred by the end of December?

GEORGE MCDONALD: Whatever he incurs up to the end of December, they'll pay whatever is due for 2004. And they'll pick it up again in 2005 with a $75 deductible.

REP. RYAN: Okay, Sir, now that you've spoken, you have to go up to the microphone and tell us who you were. I'm sorry you have to, because of the transcription. They'll have the voice, but won't have the name. I'm sorry. That's part of the code.

GEORGE MCDONALD: My name's George McDonald, and I'm an Aetna retiree too. I went through the process. I've had things like implants, which Aetna wouldn't pay for anyway. But what happens is all the expenses you incur up to the end of the year are part of that year. And you start with a new part in 2005, when you start with a new deductible. So that's the way it works.

REP. RYAN: Thank you, Sir. Thank you for letting us, and again, because of the transcript, we need to get the name. Thank you. Thank you, Mr. Drost. Does anybody else have any questions? I'm sorry. See, it wasn't so bad, was it?

JOHN DROST: If this lasted a lot longer, I'd have a couple more pages to write to talk about.

REP. RYAN: Okay. Let's get Mr. Sullivan up here real quick then. Mr. Sullivan, are you still here? If Mr. Sullivan's not here, Mr. Perra, John Perra. And he'll be followed by Mr. Ozano. Good afternoon, Sir.

JOHN PERRA: Good afternoon. Once again, thank you very much for the help you've done already, and in advance, for everything you can do for us, however small it might be in the context of the ERISA laws.

My name is John Perra. I worked at the Aetna for 30 years and retired early. Part of my decision was based on the expectation of health benefits to continue at what was then in place.

But probably more importantly, like John and many others that have testified here, is that I've managed significant staff reduction for the Aetna. And that's a very difficult thing to do, as I'm sure you know.

One of the things that made it easier was that you could sit across the table from someone and say, here, with this severance and with these expectations of benefits, it made it a little easier for me, and certainly for the people in those situations. So that's the most important thing.

Just a few quick points. If companies, I guess I'd like to keep in mind, if companies continue to cut benefits, it's got to be some kind of cost shifting to society in general, whether it's Medicare or Medicaid or some other Social Security program or whatever.

And if companies continue to do this, will we be expected, we as citizens, to bail out corporations when they abandon the benefits that they've promised?

Perhaps a consideration for the Committee is if there is a reduction of benefits that have been promised to retirees, could we tax it in order to cover, I think, the increased expenses that we would occur as a society?

Another thing that John Dwyer, I think, mentioned was the prescription drug subsidy going to employers, and them being, of course, the whole idea of subsidies being provided to corporations so they won't abandon prescription drugs.

But to add in the part that the employees pay for prescriptions as well seems to be a little bit overly generous. And maybe there's something we, as a state, could do to look at that again. And maybe we need taxation or something on those extra premiums that they get on employees' benefits.

Perhaps you already know these, but just for the record, and perhaps someone else will mention it, there are a few resources you might want to consider in your investigation.

There have been several articles, a couple articles recently by a woman by the name of Ellen Schultz, who is a reporter for the Wall Street Journal.

A couple of weeks ago, she wrote a ten-point article on how companies benefit from providing employee benefits. And it's kind of ironic that they benefit from that, but then later take them away as well.

And also you're probably aware that Barbara Connelly heads up a non-profit organization that looks at making sure that both Social Security and Medicare remain there in place for people to save those.

And another group that we're associated with, the Retirees Association, is the National Retirees Legislative Network, who is looking at the federal legislation to see what could be done to protect the reduction of the employee benefits.

And I guess I'll just leave you with a couple things. One I think is a curiosity, another is an irony.

The curiosity is that, perhaps, and I'm not sure you're aware, but Aetna, I think, for the first time for its history is holding its shareholders meeting out of state. This April's meeting will be in Philadelphia.

And I'm not sure what that's all about, but, perhaps, if Aetna's not a good, ethical person in relation to retirees, perhaps they're not a good, ethical company in relation to the State of Connecticut either.

And the final irony is that, if Aetna is successful in setting a good example in reduction of employee benefits and, perhaps, eliminating them entirely, Aetna could be out of business.

That's the only thing Aetna does is provide employee and retiree benefits. Quite an irony. Thank you.

REP. RYAN: Thank you. Do we have any questions for Mr. Perra? Thank you, and thank you for those resources. And Mr. Ozano.

MR. OZANO: The points I was going to make have been made by others. I'll pass.

MR. RYAN: Thank you, Sir, thank you coming in. I want to thank everybody. I know a lot of people out there did not speak, but your presence here really did make a difference in terms of support of your fellow retirees on this important issue. So we certainly appreciate you doing that. This does bring us to the end of the list of Aetna retirees. We have no more signups for the other retirees that are from the general public.

Is there anyone who did wish to speak, but didn't get a chance to speak and would like to now?

Okay, this public hearing is adjourned. I do want to thank the Representatives from the Congressional Delegation for attending today, along with Mr. Dwyer for his testimony and being here and bringing this issue to us, as well as the ERISA attorneys Ms. Kemp, Mr. Moukawsher and Mr. Rintoul for bringing their information to us as well. Thank you all for coming.

[Whereupon, the hearing was adjourned.]