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Interviews With John Magenheimer, Roben Farzad

Aired July 16, 2003 - 20:42   ET


PAULA ZAHN, CNN ANCHOR: The ultimate focus in business is the bottom line. Faced with soaring health care costs, many companies are cutting benefits. One example, you're probably paying a lot more for prescriptions than you did just a few years ago, but as Jennifer Rogers reports, some people say their lives are being sacrificed for the bottom line.

JENNIFER ROGERS, CNN CORRESPONDENT (voice-over): John and Sally Ferrari are fighting a war on two fronts. One, against Sally's Alzheimer's; another against her former employer, Polaroid.

JOHN FERRARI, PATIENT'S HUSBAND: In the mailbox, was a letter from Polaroid. Was like, our feet were cut off; Polaroid terminated her. An unsigned letter. Statement they could no longer afford to pay the medical benefits that we had considered were contractual.

ROGERS: Polaroid would not comment on this case, but it is a growing trend in corporate America. Workers on long-term disability suddenly out of a job, and out on their own in terms of insurance.

A recent survey found over a quarter of companies terminate employees as soon as long-term disability starts. Just under another quarter let go of an employee after a set amount time, usually six to 12 months.

(on camera): Now the companies argue they have no other choice, with health care costs soaring and the number of Americans on disability up more than 60 percent in the last decade, they say they have to cut costs somewhere and contend those on long-term disability should be able to find new insurance.

JIM CIRCIO, WASHINGTON BUSINESS GROUP ON HEALTH: There is coverage up until 24 months after a disability occurs, someone is eligible for Medicare. Now, what employers do successfully that I think others don't is they effectively bridge that gap.

FERRARI: Sally, lunch is ready.

ROGERS: But for some, Medicare's limited access and quality of care isn't adequate. The Ferraris are suing Sally's former employer. She still receives 70 percent of her old salary and now has benefits through John's job. The problem, he has to work to keep the coverage.

FERRARI: I wanted to be able to take care of her while she could still remember my name. I don't know if that's going to happen.

ROGERS: Jen Rogers, CNN Financial News, New York.


ZAHN: John Magenheimer says he too is a casualty of the bottom line. He was with Polaroid for more than 20 years. In 1992, he developed cancer, but he kept on working. He finally went on long- term disability in 1998. Last summer, Polaroid fired him.

John Magenheimer joins us now from Watertown, Massachusetts. John, thanks for being with us.


ZAHN: I'm sorry, I know there's a delay in this signal here. You had just undergone surgery when you got this news from the company. How did they break it to you?

MAGENHEIMER: Well, the company didn't really break it to me themselves. It was -- I was under -- recuperating from one of the surgeries I had had, and I saw information in the newspaper, articles in the newspaper, and then called some friends at Polaroid, who through innuendo told me what was going to occur, that all people on long-term disability were going to be cut off from the company, and that meant that there were no longer any benefits for medical, dental or life insurance.

And having -- I have metastatic melanoma. It's a deadly form of skin cancer. And with that you are not going to be able to just walk in and get medical insurance. It's at the time you need it, they cut it, and it was something that had been at the company. The benefits had been there at the company for all the years of their existence.

ZAHN: So, John, what would have happened to you if you could not have tapped into your wife's health care policy and you couldn't have tapped into the COBRA plan?

MAGENHEIMER: Well, one of the things is the COBRA plan ends. My dental insurance is through COBRA, and because of -- because of the radiation therapy and chemotherapies, my teeth are approximately bubble gum. The -- and that benefit will end in January, and there's no insurance.

For the medical benefits, the COBRA medical benefits also end. And that is something that would be a very significant difficulty for me. If I didn't have it through my wife's work, I really don't know what I would do. I don't know.

ZAHN: And finally, we called Polaroid and we got a statement from them, and they basically said that they were in bankruptcy proceedings, John, at the time, that they had to let go of a lot of people, and they went on to say that those on long-term disability still receive up to 70 percent of their salaries, if not their benefits. Is that the case for you? MAGENHEIMER: That is the case. There is the long-term disability insurance for the salary is there, but, for example with my life insurance, all of that was canceled, and I was an executive with the corporation and had $1 million worth of life insurance that I felt was important for my family, particularly as my children were finishing up in college, and it was important for them to have some kind of cushion.

ZAHN: Sure.

MAGENHEIMER: My prognosis for the melanoma for the last 12 years has been three to six months, and with the insurance taken away, I was -- for my life insurance -- I was livid. I did bark at that with the life insurance corporation companies, and I end up paying about $20,000 a year for $500,000 in life insurance.

ZAHN: Well, John, I know this is difficult for you to talk about when you're still trying to figure out how to navigate this. We thank you for sharing your personal story, and we want to bring someone else into the discussion now to help us better understand how common this is. We wish you the best of luck and hope you continue to get the kind of care that you need.

You might be wondering how many companies can get away with treating people like this in these circumstances. Perhaps it could happen to you. For the business perspective in all of this, I'm joined by Roben Farzad, the staff writer from "Smart Money" magazine. How often does this happen?

ROBEN FARZAD, "SMART MONEY" MAGAZINE: Unfortunately, it's par for the course. It seems straight of out Dickens, but within the capitalist framework, companies can hire and fire largely freely, whether you're disabled or ablebodied, and these people are some of the more unfortunate casualties of this latest pink slip downturn.

ZAHN: But where should a corporation start? Particularly if it's a corporation like Polaroid, that was in bankruptcy proceedings. Is there any fair way to do this? Is there any equitable way to do it?

FARZAD: You are damned if you do, damned if you don't. The union might butt heads with you if you skip seniority. Some people on long-term disability are unionized. You always run into something. I think it ultimately points to deficiency in the government safety net. Unfortunately, you have to wait until you're 65, you have to hold out, and many times, many people have to work until that very day when they can get Medicare.

ZAHN: And that is the sad thing about the this bottom line, because I am told that this trend will increase.

FARZAD: It will definitely increase. What you have is an aging workforce right now that has to work to make ends meet. The retirement savings have been obliterated, and on top of that, health care costs are spiraling out of control, so you have this terrible confluence, this perfect storm, if you will, at the worst possible time.

ZAHN: And then John is pretty typical of what is happening to those...


ZAHN: ... service to a company.

FARZAD: You're seeing a number of long-term care disability cases nearly double in the past 10 years.

ZAHN: Thank you for joining us tonight, Roben Farzad.

FARZAD: Thank you for having me on.


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