Kodak has announced that it intends to seek to cut some retiree health care benefits at the omnibus hearing in its bankruptcy court proceedings on March 20, 2012. The reduction of health care benefits has been an expected result of Kodak’s Ch. 11 filing. Their intention as stated in the letter below is to continue health care benefits for those not yet 65 and not eligible for Medicare and for those who retired before 1991.
Here are some of our firm’s thoughts on this motion:
- Everyone in Rochester, everyone watching Kodak, has known that retiree health care was very likely to go.
- This is earlier than expected in the bankruptcy process, but it also preserves a bridge of coverage to Medicare for many retirees – this is better than most expected!
- One of the most at-risk groups – retirees under the age of 65 – has been saved from the health care axe. For now.
- Notice will have to be given after the court either approves or denies the motion on March 20 – at the earliest, health care changes should be around mid-May.
- Pre-1991 retirees not affected by this motion; the contract for pre-1991 retirees is harder to walk away from.
And here is the letter from Kodak:
February 27, 2012
Dear Kodak Retiree, LTD Recipient or Survivor:
Eastman Kodak Company and its U.S. subsidiaries filed for Chapter 11 reorganization on January 19, 2012 with the following objectives:
- To enhance the Company’s liquidity position in order to maintain the confidence of and relationships with our vendors, suppliers, and customers;
- To spur the monetization of the Company’s valuable intellectual property and fully enforce our intellectual property rights against industry participants that have infringed our proven and valuable digital imaging patents;
- To fairly apportion our legacy costs for a company of the size we are today; and
- To maximize the value of the Kodak enterprise for all of our stakeholders by reorganizing around our commercial and consumer business units.
Among the legacy costs that must be addressed as part of our reorganization are retiree health care costs that are not borne by many of the companies we compete against in the marketplace. As we have changed these benefits over time, we have always tried to balance the needs of our retirees with the needs of the Company. It is now clearer than ever that in order to remain a participant in the market tomorrow, we must put Kodak on a sustainable financial path today.
You are receiving the enclosed legal motion because there is an important hearing scheduled on March 20, 2012, at which time the U.S. Bankruptcy Court will consider a planned change in Kodak retiree medical coverage that we believe will affect you. This letter summarizes the proposed change, which we believe represents a necessary step in Kodak’s efforts to become a competitive and sustainable enterprise during and after its Chapter 11 reorganization process. We urge you to read the entire legal motion enclosed with this letter and to consult an attorney with any questions you may have.
The motion filed by the Company would discontinue retiree benefits under Kodak’s medical plan (defined in the motion as “Medicare Enhanced Benefits”) for the following individuals who have attained age 65 (regardless of Medicare eligibility) or are under age 65 and Medicare eligible:
- Former employees who retired on or after October 1, 1991;
- Former employees who became eligible for long-term disability benefits on or after October 1, 1991;
- Current employees who are retirement eligible when they leave the Company; and
- Survivors and dependents of these individuals.
A hearing to consider the motion is scheduled to occur in the United States Bankruptcy Court for the Southern District of New York (located at One Bowling Green, New York, New York 10004) on March 20, 2012. Pending approval of the Bankruptcy Court, this change will become effective on May 1, 2012.
Our ultimate objective is to preserve a set of retiree benefits that are most critical to our retiree population and which would be difficult to replace. Preserving these most critical benefits must be accomplished within the bounds of affordability for the Kodak that will emerge from Chapter 11. As such, this proposed change to retiree medical benefits represents one important step in an ongoing process to address Kodak’s legacy costs and enable the Company to move toward a more sustainable path.
We understand that this change will be difficult. However, individuals affected by this change who have Medicare coverage will continue to be covered by Medicare, and will typically have access to a variety of other insurance options available in their community to supplement their Medicare coverage. In some cases, the costs associated with these options may be lower than what you are now paying under the Kodak plan. All affected individuals will also have the opportunity to elect COBRA continuation coverage under the Kodak plan. More details on COBRA coverage will be provided at a later date.
We are committed to keeping you informed throughout this process. To help us deliver timely communications to you, we need your help. If you would like to receive such communications electronically, please go to the retiree tab of the Kodak Transforms website at www.kodaktransforms.com and look for instructions for how to subscribe to future e-mail notifications.
We encourage you to review the Question & Answers included with this letter. If you have additional questions now or in the future, please call the retiree information hotline toll-free at (888) 249-2721, or visit www.kodaktransforms.com.
You may access a copy of motion (and accompanying notice) directly by clicking the “Information for Retiree Medical Beneficiaries” option on our claims agent’s web site at www.kccllc.net/kodak.
Eastman Kodak Company
Enc.
All benefits information in this document is subject to applicable law and the terms of the relevant plan document, which will govern if there are any differences. The Company reserves the right to amend or terminate any benefit plan at any time.
Questions & Answers
The following questions and answers have been prepared to help respond to questions you may have about this proposed change to Kodak retiree medical coverage. Please note that the term “retirees” also includes LTD recipients, survivors and dependents.
Q. Why is Kodak making this change to retiree medical coverage? Will it be the only change?
A. This change is one of many difficult but necessary decisions the Company needs to make in order to establish a financially sustainable course for the future. Fairly managing legacy costs is one of the key objectives Kodak must achieve during its Chapter 11 reorganization in order to continue delivering value to its stakeholders in the years ahead.
Q. I’m eligible for Medicare, but my covered dependents are not. What happens to their coverage?
A. Kodak medical coverage for dependents who are under age 65 and not eligible for Medicare will not be affected by this change until they become age 65 or become eligible for Medicare, whichever occurs first. As a result of this change, however, the cost of their current coverage may increase.
Q. I’m not eligible for Medicare, but my covered dependent is. What happens to our coverage?
A. You will continue to be covered under Kodak’s medical plan but your dependent will lose his or her coverage.
Q. Why are retirees who reached age 65 or are on Medicare losing coverage but pre-65 retirees aren’t?
A. We are taking this step now in light of two important realities: 1) Kodak must adopt a more competitive cost structure; and 2) those affected by this change are typically covered by Medicare and should have ready access to other options to replace this supplemental coverage.
Q. Will I have to pay more for coverage than what I am paying today through Kodak?
A. Not necessarily. Many retirees with Medicare coverage will have access to insurance options that supplement their Medicare coverage with no monthly premiums that are comparable to what they have through Kodak.
Q. I am currently not eligible for Medicare, but will be in the near future. What will happen to my coverage when I become eligible for Medicare?
A. Prior to becoming eligible for Medicare, you will need to enroll in Medicare Parts A & B. Once enrolled in Parts A & B, if you want to pursue further coverage, you will need to evaluate the medical options available to you in your area.
Q. When will we know whether or not the court approves the motion?
A. The hearing is scheduled for March 20, 2012. It is difficult to determine when the Court will make its ruling, but you will be informed as soon as possible once a ruling has been made.
Q. Where can I go to get information about insurance options to supplement my Medicare coverage?
A. The options vary depending on where you live. You can contact local insurance companies to find out what options are available in your area. You can also contact the Centers for Medicare & Medicaid either by phone at 1-800-MEDICARE or go to the Medicare website at www.medicare.gov and go to the Medicare Plan Finder tool. In order to get an accurate comparison of what you have today, you’ll need to select “Medicare Health Plans with drug coverage”.
Q. Is there any action that I need to take now?
A. If you are eligible for Medicare, you can start exploring the available insurance options in your area to determine which one will best meet your needs.
All benefits information in this document is subject to applicable law and the terms of the relevant plan document, which will govern if there are any differences. The Company reserves the right to amend or terminate any benefit plan at any time.
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Questions? Find me on twitter at @chris_crom or follow or subscribe to this blog to comment.
Chris Cromwell
Business Development Manager
Brighton Securities
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