Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 10:00 AM

Daniel Kane

Mr.

Statement of Daniel J. Kane,
International Secretary-Treasurer
United Mine Workers of America
before the
Committee on Energy and Natural Resources
United States Senate
Re-Authorizing the
Abandoned Mine Lands Program
September 27, 2005
Mr. Chairman, members of the Committee, I am Daniel J. Kane, International Secretary-
Treasurer of the United Mine Workers of America (UMWA). The UMWA is a labor union that
has represented the interests of coal miners and other workers in the United States and Canada
for more than 115 years. We appreciate the opportunity to appear before the Committee to
discuss the Abandoned Mine Land Reclamation Fund (AML Fund) and its vital relationship to
the UMWA Health Funds. Representing people who live and work in the nation’s coal fields,
the UMWA has a strong interest in both the reclamation of abandoned mine lands and the
preservation of health care for UMWA retirees who worked hard all their lives to provide the
nation with energy. We strongly support the extension of the AML program in a way that
accomplishes both these goals.
The UMWA supports the goals of the Surface Mining Act and the Abandoned Mine
Lands program. When enacting the Surface Mining Control and Reclamation Act of 1977
(SMCRA), Congress found that "surface and underground coal mining operations affect
interstate commerce, contribute to the economic well-being, security, and general welfare of the
Nation and should be conducted in an environmentally sound manner." That statement is as true
today as it was in 1977. Coal mining contributes significantly to our national economy by
providing the fuel for over half of our nation's electricity generation. Coal miners are proud to
play their part in supplying our nation with domestically-produced, cost-effective, reliable
energy. We also live in the communities most affected by coal mining and support the intent of
Congress that coal mining must be conducted in an environmentally sound manner.
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The AML program, financed by production fees levied on the coal industry, was designed
to provide the means to reclaim lands that had been mined in previous years and abandoned
before reclamation had been done. The law was amended in 1991 to permit the investment of
monies held in the AML Fund to earn interest. In 1992, the Energy Policy Act extended the
AML fees until 2004 and authorized the use of AML interest to pay for the cost of benefits for
certain eligible retirees under the Coal Act. Congress has further extended the authority of OSM
to collect AML fees through June 2006.
The UMWA believes that when Congress authorized the use of AML interest to finance
the cost of health care for retired coal miner, it was a logical extension of the original intent of
Congress when the AML Fund was established. Congress joined these two programs together
for a specific reason–they both represent legacy costs of the coal industry that compelled a
national response. When Congress created the AML Fund in 1977, it found that abandoned mine
lands imposed "social and economic costs on residents in nearby and adjoining areas." When
Congress enacted the Coal Act in 1992, it also was attempting to avoid unacceptable social and
economic costs associated with the loss of health benefits for retired coal miners and widows.
The UMWA Combined Benefit Fund (CBF) was created by Congress to provide health
benefits to retired coal miners and their widows. Today, the Combined Benefit Fund provides
health benefits to nearly 37,000 elderly beneficiaries who reside in nearly every state in the
nation. The average age of the CBF beneficiary population is about 80 years, about two-thirds of
them are widows and their total estimated annual health cost is about $360 million. Congress
intended for the financial mechanisms it put in place to provide self-sustaining financing of the
cost of those benefits. However, rapidly rising health costs, a series of adverse court decisions,
bankruptcies of major contributing employers (particularly in the steel industry), and low interest
earnings at the AML Fund have eroded those financing mechanisms and placed the CBF in
financial jeopardy.
Bankruptcies in the coal and steel industries have also added thousands of new orphan
retirees to the UMWA 1992 Benefit Fund and the UMWA 1993 Benefit Fund, placing serious
strains on the financial operations of those two plans. For example, the bankruptcy of Bethlehem
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Steel in 2003 added nearly 4,000 new beneficiaries to the 1992 and 1993 Funds. Last year’s
bankruptcy of Horizon Natural Resources added about 1,500 new beneficiaries to the UMWA
1992 Fund and about 2,200 new beneficiaries to the UMWA 1993 Fund. These two
bankruptcies alone added about 7,000 beneficiaries to the 1992 and 1993 Funds, more than 35%
of the total population of the two funds. These continuing financial difficulties highlight the
need for Congress to enact Coal Act reforms as part of its AML re-authorization.
Congress has intervened three times since 1999 to shore up the financial condition of the
CBF through emergency appropriations of interest money from the AML Fund. In December
1999, Congress provided $68 million to cover shortfalls in CBF premiums. In October 2000,
Congress appropriated up to $96.8 million to cover deficits in the CBF’s net assets through
August 31, 2001. And most recently, in January 2003, Congress appropriated $34 million from
the AML interest account to the Combined Benefit Fund. In addition, the UMWA Funds and the
Center for Medicare and Medicaid Services (CMS) expanded their existing nationwide, risksharing
Medicare Demonstration project in January 2001 to include a new prescription drug
component. That project was scheduled to run until mid-2004, and to reimburse the Funds for
27% of its Medicare prescription drug expenditures. It is a pilot project designed to demonstrate
the efficacy of providing prescription drugs under Medicare, a timely project that we believe will
prove useful to CMS and Congress as prescription drug coverage expands to the Medicare
population.
With bi-partisan support from members of Congress, CMS announced an extension of the
prescription drug demonstration program in early 2004 that extended the program until
September 30, 2005. I am pleased to report that Secretary Michael Leavitt recently announced a
further extension of the prescription drug demonstration until September 30, 2007. This
demonstration extension is certainly welcome news; however, is does not alter the fact that there
is a pressing need for a long-term solution to the financial problems of the UMWA health care
funds.
The need for a long-term solution for the financial problems of the UMWA health care
funds coincides with the need to re-authorize the AML Fund. We believe the re-authorization
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effort can, and should, meet four broad policy objectives:
• Provide sufficient duration and level of tax to fund the reclamation needs;
• Focus on Priority 1 and 2 public health and safety projects;
• Resolve the long-standing dispute between states and OSM over the state share of
collections; and,
• Provide long-term financial solvency for the UMWA health care funds.
Mr. Chairman, opponents periodically allege that the benefits provided by the UMWA
Funds are too generous and should be cut. While the costs to the beneficiary tend to be lower
than some plans, the benefits are not substantially more generous than other plans in comparable
industries. The GAO compared the UMWA Funds benefits to retiree plans in manufacturing
covering union and salaried retirees in 2002 and found that “many features of the Fund’s health
plans are similar to those offered in the comparison plans. In particular, the Funds’ coverage
for hospital and physician services, which account for the majority of health care spending, is
comparable to the coverage provided by the other plans.”
Everyone should keep in mind that these retirees have made significant financial
contributions to their health care, to the tune of $210 million that was transferred from their
pension plan pursuant to the Coal Act. In addition over the years, miners traded lower wages and
lower pensions for the promise of retiree health care. The average pension for a 1950 pensioner
is $375 per month and their widows receive $155 per month in pension benefits. For the 1974
Plan retirees, the average pension is $532 per month while the average surviving spouse benefit
is $373 per month. Thus, they do not have the financial ability to bear the kinds of co-payments
that some retirees pay. To renege on the historic bargain they made over many decades to accept
lower wages and pensions for this health care package would be a cruel and crushing economic
blow.
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In addition, this is an aged, fragile population that is sicker than the average Medicare
population. A study performed by Mercer Human Resources Consulting found this population to
have a 35% greater burden of illness compared to the Medicare population. Cutting the level of
benefits for a population such as this would be a cruel response to the continuing financial crisis.
Two bills have been introduced in the Senate dealing with AML reauthorization–S. 961
by Senator Rockefeller and S. 1701 by Senator Thomas. Both bills would extend the AML fee
collection (through 2019 and 2016, respectively) and provide continued AML interest transfers to
the Combined Benefit Fund. Recognizing the growing orphan problem, S. 961 would also
permit transfers to support orphan retirees in the 1992 and 1993 plans. While we appreciate both
these efforts, we must recognize that they do not represent the long term financial solution that
many have called for. In order to come up with a long term solution, the UMWA has been
working with a coalition of Coal Act/AML stakeholders to devise legislation that is a modified
version of S. 961 that would satisfy the needs of all parties, including the “reachback” companies
and the “final judgment” companies. Representatives Cubin and Rahall made an effort to attach
the legislation to the Energy bill during the House-Senate Energy Conference, but the effort
failed partly because of confusion about the AML provisions of the bill. Since that time, many of
those who opposed that effort are now supporting the coalition effort. The proposed legislation,
known as the Cubin-Peterson-Rahall compromise, would:
1) Extend the AML program for 15 years and reduce the fees from 35¢ to 28¢ per ton for
surface mined coal, from 15¢ to 12¢ for underground coal and from 10¢ to 8¢ per ton for lignite.
States will automatically receive their share of AML funding on an ongoing basis.
2) Provide that the unallocated federal share of moneys that are paid to the U. S. Treasury
under the Mineral Leasing Act after date of enactment shall be used to make payments to states
and tribes of their unappropriated balance of state share collections.
3) Amend SMCRA to provide for annual transfers of AML Fund interest (including
stranded interest and unappropriated RAMP funds) each year to the CBF, 1992, and 1993 Funds
to pay health benefits of orphan beneficiaries and cover any deficits.
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4) Provide that transfers to the 1993 Plan are limited to the cost of providing benefits to
orphan beneficiaries as of December 31, 2005.
5) Beginning in January 1, 2006 sufficient federal on-shore mineral leasing and royalty
revenues will be used as needed to pay for:
a. Health care costs of orphan retirees in CBF, 1992 and 1993 Funds.
b. Health care costs of CBF retirees attributable to the “reachback” companies.
c. Payment to “Final Judgment” companies equal to unreimbursed premiums (plus
interest) paid to the Combined Benefit Fund.
To the extent such proceeds are insufficient, ongoing orphan obligations will be met from
general funds as a mandatory appropriation.
6) Modify SMCRA allocation formulas to provide that states with higher reclamation
obligations such as Pennsylvania, Kentucky and West Virginia, receive higher allocations.
7) Provide that “minimum program” states will receive $3.0 million per year.
This legislation has garnered support from the various stakeholders in the AML/retiree
health care debate. It is a carefully crafted compromise and we believe it is worthy of support
from this committee.
GAO Study
In 2002, the U.S. Government Accountability Office (GAO) issued a report on the Coal
Act entitled “Retired Coal Miners’ Health Benefit Funds: Financial Challenges Continue.”
While the report was issued three years ago, its conclusions are still pertinent today. Among the
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findings of the GAO were that:
• the Combined Benefit Fund faces continuing financial challenges which have
been exacerbated by various adverse court decisions that have reduced the per
beneficiary premiums paid to the CBF and relieved some companies of
responsibility for paying for their beneficiaries;
• CBF beneficiaries traded lower pensions over the years for the promise of their
health benefits and have engaged in considerable cost sharing by contributing
$210 million of their pension assets to help finance the CBF;
• the benefits provided to Coal Act beneficiaries are generally comparable to
coverage provided by major manufacturing companies and companies with
unionized work forces;
• CBF beneficiaries tend to be sicker, and therefore use more health care, than the
average Medicare population; and
• the CBF trustees have adopted numerous managed care initiatives and have a
history of achieving savings against their Medicare targets in demonstration
projects, thus saving money not only for the Funds but for Medicare and the U.S.
Treasury.
The GAO report clearly supports the positions the UMWA has advocated before
Congress and the need for additional legislation. A promise made in the White House in 1946
was subsequently reaffirmed in 1992. Congress intended the Coal Act to be self-sustaining and
self-financing, but various court decisions have eroded that financing. There is no question that
this is an elderly, frail population that is sicker than the general Medicare population and
deserves the benefits they were promised. There is also no question that the Funds have
aggressively managed the benefit plans and instituted state-of-the-art managed care programs that
aim to improve the quality of care and reduce costs. Unfortunately, there is also no question that
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the nation’s promise to retired coal miners will be violated if we do not enact a long-term
financial solution to the coal industry retiree health care funding crisis.
This is a unique population and a unique situation. We are unaware of any other instance
in which a major industry-wide health and welfare plan in the private sector was created in a
contract between the federal government and the workers. All three branches of our government
have played substantial roles in creating, shaping and determining the fate of the UMWA Funds.
The Government Accountability Office clearly laid out the financial difficulties facing the Funds
and more recent actuarial projections show that Congress must act in order to shore up the
financial structure. Again, we encourage members of Congress to enact legislation modeled on
the coalition bill crafted by Representatives Cubin, Rahall and Peterson.
The UMWA Health and Retirement Funds and the U.S. Government
The UMWA Health and Retirement Funds (the Funds) was created in 1946 in a contract
between the United Mine Workers of America and the federal government during a time of
government seizure of the mines. The contract was signed in the White House with President
Harry Truman witnessing the historic occasion.
The UMWA first began proposing a health and welfare fund for coal miners in the late-
1930s but met strident opposition from the coal industry. During World War II, the federal
government urged the union to postpone its demands to ensure coal production for the war effort.
When the National Bituminous Wage Conference convened in early 1946, immediately
following the end of the war, a health and welfare fund for miners was the union's top priority.
The operators rejected the proposal and miners walked off the job on April 1, 1946. Negotiations
under the auspices of the U.S. Department of Labor continued sporadically through April. On
May 10, 1946, President Truman summoned John L. Lewis and the operators to the White
House. The stalemate appeared to break when the White House announced an agreement in
principle on a health and welfare fund.
Despite the White House announcement, the coal operators still refused to agree to the
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creation of a medical fund. Another conference at the White House failed to forge an agreement
and the negotiations again collapsed. Faced with the prospect of a long strike that could hamper
post-war economic recovery, President Truman issued an Executive Order directing the Secretary
of the Interior to take possession of all bituminous coal mines in the United States and to
negotiate with the union "appropriate changes in the terms and conditions of employment."
Secretary of the Interior Julius Krug seized the mines the next day. Negotiations between
representatives of the UMWA and the federal government continued, first at the Interior
Department and then at the White House, with President Truman participating in several
conferences.
After a week of negotiations, the historic Krug-Lewis agreement was announced and the
strike ended. It created a welfare and retirement fund to make payments to miners and their
dependents and survivors in cases of sickness, permanent disability, death or retirement, and
other welfare purposes determined by the trustees. The fund was to be managed by three
trustees, one to be appointed by the federal government, one by the UMWA and the third to be
chosen by the other two. Financing for the new fund was to be derived from a royalty of 5 cents
per ton of coal produced.
The Krug-Lewis agreement also created a separate medical and hospital fund to be
managed by trustees appointed by the UMWA. The purpose of the fund was to provide for
medical, hospital, and related services for the miners and their dependents. The Krug-Lewis
agreement also committed the federal government to undertake "a comprehensive survey and
study of the hospital and medical facilities, medical treatment, sanitary and housing conditions in
coal mining areas." The expressed purpose was to determine what improvements were necessary
to bring coal field communities in conformity with "recognized American standards."
To conduct the study, the Secretary chose Rear Admiral Joel T. Boone of the U.S. Navy
Medical Corps. Government medical specialists spent nearly a year exploring the existing
medical care system in the nation's coal fields. Their report, "A Medical Survey of the
Bituminous Coal Industry," found that in coal field communities, "provisions range from
excellent, on a par with America's most progressive communities, to very poor, their tolerance a
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disgrace to a nation to which the world looks for pattern and guidance." The survey team
discovered that "three-fourths of the hospitals are inadequate with regard to one or more of the
following: surgical rooms, delivery rooms, labor rooms, nurseries and x-ray facilities." The study
concluded that "the present practice of medicine in the coal fields on a contract basis cannot be
supported. They are synonymous with many abuses. They are undesirable and in many instances
deplorable."
Thus the Boone report not only confirmed earlier reports of conditions in the coal mining
communities, but also established a strong federal government interest in correcting
long-standing inadequacies in medical care delivery. Perhaps most important, it provided a road
map for the newly created UMWA Fund to begin the process of reform.
The Funds established ten regional offices throughout the coal fields with the direction to
make arrangements with local doctors and hospitals for the provision of "the highest standard of
medical service at the lowest possible cost." One of the first programs initiated by the Funds was
a rehabilitation program for severely disabled miners. Under this program, more than 1,200
severely disabled miners were rehabilitated. The Funds searched the coal fields to locate
disabled miners and sent them to the finest rehabilitation centers in the United States. At those
centers, they received the best treatment that modern medicine and surgery had to offer, including
artificial limbs and extensive physical therapy to teach them how to walk again. After a period of
physical restoration, the miners received occupational therapy so they could provide for their
families.
The Funds also made great strides in improving overall medical care in coal mining
communities, especially in Appalachia where the greatest inadequacies existed. Recognizing the
need for modern hospital and clinic facilities, the Funds constructed ten hospitals in Kentucky,
Virginia and West Virginia. The hospitals, known as Miners Memorial Hospitals, provided
intern and residency programs and training for professional and practical nurses. Thus, because
of the Funds, young doctors were drawn to areas of the country that were sorely lacking in
medical professionals. A 1978 Presidential Coal Commission found that medical care in the coal
field communities had greatly improved, not only for miners but for the entire community, as a
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result of the UMWA Funds. "Conditions since the Boone Report have changed dramatically,
largely because of the miners and their Union--but also because of the Federal Government,
State, and coal companies." The Commission concluded that "both union and non-union miners
have gained better health care from the systems developed for the UMWA."
The Coal Commission
In the 1980s, medical benefits for retired miners became a sorely disputed issue between
labor and management, as companies sought to avoid their obligations to retirees and dump those
obligations onto the UMWA Funds, thereby shifting their costs to other signatory employers.
Courts had issued conflicting decisions in the 1980s, holding that retiree health benefits were
indeed benefits for life, but allowing individual employers to evade the obligation to fund those
benefits. The issue came to a critical impasse in 1989 during the UMWA-Pittston Company
negotiations. Pittston had refused to continue participation in the UMWA Funds, while the union
insisted that Pittston had an obligation to the retirees.
Once again the government intervened in a coal industry dispute over health benefits for
miners. Secretary of Labor Elizabeth Dole appointed a special "super-mediator," Bill Usery, also
a former Secretary of Labor. Ultimately the parties, with the assistance of Usery and Secretary
Dole, came to an agreement. As part of that agreement, Secretary Dole announced the formation
of an Advisory Commission on United Mine Workers of America Retiree Health Benefits, which
became known as the "Coal Commission." The commission, including representatives from the
coal industry, coal labor, the health insurance industry, the medical profession, academia, and the
government, made recommendations in 1990 to the Secretary and the Congress for a
comprehensive resolution of the crisis facing the UMWA Funds. The recommendation was
based on a simple, yet powerful, finding of the commission:
"Retired miners have legitimate expectations of health care benefits for life; that was the
promise they received during their working lives, and that is how they planned their
retirement years. That commitment should be honored."
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The underlying Coal Commission recommendation was that every company should pay
for its own retirees. The Commission recommended that Congress enact federal legislation that
would place a statutory obligation on current and former signatories to the National Bituminous
Coal Wage Agreement (NBCWA) to pay for the health care of their former employees. The
Commission recommended that mechanisms be enacted that would prevent employers from
"dumping" their retiree health care obligations on the UMWA Funds. Finally, the Commission
urged Congress to provide an alternative means of financing the cost of "orphan retirees" whose
companies no longer existed.
The Coal Act
Recognizing the crisis that was unfolding in the nation’s coal fields, Congress acted on
the Coal Commission's recommendations. The original bill introduced by Senator Rockefeller
sought to impose a statutory obligation on current and former signatories to pay for the cost of
their retirees in the UMWA Funds, require them to maintain their individual employer plans for
retired miners, and levy a small tax on all coal production to pay for the cost of orphan retirees.
Although the bill was passed by both houses of Congress, it was vetoed as part of the Tax
Fairness and Economic Growth Act of 1992.
In the legislative debate that followed, much of the underlying structure of the Coal
Commission's recommendations was maintained, but there was strong opposition to a general
coal tax to finance orphan retirees. A compromise was developed that would finance orphans
through the use of interest on monies held in the Abandoned Mine Lands (AML) fund. In
addition, the Union accepted a legislative compromise that included the transfer of $210 million
of pension assets from the UMWA 1950 Pension Plan. With these compromises in place, the
legislation was passed by Congress and signed into law by President Bush as part of the Energy
Policy Act.
Under the Coal Act, two new statutory funds were created--the UMWA Combined
Benefit Fund (CBF) and the UMWA 1992 Benefit Fund. The former UMWA 1950 and 1974
Benefit Funds were merged into the Combined Fund, which was charged with providing health
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care and death benefits to retirees who were receiving benefits from the UMWA 1950 and 1974
Benefit Plans on or before July 20, 1992. The CBF was essentially closed to new beneficiaries.
The Coal Act also mandated that employers who were maintaining employer benefit plans under
UMWA contracts at the time of passage would be required to continue those plans under Section
9711 of the Coal Act. Section 9711 was enacted to prevent future "dumping" of retiree health
care obligations by companies that remain in business. To provide for future orphans not eligible
for benefits from the CBF, Congress established the UMWA 1992 Benefit Fund to provide
health care to miners who retired prior to October 1, 1994 and whose employers are no longer
providing benefits under their 9711 plans.
The CBF is financed by per-beneficiary premiums paid by employers with retirees in the
fund. The premium is set by the Social Security Administration and is escalated each year by the
medical component of the Consumer Price Index. Interest earned by the AML Fund is made
available to finance the cost of orphan retirees. The remainder of CBF income derives from
Medicare capitation and risk sharing arrangements, DOL Black Lung payments, investment
income and miscellaneous court settlements. The benefits for orphans covered by the UMWA
1992 Fund are financed solely by operators that were signatory to the NBCWA of 1988.
In passing the Coal Act, Congress recognized the legitimacy of the Coal Commission's
finding that "retired miners are entitled to the health care benefits that were promised and
guaranteed them." Congress specifically had three policy purposes in mind in passing the Coal
Act:
"(1) to remedy problems with the provision and funding of health care benefits with
respect to the beneficiaries of multiemployer benefit plans that provide health care
benefits to retirees in the coal industry;
(2) to allow for sufficient operating assets for such plans; and
(3) to provide for the continuation of a privately financed self-sufficient program for the
delivery of health care benefits to the beneficiaries of such plans.''
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Without question, Congress intended that the Coal Act should provide "sufficient
operating assets" to ensure the continuation of health care to retired coal miners. However, the
financial mechanisms have been eroded and have placed the Coal Act in continuing financial
crises.
Recent Court Decisions
The 2002 GAO study found that a number of court decisions have eroded the financial
condition of the Combined Fund–and the legal onslaught on the Coal Act continues. While
Congress clearly intended that the Coal Act be financially self-sustaining, various court decisions
have undercut Congressional intent. A 1995 decision by a federal court in Alabama in NCA v.
Chater overturned the premium determination by the Social Security Administration (SSA) and
reduced the premium paid by employers by about 10%. Over time, the effect of this decision was
to remove hundreds of millions of dollars from the financing structure of the Coal Act. A 1999
decision by the same court ordered the CBF to return about $40 million in contributions to the
employers, representing the difference between the original SSA premium rate actually paid and
the rate established in NCA. The trustees of the CBF filed suit against the Social Security
Administration in the District of Columbia in an attempt to set aside the NCA decision. In late-
2002, the D.C. Court struck down the Social Security Administration’s nationwide application of
the NCA decision and ordered SSA to report to the Court what premium rate should apply to
companies not covered by the NCA decision. In June 2003, SSA notified the Court it would
apply a higher premium to companies not covered by the earlier decision. However, while most
companies were paying the higher rate under protest, over 200 companies filed suit seeking to
overturn the higher rate. In August 2005, the United States District Court for the District of
Maryland issued a ruling in favor of the companies and enjoining the CBF from applying the
higher rate. If the CBF ultimately loses the premium rate case, it will have to reimburse the
operators for about $72 million in higher premiums that were collected prior to the court ruling.
In 1998, the Supreme Court rendered a decision in Eastern Enterprises that struck down
the obligation to contribute to the CBF for companies that were signatory to earlier NBCWAs but
did not sign the 1974 or later contracts. Those employers were relieved of their contribution
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obligations in the future and the Combined Fund returned millions of dollars in prior
contributions. Most of these retirees are now part of the unassigned beneficiary pool whose
benefits are funded from other sources. Since that time, a number of other companies who
signed the 1974 or later NBCWAs have also attempted to convince the courts that they, too,
should be relieved of their responsibility. Most of these cases have now completed their appeals
process, with the courts holding that the companies cannot walk away from their Coal Act
obligations.
The cumulative effect of these court decisions threatened a repetition of the problems and
re-creation of the crisis of the 1980s that led to the creation of the Coal Act, meaning employers
have been relieved of liability for their retirees and revenues have been significantly reduced
from the employers that remain obligated. Compounding the revenue loss stemming from these
court decisions is the fact that the escalator used to adjust the premium for inflation (the medical
component of the Consumer Price Index) is inadequate to measure the health care cost increases
in a closed group of aging beneficiaries who experience annual increases in utilization. The
combination of escalating medical costs, loss of income, an increasing orphan population and an
inadequate escalator have led to a continuing financial crisis for Coal Act beneficiaries.
I mentioned earlier the bankruptcies of a number of steel companies that had retirees
covered by the Coal Act. Recent bankruptcies at LTV, Bethlehem Steel and other steel
companies have further reduced the premiums paid to the CBF, increased orphan costs for the
AML fund, and added thousands of 9711 plan beneficiaries to the 1992 Plan. The Horizon
bankruptcy in 2004 greatly increased the populations of the 1992 and 1993 Benefit Funds. The
growth in the orphan population has forced a dwindling number of employers to fund a growing
burden of health care expenses for retirees who did not work for them. The magnitude of these
bankruptcies, which we believe that Congress did not anticipate when it passed the Coal Act, has
exacerbated the problems of the UMWA Funds and reinforce the call for a long-term solution.
Now Is The Time For A Long-term Solution
Mr. Chairman, there is a growing bi-partisan consensus that Congress needs to forge a
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long-term solution to the coal industry retiree health care financial crisis. Over their working
lives, these retirees traded lower wages and pensions for the promise of retiree health care that
began in the White House in 1946. In 1992, they willingly contributed $210 million of their
pension money to ensure that the promise would be kept. Everything that this nation has asked
of them–in war and in peace–they have done. They are part of what has come to be called the
“Greatest Generation” and deservedly so. They have certainly kept their end of the bargain that
was struck with President Truman. But now they find that the promise they worked for and
depended on is in jeopardy of being broken. We must stand up and say that this promise will be
kept.
Mr. Chairman, we thank you for the opportunity to add our support to the effort to reauthorize
the AML program and to provide a long-term solution to the financial problems of the
UMWA Funds. I would be happy to answer any questions you may have.